US Imported Beef Market A Weekly Update

Transcription

1 US Imported Beef ket A Weekly Update Prepared Exclusively for Meat & Livestock Australia - Sydney Volume XVIII, Issue 17 4, 2018 Prepared by: Steiner Consulting Group SteinerConsulting.com service@steinerconsulting.com ket Highlights for the Week: US fed cattle slaughter for the week ending 5 estimated at 518,000 head, 4.3% higher than a year ago and the largest weekly slaughter so far this year. There is broad expectation that fed slaughter will steadily increase in June and y and eventually pressure fed cattle pries lower. CME fed cattle futures for June currently trading at a $20 discount to the spot market, an illustration of the extreme bearishness, but also the potential for a major correction should beef demand continue to surprise. Australia beef exports were up 32% in April, in part due to Easter holiday calendar differences from a year ago. Australia beef exports to the US were higher but the share of exports to the US was little changed from a year ago. Exports to Japan continue to expand and shipments to China were up 54% in April, surpassing exports to S. Korea. 50CL beef trim prices hold steady but prices expected to come under pressure in June and y due to larger slaughter, weaker demand post Memorial Day weekend Imported ket Activity for the Week Imported beef prices were higher this week on improved end user interest and limited supplies in the spot market. Participants were contacted during our weekly survey indicated prices were steadily higher for much of the week. Volume was limited and users looking to book larger packages likely had to pay up in order to secure product. New Zealand cow slaughter is ex- pected to hit annual highs later this month but much of the expected production is largely booked. Some attributed the higher prices to some short covering activity. Higher beef prices in the domestic market and firm prices for domestic product may have also contributed to the increase in inquiries for imported product. Prices or round cuts in the spot market are especially firm but there is a lot of debate about valuation for later in the summer. The two tier market is expected to con- Key kets for Australian Beef: Metric Ton. Shipped Weight Basis 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Japan USA ROW China S. Korea

2 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 2 tinue at least until the end of this month considering the premiums currently being paid for fed product. USDA quoted the price of domestic fed cap offs for delivery 0-21 days forward at $310 FOB Central US. For end users looking to get this product to plants along the coasts the cost exceeds $320. Frozen imported is currently trading in the high 290s. Keep in mind, however, that different from frozen grinding beef, which does not have any additional defrosting costs, frozen cuts will incur some yield loss at defrosting time and defrosting cost. The question is what kind of price to expect for cap off rounds in late June and y. US fed cattle slaughter is expected to be higher at that time and seasonally demand is softer during the hot winter months. More competition for Australian beef April data shows Higher slaughter and earlier Easter in 2018 likely affected the volume of Australian beef exported in April. Official statistics show total exports for the month were 88,179 MT, 31.8% higher than a year ago. Exports to all key markets were higher but, as the chart on page 1 shows, the share of exports to the US market was no different than a year ago. Demand in other markets continues to be quite robust, especially in Asia, helping absorb the increase in supply. Exports to Japan were 27,225 MT, 34.6% higher than a year ago. Grinding beef prices in Japan continue to increase compared to a year ago and prices paid are at a premium to what the US market is currently paying. The top chart to the right shows the value of imported Australian 80CL trim in Japan. Data is reported on a Yen/kg basis and it is the wholesale value in Japan warehouse. Keep in mind it includes the cost of tariffs, other clearing costs, and profit. The main point is that current prices are about 10% higher than a year ago. Exports to other Asian markets were also higher in April. Shipments to South Korea were 11,551 MT, 37% higher than a year ago. For the year exports to South Korea are up 14% from a year ago. Exports to China have also accelerated as demand there continues to expand. With China now accounting for about half of South American beef exports, there is broad expectation that buyers there will be more active in Australia and Oceania. Shipments to China in April were 12,714 MT, 54% higher than a year ago. For the year exports to 80CL Imported Beef Price in Japan, Oceania Product. US$/lb. Equivalent Wholesale FOB Price. Converted from Yen/KG quote using US FED reported exchange rate % Y/Y Feb Apr Jun Aug Oct Dec Feb Price Ratio of 50CL Boneless Beef vs. Fed Steer Prices #DIV/0! #DIV/0! Yr Avg Feb Feb Apr Apr Jun Jun Aug Aug Aug Oct Oct Dec Dec WEDNESDAY DATES China have averaged almost 11,000 MT/month, 37% higher than last year. While Australian slaughter is expected to be higher than a year ago during the winter months, strong demand from Asian markets will continue limit the downside price risk for Australian product. USDA report outlines the benefits of TPP-11 for Australia A recent USDA report highlighted the benefits that will accrue to the Australian beef industry. The beef section states: Under CPTPP, there will be significant reductions and elimination of tariffs for beef and beef products into Japan (building on the JAEPA Agreement). Under the CPTPP, Australian beef exporters will enjoy a tariff reduction of 27.5 percent in the first year of the agreement for fresh and frozen products while 2.71

3 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 3 WEEKLY STEER AND HEIFER SLAUGHTER. '000 HEAD Source: USDA sltr June slaughter y / Aug slaughter Yr Avg Feb Apr Jun Aug Oct Dec U.S. beef tariffs will remain at 38.5 percent. In general, duties for TPP-11 countries will see their tariff rates for beef exports decline to 9 percent within 15 years. In addition, Japanese tariffs on processed meat products will drop to zero within 15 years. Instead of current country-specific safeguard trigger levels, the CPTPP safeguard will work on an aggregated volume of imports from all parties to the agreement. The safeguards will start at 590,000 MT and gradually increase. Under CPTPP, Australia will be able to exceed its JAEPA safeguard volumes. Source: USDA/FAS (link) US fed slaughter expected to surge higher in June and y Fed cattle slaughter in April was near year ago levels despite significantly more cattle on feed. That cannot continue and, as the chart above shows, the supply of fed cattle expected to come to market in, June and y should be notably above year ago levels. For the week ending 5 we estimated fed cattle slaughter was 518,000 head, 4.3% higher than a year ago. This contrasts with April when weekly fed slaughter averaged 490,000 head/wk, just 2% higher than a year ago. The modest increase in slaughter, so far, has helped support beef cutout values. What is always a bit of a guessing game is the structure of placements in previous months and the exact time when those cattle will be market ready. Different from hogs, which have fairly precise grow out periods, fed cattle performance is affected by the weight of cattle when they enter the yard, weather, feed mix, breed and feedlot management. The chart above shows target slaughter levels for fed cattle for the rest of the spring and into summer. weekly fed cattle slaughter is expected to increase by around 20,000-25,000 head/week from April levels. That increase would correspond to a 5% gain compared to year ago levels. Most of the increase will come in the form of higher Saturday slaughter. Indeed, Saturday slaughter last week likely was 48,000 head, 40% higher than the same Saturday a year ago. Slaughter is expected to ramp up further in June and we expect it to be in the k head/ week area. This would imply fed cattle slaughter as much as 7% higher than a year ago during June. We expect fed cattle slaughter to stay high relative to year ago into y and August as producers were forced to place cattle on feed at light weights, which will tend to stretch out feeding times. Bottom line: From a supply perspective the recent price action makes sense. The higher slaughter this week is likely only the beginning of consistently higher fed slaughter. In the next four weeks retail demand should continue to be excellent as buyers source product to support Mother s Day (mid ), Memorial Day (end of ) and Father s Day (mid June) features. The real challenge for the fed cattle complex will likely come later in June when slaughter could hit its peak just as seasonal retail demand starts to fade. Fed cattle futures already have factored this possibility, with June fed cattle futures trading at $22 discount to current prices.

4 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 4 CME Cattle Feeder Index and US Cattle kets Special Live Animal Reference Price Current Week Prior Week % CHANGE VS. Last Year WK AGO Apr from Last Year CME FEEDER CATTLE INDEX % % Apr 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 Apr 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 UNQ 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 Apr 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 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 UNQ 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 Domestic Cutouts Apr 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 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 Apr Live Cattle Futures June ' August ' October ' December ' Feeder Cattle Futures ' August' tember ' October ' Corn Futures ' / / / y ' / / tember ' / / December ' / / Ch Wheat Futures ' / / / y ' / / / tember ' / / / December ' / From Last Slaughter Information 7 Days Ending 7 Days Ending Week 7 Days Ending From Last Year Apr Total Cattle Slaughter 597, ,000-11, ,000 2, Apr Apr Apr-17 Total Cow Slaughter 120, ,002 4, ,443 9,696 Dairy Cow Slaughter 59,877 61,422-1,545 56,378 3,499 Beef Cow Slaughter 60,262 54,580 5,682 54,065 6,197

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 17 4/29/2017 4/28/2018 Australia 67,559 66,063 (1,496) -2.2% Brazil 2,752 - (2,752) % Canada 74,962 82,247 7, % Chile (136) % Costa Rica 3,234 2,882 (352) -10.9% France Honduras Ireland % Japan % Mexico 60,902 60, % Netherlands New Zealand 66,103 71,913 5, % Nicaragua 15,685 18,071 2, % Spain Uruguay 10,666 10, % Total 302, ,596 11, % Source: AMS - USDA US Beef Imports. Metric Ton. Data Source: USDA/Agricultural keting Service Imports as of April 28, 2018 Individual Country Volume. MT & Y/Y % Ch , ,000 80,000 60,000 40,000 20,000 TOTAL YTD: +3.9% Total 370, , , , , , , , , , ,000 Total -2% 10% 0% 9% 15% 0% 3.9%

10 VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 10 Australian Beef Quota Position Metric Ton. Australian Department of Agriculture Statistics Balance 334, Quota Shipments 88, % 2018 Quota 423, % USA Quota Entries through Week Ending April 30 Source: US Customs 500, , , , , YTD 2018 YTD % ch. Quota % cleared Australia New Zealand Uruguay Other 66,232,661 66,977,812 7,320,440 23,105,899 63,014,545 70,994,705 5,636,367 23,245,710-5% 6% -23% 1% 418,214, ,402,000 20,000,000 64,805,000 15% 33% 28% 36%