US Imported Beef Market A Weekly Update

Transcription

1 US Imported Beef Market A Weekly Update Prepared Exclusively for Meat & Livestock Australia - Sydney Volume 19, Issue 11 March 15, 2019 Prepared by: Steiner Consulting Group SteinerConsulting.com service@steinerconsulting.com Market Highlights for the Week: Hog futures jumped 14% last week as African Swine Fever speculation, once again, grips US market Beef prices are expected to benefit, in part due to higher prices for pork in the US this summer but also because of strong China beef demand in the world market. New Zealand official February export data will be available at the end of March but expectations are that China was major buyer, competing with the US US cow prices are moving higher as supplies of cull cows decline with improving weather and higher feed supplies. Feeder cattle prices for late summer and fall currently hold a 12% premium to spot feeder cattle prices. Ample moisture this past winter is expected to lead to good pasture conditions this spring US COF inventory on March 1 is expected to be about the same as a year ago. Imported Market Activity for the Week Imported beef market trading remains difficult as more Australian beef continues to go directly to large users bypassing the open market while New Zealand offerings remain limited. China has become a major player in New Zealand and we should get official data on February New Zealand beef exports at the end of March. There appears to be more realization in the market that China de- mand is not going away anytime soon. The chart below shows the dramatic surge in US lean hog values this past week as market participants were shocked by first a big jump in Chinese hog prices, then reports that US packers sold almost 24,000 MT of product in just one week to China and then China reports that the breeding herd there is down 14% since August and 20% from a year ago. USDA issued a report on Chinese poultry demand last week, underscoring a big jump in demand as August 2019 CME Lean Hog Futures Source: CME. Prices Quoted in USD/cwt, hog carcass. +14%

2 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 2 consumers look to replace pork in their diets. Beef is far more expensive than chicken in China but demand has been exploding in recent years. With disease concerns surrounding pork (African Swine Fever) and poultry (Avian flu), beef and lamb demand in China is up and should continue to grow. While slaughter in both New Zealand and Australia has been higher than a year ago this has not resulted in any appreciable increase in the supply of imported beef available in the open market in the US. Seasonally imported beef prices are firm in March and April as fast food operators look to bolster inventories for their spring demand. Lean domestic beef prices have been trending higher, which continues to support demand for imported product. Prices for imported round cuts are particularly firm at this time as overseas markets continue to hold a premium to US. The US has benefited so far by the strong US dollar. Forecasts are for the US currency to hold near current levels in the very near term but then drift a bit lower in the second half of the year. This is predicated on forecasts for a stabilization of growth trends in China and continued, albeit slower, global expansion. The point is that, at this point, it appears unlike for the US dollar to continue to benefit imports to the same degree it did a year ago. US cow meat prices have been stronger in recent weeks despite higher cow meat supplies. The chart to the right shows the year/year increase in the number of beef and dairy cows coming to market. In the last four weeks US cow slaughter has been around 512k head, 33.8k head or 7% higher than the same period a year ago. During this time of year dairy cows make up a larger share of cull cow slaughter but the increase in the number of milk cows going to slaughter has been higher than normal. Poor dairy margins and continued growth in US milk supplies despite a smaller inventory continue to drive the dairy cull. In the last four weeks total dairy cow slaughter has been around 284k head, 23.5k or 9% higher than a year ago. Beef cow slaughter during this period has been a total of 228k head, 10.3k or 5% higher than a year ago. At this time there is a lot of speculation about the pace of beef cow slaughter this coming spring. Expectations are for above average pasture conditions, which normally tends to limit the number of cull cows coming to market. Calf and feeder cattle prices should also be supportive. Nearby feeder cattle prices are weak because poor feedlot conditions and extreme winter weather have limited the number of cattle moving into feed- RATIO OF COW CARCASS PRICE VS. COW CUTOUT Source: USDA Mandatory Price Reporting. Monthly Averages Calculated from USDA Daily Reports Boner 85% Breaker 75% Cutter(lean) 90% Y/Y in Cow Slaughter. Contribution of Beef and Dairy Cows. Weekly Data. '000 Head. Source: USDA-NASS. Calculations by Steiner Consulting Beef cows Dairy Cows Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 US Dollar per 1 AUD Monthly Average Exchange Based on Daily Prices. Source: Google Finance Feb 2019 Feb M Appreciation 10%

3 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 3 lots. As a result there is a larger supply of cattle outside feedlots. As the chart on page 4 shows, the current feeder cattle index is currently at $137/cwt. However, summer and fall feeder cattle prices hold a 12% premium to the current market. Higher feeder cattle prices are driven by robust prices for fed cattle as well as relatively low feed prices. In the short term the increase in cow slaughter has been driven by more dairy cows coming to market. US COF Supply expectations March 1 Our current estimate is that placements in February were 1% lower than the previous year. While placements in Texas and Colorado were likely higher than a year ago, we think lower placements in Kansas, Nebraska and IA/MN likely offset those increases. But we would not be surprised if we saw a modest increase in placements for the month. The reason we say that is that feeder cattle sales in February were higher than the previous year. Sales of feeder cattle over 600 pounds during the four February weeks were 5% higher than the previous year. In addition, we continue to see more feeder cattle imports from Mexico and Canada. Weekly imports from these two countries during this period was up by more than 33,000 hear or 22.7% compared to the same period a year ago. The supply of long fed cattle remains above year ago levels, which should keep fed cattle prices in check in the near term. The inventory of cattle that, as of February 1, had spent 150 days or more on feed was estimated to be million head, 36.4% higher than a year ago. This was the biggest inventory of +150 day cattle as of February 1 since the survey begun some 20 years ago. That supply likely increased in February. We currently estimate the supply of +150-day cattle on feed as of March 1 to be 2.3 million head, 22% higher than a year ago. The Feb 1 supply of +120 day cattle was estimated at million head, 12.2% higher than a year ago. We think that on March 1, 2019 the inventory of +120-day cattle was million head, 6.6% higher than last year. This is a significant supply of cattle that will be available for marketing in March and April. The lower placements a the end of 2018 and early 2019 have the potential to create a marketing hole in May and June. However, much will depend on the marketing pace during March and April. If producers do maintain a marketing rate similar to a year ago, then there is the Steiner February COF Estimates (pct of year ago) Placed on feed in February: 99.0 Marketed in February: Total on Feed March 1: USA Cattle on Feed Inventory Feedlots with head Capacity. 1st of Month Inventory. '000 head. USDA BEGINNING OF MONTH INVENTORIES, 000 HEAD 12,000 11,700 11,400 11,100 10,800 10,500 10,200 9,900 Steiner Estimate Avg JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC potential for notably lower supplies of market ready cattle by late spring. We think the marketing rate in February was lower than the previous year and marketings so far in March have not been much better. Fed cattle slaughter should be higher in April and May and so far we still think the risk of a marketing hole developing is relatively low.

4 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 4 CME Cattle Feeder Index and US Cattle Markets Special Live Animal Reference Price Current Week Prior Week % CHANGE VS. Last Year WK AGO 14-Mar-19 7-Mar Mar-18 from Last Year CME FEEDER CATTLE INDEX % % 15-Mar-19 8-Mar Mar-18 FED STEER (5-MKT AVG) % % CUTTER COW CARCASS, NATIONAL, 90% LEAN, LB. (carcass wt.) % % BONER COW CARCASS, NATIONAL, 85% LEAN, LB. (carcass wt.) % % BREAKER COW CARCASS, NATIONAL, 75% LEAN, 500+ (carcass wt.) % % CUTTER COW CARCASS CUTOUT, 5-DAY MA, USDA % % 260 CME Feeder Cattle Index Source: Chicago Mercantile Exchange

5 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 5 TABLE 2 IMPORTED BEEF PRICES, 7:45 DAYS, CIF From Last Current Week Prior Week Week Last Year From Last Year 15-Mar-19 8-Mar Mar-18 US East Coast Australian/NZ Lean, CIF 95 CL Bull, E. Coast CL Blended Cow CL Shank CL Fores CL Chucks UNQ UNQ N/A UNQ N/A 95 CL Bull, W. Coast Uruguay CFH 90CL, E. Coast UNQ UNQ N/A UNQ N/A US East Coast, Trimmings, CIF 85 CL Trimmings CL Trimmings CL Trimmings UNQ N/A CL Trimmings UNQ UNQ N/A UNQ N/A US East Coast Australian Cuts, CIF Cap Off Steer Insides Steer Insides 14/18 UNQ UNQ N/A UNQ N/A Steer Flats Steer Knuckles

6 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 6 TABLE 3 IMPORTED BEEF PRICES, 7:45 DAYS, US WAREHOUSE From Last Current Week Prior Week Week Last Year From Last Year 15-Mar-19 8-Mar Mar-18 US East Coast Australian/NZ Lean, FOB US Port 95 CL Bull, E. Coast CL Blended Cow CL Shank CL Fores CL Chucks UNQ UNQ N/A UNQ N/A 95 CL Bull, W. Coast Uruguay CFH 90CL, E. Coast UNQ UNQ N/A UNQ N/A US East Coast, Trimmings, FOB US Port 85 CL Trimmings CL Trimmings CL Trimmings UNQ UNQ N/A N/A 65 CL Trimmings UNQ UNQ N/A UNQ N/A US East Coast Australian Cuts, FOB US Port Cap Off Steer Insides Steer Insides 14/18 UNQ UNQ N/A UNQ N/A Steer Flats Steer Knuckles

7 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 7 TABLE 4 US DOMESTIC BEEF AND CATTLE PRICES Current Week Prior Week From Last Week Last Year from Last Year 15-Mar-19 8-Mar Mar-18 Domestic Cutouts Low High Wt.Avg Low High Wt.Avg Low High Wt.Avg Choice Cutout Select Cutout Domestic Lean Grinding Beef 90 CL Boneless CL Beef Trimmings CL Beef Trim Domestic Pork Trim 42 CL Pork Trim CL Pork Trim Point of Lean Values 90 CL Domestic CL Beef Trimming CL Pork Trim CL Pork Trim National Direct Fed Steer (5-day accum. wt. avg. price)

8 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 8 TABLE 5 FUTURES AND SLAUGHTER INFORMATION From Last Futures Contracts Current Week Prior Week Week Last Year From Last Year 15-Mar-19 8-Mar Mar-18 Live Cattle Futures April ' June ' August ' October ' Feeder Cattle Futures April ' May ' August ' September ' Corn Futures May ' / / / July ' / / September ' / / / December ' / / Ch Wheat Futures May ' / / / July ' / / / September ' / / December ' / From Last Slaughter Information 7 Days Ending 7 Days Ending Week 7 Days Ending From Last Year 16-Mar-19 9-Mar Mar-18 Total Cattle Slaughter 593, ,000-10, ,000-8,000 2-Mar Feb-19 3-Mar-18 Total Cow Slaughter 127, , ,720 7,744 Dairy Cow Slaughter 71,494 71, ,738 4,756 Beef Cow Slaughter 55,970 55, ,982 2,988

9 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 9 TABLE 7 - US BEEF IMPORTS (Source: USDA/AMS) US Fresh/Frozen Beef Imports. Metric Ton. Data Source: USDA/Agricultural Marketing Service Imports as of March 9, 2019 Individual Country Volume. MT & Y/Y % Ch. 60,000 50,000 YTD Imported Fresh/Frz Beef Passed for Entry in the US week 10 3/10/2018 3/9/2019 Argentina - 12 Australia 35,484 35, % Brazil Canada 46,952 56,317 9, % Chile Costa Rica 1,658 1, % France Honduras % Ireland % Japan % Mexico 39,092 42,720 3, % Netherlands New Zealand 43,424 28,949 (14,475) -33.3% Nicaragua 9,854 13,031 3, % Spain Uruguay 4,958 7,316 2, % Total 182, ,528 5, % Source: AMS - USDA TOTAL YTD: +2.8% Total 190, ,000 40, ,000 30, ,000 20, ,000 10, , ,000 Total 1% 20% 9% -33% 32% 48% 2.8%

10 VOLUME 19, ISSUE 11 US IMPORTED BEEF MARKET PAGE 10 Australian Beef Quota Position Metric Ton. Australian Department of Agriculture Statistics 14-Mar-19 Quota Shipments 65, % 2019 Quota 428,214 Balance 362, % USA Quota Entries through Week Ending March 11 Source: US Customs 500, , , , , YTD 2019 YTD Y/Y % Quota % cleared Australia New Zealand Uruguay Other 33,315,077 43,782,264 2,548,625 13,715,840 33,146,771 26,957,471 3,784,391 14,061,079-1% -38% 48% 3% 418,214, ,402,000 20,000,000 64,805,000 8% 13% 19% 22% Note: Customs did not provide an update this week. Data reflects last week s levels.