U.S. beef trade gains steam

U.S. beef trade gains steam

“The U.S. export numbers were generally encouraging, and seem to reflect increasing domestic supply coupled with lower prices and a relatively lower U.S. dollar, all assisting sales to foreign customers,” say analysts with the Livestock Marketing Information Center.

Beef export volume increased 8% in July—from a year earlier—according to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Beef export value for July was 5% less at $526.7 million. For January through July, export volume was up 4% to 640,888 metric tons, while value fell 10% to $3.44 billion.

“The U.S. export numbers were generally encouraging, and seem to reflect increasing domestic supply coupled with lower prices and a relatively lower U.S. dollar, all assisting sales to foreign customers,” say analysts with the Livestock Marketing Information Center (LMIC) in the most recent Livestock Monitor.

Likewise, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, explains that increased U.S. beef production and lower cattle prices are reversing the trend of recent years, where beef exports decreased as record-high prices rationed demand in both domestic and international markets.

According to USMEF, exports accounted for 14% of total beef production in July and 11% for muscle cuts only – each up about 1 percentage point from a year ago. For January through July, these ratios were 13% and 10%, respectively, steady with last year.

Export value per head of fed slaughter was $263.89 in July, down 5% from a year ago. For January through July, export value per head was $251.82, which was 13% less.

“Markets work best and most efficiently, not by stopping and starting abruptly, but by gently tapping the brakes or the accelerator as conditions change,” Peel explains. “International trade of cattle and beef is a significant buffer that reduces drastic market swings in U.S. markets.”

In 2014 and 2015, Peel explains record-high U.S. prices and reduced supplies had the expected effect of stimulating beef imports and cattle imports while retarding beef exports. A strong U.S. dollar exaggerated those effects both ways.

“Increased imports augmented supplies of beef, especially supplies of lean processing beef – primarily for ground beef – and moderated what would have been an even more extreme impact on domestic demand in a period of record prices,” Peel says.

So far this year, beef exports are recovering, albeit slowly and unevenly, Peel says. He explains, “Beyond short-term market conditions, trade flows are impacted by longer term conditions in various countries and structural changes that alter the long-term trajectory of beef and cattle trade flows.”

For example, China became the second largest beef importer in recent years as consumption there exceeds beef production, making China a global beef market participant for the first time.

“The United States does not yet have direct access to the Chinese market but the impacts are already evident in global markets and are expected to continue to grow,” Peel says.

Closer to home, Peel explains Mexico’s growth in beef production, processing and exporting impacts the U.S. market in a variety of ways. For instance, he explains Mexico was the fourth largest source of beef imports for the U.S. last year.

“At the same time, increased demand for Mexican cattle in Mexico is reducing the flow of Mexican feeder cattle to the United States,” Peel explains. “Cattle imports from Mexico were down 54.1% year-over-year in July and are down 20.9% for 2016 to date. This is likely a permanent or at least long-lived decrease in Mexican cattle exports.”

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Analysts expect decreased beef imports and growing beef exports to play a central role in stabilizing cattle and beef prices in the United States as production expands in the coming years.

“Along with domestic beef demand, international demand for U.S. beef will determine just how big the U.S. beef industry needs to be as it grows,” Peel says. “More than just total tonnage, beef exports and imports are critical in balancing the supply and demand of specific beef products. This helps maximize the value of every beef carcass in the U.S. market.”

 

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