US Imported Beef Market A Weekly Update

Transcription

1 US Imported Beef Market A Weekly Update Prepared Exclusively for Meat & Livestock Australia - Sydney Volume XVIII, Issue 33 August 31, 2018 Prepared by: Steiner Consulting Group SteinerConsulting.com service@steinerconsulting.com Market Highlights for the Week: USDA announces another case of atypical BSE in a Florida cow but markets shrug it off as it is not expected to impact domestic or export demand Participants continue to debate the implications of spreading African Swine Fever in China and the potential impact this has not just on pork supplies but also demand for other proteins, especially beef China and Hong Kong now account for half of exports from major South American beef suppliers Cow and bull slaughter last week was estimated at 131,000 head, 5.4% higher than a year ago and 11.4% higher than the five year average. Fed cattle slaughter for the week was estimated at 505,000 head, 1.2% higher than a year ago and 4.3% higher than a year ago In the four weeks ending August 23 US exports of fresh/frozen beef muscle cuts averaged 17,481 MT/week, 781 MT or 4.5% higher than the same four week period a year ago Fed steer weights remain close to year ago levels but September marketings remain key to maintain currentness. Imported Market Activity for the Week Trading in the imported beef market was fairly quiet this week as end users were largely focused on the Labor Day production schedules and seemed to have limited interest in booking forward loads. Offerings from Australia have been relatively limited, with overseas suppliers largely focused on Asian markets and offerings there that are notably above US values. This is especially true for fat trim. US fat trim values are now under pressure as 50CL prices are down as much as 30% from earlier in the month. US fed cattle slaughter is expected to remain high through early October and steer weights seasonally increase during this time of year (see discussion on weights on page 3). Market participants we contacted during the week continue to discuss the implications that the spread of African Swine Fever (ASF) in China will have on global beef demand. Two recent cas- China and Hong Kong Exports as % of All Country's Beef Exports Based on YTD Export Data. Data collected by Steiner Consulting Based on Official Statistics 60.0% China Beef Consumption: Domestic Source + Imports Source: USDA-FAS. Pounds per Person in Carcass Wt. Equivalent % Hong Kong China 14.0 Imported Beef Domestic Beef 40.0% % % % % Brazil Argentina Uruguay Australia N. Zealand USA Canada S. America Oceania N. America

2 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 2 es of ASF bring the number of outbreaks to six. The latest was announced on Sunday (US time) in Xuancheng City, Anhui Province. Beef demand in China has increased at a faster pace than domestic production and the country has had to increasingly rely on imports to fill the growing demand. Currently China is the second largest beef importer in the world, after the USA, and it is expected to become the largest importer in Combined China and Hong Kong demand account for about half of South American beef exports this year and it is likely that share will increase further in As China has tightened controls of gray trade in recent months buyers have had to become more active in Oceania, with almost 25% of all New Zealand exports and over 13% of Australian exports now going to the Chinese market. Australian slaughter has increased this year but much of the growth has gone to support Chinese demand. Noone knows how ASF will impact Chinese pork production and all impact analyses rely on that initial estimate of production losses. This is the first time ASF has entered China so history is no guide. In 2007 the spread of blue ear disease in the Chinese hog population caused pork production to decline 8% according to USDA. Given the lethality of ASF and the fact there is no vaccine it is possible the decline in production may exceed those of a decade ago. However, the Chinese industry has become more commercialized in the past decade and arguably has better safaguards in place. Again, no one really knows but the risk is clear. What is also a fair point is that beef demand in China may receive a further boost due to a) the shortfall in pork supply availability and b) fears about safety of domestic pork supply. USA market highlights for the week: Last week USDA announced a case of BSE in a six year old cow in Florida. The announcement had little impact on futures trading as participants did not expect this finding to impact domestic or export markets. As it did a year ago, South Korea announced that it would enhance testing of US beef but trade will continue as usual. Non fed cattle slaughter continues to run well above year ago levels. The main challenge for cow slaughter this fall will be slaughter capacity. Last week cow and bull slaughter was estimated at 131,000 head, 5.4% higher than a year WEEKLY COW & BULL SLAUGHTER. '000 HEAD Source: USDA Yr Avg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ratio of 90CL Boneless Beef Price vs. Calculated Value of Cutter Cutout Weekly USDA Price Data. Analysis by Steiner Consulting Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov De ago and 11.4% higher than the five year average. In the last six weeks non-fed cattle slaughter in the US has been 14% above the five year average. 90CL boneless beef prices have been quite firm for much of the summer but overall value remains in line with the value of cow cuts. Demand for lean beef continues to drive prices for both 90CL boneless beef and cow cuts. Fed cattle slaughter last week was estimated at 505,000 head, about the same as the previous week and 1.2% higher than a year ago. Fed cattle prices were lower towards the end of last week. With August being a delivery month for the fed cattle contract the lower cash prices caused August futures to decline 300 points as cash and future contract prices need to converge. However, prices for October and December were not impacted as much. In the short term there may be some downward pressure on fed cattle values as retailers look to diversify their meat offerings. Pork and chicken prices are running some 25-

3 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 3 30% under year ago levels and offer significant value to the consumer. On feed supplies on August 1 were up 4.6% from a year ago and we estimate that fed cattle slaughter in August was flat to as much as 1% lower than a year ago. Feedlots will need to market cattle more aggressively in September in order to stay current. In the four weeks ending August 23 total beef exports averaged 17,481 MT/wek, 781 MT or 4.5% higher than the same four week period a year ago. Some markets continue to far outperform year ago. Shipments to South Korea in the last four weeks have averaged 4,863 MT/ wk, 1,188 MT or 32% higher than a year ago. Japan remains the top market for US beef and in the last four weeks shipments have averaged 6,027 MT/wk, 5% higher than last year s already lofty levels. Net sales to Japan in the most current reported week (Aug 23) were 8,873 MT, well ahead of the weekly shipment pace. Net sales to Korea slowed down, however, at 3,949 MT. Total net sales for the week were 20,636 MT and in the last three weeks net beef sales have averaged near 21,000 MT, much higher than the level of weekly shipments either this year or last. The higher sales should continue to bolster beef shipments in the coming weeks and packers will continue to source cattle in order to cover those sales. Last year beef shipments in Sep/Oct/Nov averaged around 15,700 MT/wk. and we are currently on track to remain well above those levels. Steer weights in the last USDA report (Aug 18) were 886 pounds (dressed carcass), just 2 pounds or 0.2% higher than the same week a year ago. We think weights have continued to move higher the last two weeks but they are still close to 2017 levels. We think the average steer weight at the end of this week will be close to 890 pounds, this is about 4 pounds heavier than two weeks ago but still in line with year ago levels. The steer weight data suggests that feedlots remain current. Last year, higher retail features, strong forward sales and robust packer margins allowed for a high marketing rate. This kept steer weights in check through much of the fall and set the stage for very robust cattle prices going into the yearend holidays. Marketings in September will be critical once again. Memories of 2015 and 2016 are still fresh. During the fall of those two years producers simply lost ground in Export Shipments of Fresh/Frozen Muscle Cuts of Beef: All Markets Based on USDA Weekly Export Data. Source: USDA-FAS 23,000 21,000 19,000 17,000 15,000 13,000 11,000 9,000 7,000 5,000 million lb. product wt Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Actual USDA Weekly Steer Weights. Reported with a Two week lag + Steiner Estimate Source: USDA & Steiner Consulting Estimates DRESSED WEIGHTS, POUNDS Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec terms of currentness, there were more lower yielding cattle in the mix and cattle prices struggled to gain traction. Fed cattle weights this year have been very close to year ago so any increase in beef production has come from slaughter numbers rather than additional weight on the carcass. Using weekly data we calculate that between July 1 and Aug 18 total fed beef production (steers+heifers) was billion pounds, a relatively modest 1.5% increase compared to a year ago. Weights contributed just 0.2% to this increase, the rest is accounted by higher slaughter numbers. Slaughter numbers are expected to increase into the fall, a function of higher cattle on feed. But if weights stay in check, this will tend to limit the overall increase in supply. Est Avg. 2012

4 VOLUME XVIII, ISSUE 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 30-Aug Aug Aug-17 from Last Year CME FEEDER CATTLE INDEX % % 31-Aug Aug-18 1-Sep-17 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 XVIII, ISSUE 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 31-Aug Aug-18 1-Sep-17 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 CL Trimmings UNQ UNQ N/A 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 UNQ UNQ N/A N/A Steer Knuckles

6 VOLUME XVIII, ISSUE 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 31-Aug Aug-18 1-Sep-17 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 CL Trimmings UNQ UNQ N/A 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 UNQ UNQ N/A N/A Steer Knuckles

7 VOLUME XVIII, ISSUE 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 31-Aug Aug-18 1-Sep-17 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 (5 day accum. Direct wt. Fed avg. Steer price)

8 VOLUME XVIII, ISSUE 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 31-Aug Aug-18 1-Sep-17 Live Cattle Futures August ' October ' December ' February ' Feeder Cattle Futures August' September ' October ' November ' Corn Futures September ' / / December ' / / / March ' / / May ' / / / Ch Wheat Futures September ' / / / December ' / / March ' / / May ' / / From Last Slaughter Information 7 Days Ending 7 Days Ending Week 7 Days Ending From Last Year 1-Sep Aug-18 2-Sep-17 Total Cattle Slaughter 636, ,000-24, ,000-9, Aug Aug Aug-17 Total Cow Slaughter 121, ,098 1, ,508 10,881 Dairy Cow Slaughter 60,562 60, ,088 3,474 Beef Cow Slaughter 60,827 59,150 1,677 53,420 7,407

9 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 9 TABLE 7 - US BEEF IMPORTS (Source: USDA/AMS) YTD Imported Fresh/Frz Beef Passed for Entry in the US week 34 8/26/2017 8/25/2018 Australia 151, ,482 (1,679) -1.1% Brazil 9,022 - (9,022) % Canada 168, ,452 12, % Chile (202) % Costa Rica 5,578 5,551 (27) -0.5% France Honduras 208 1, % Ireland 1,430 1, % Japan % Mexico 120, ,289 9, % Netherlands (228) % New Zealand 150, ,571 8, % Nicaragua 29,549 33,842 4, % Spain Uruguay 26,102 23,486 (2,616) -10.0% Total 663, ,733 22, % Source: AMS - USDA US Beef Imports. Metric Ton. Data Source: USDA/Agricultural Marketing Service Imports as of August 25, 2018 Individual Country Volume. MT & Y/Y % Ch. 250, , TOTAL YTD: + 3.3% Total 720, , , , , , , , ,000 50, , , ,000 Total -1% 8% 8% 6% 15% -10% 3.4%

10 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 10 Australian Beef Quota Position Metric Ton. Australian Department of Agriculture Statistics 30-Aug-18 Quota Shipments 174, % 2018 Quota 423, % Balance 248,475 USA Quota Entries through Week Ending August 27 Source: US Customs 500, , , , , YTD 2018 YTD % ch. Quota % cleared Australia New Zealand Uruguay Other 146,325, ,363,358 15,237,094 46,043, ,133, ,801,232 14,225,249 44,679,138 2% 8% -7% -3% 418,214, ,402,000 20,000,000 64,805,000 36% 75% 71% 69%