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CME: Uncertainty About Meat Trade Going Forward

09 March 2018

US - US beef and pork exports registered impressive gains in January and, based on weekly export reports, we expect February shipments to show robust growth as well, reports Steiner Consulting Group, DLR Division, Inc.

The two charts below show the volume of beef and pork exports in January relative to exports last year and the five year average.

Total exports of fresh/frozen and cooked beef in January were 80,495 MT, 14.5 per cent higher than a year ago. Strong demand from Asian markets drove the gains in US beef exports last year and that was the case again in January.

Shipments to Hong Kong were 10,249 MT, a 44 per cent gain compared to the previous year. Beef demand in China has been growing rapidly in recent years as consumers there adopt a more western diet but also substitute chicken with beef due to bird flu fears.

Exports to Mainland China remain relatively small (802MT) but as the supply of hormone free beef in the US increases we should start to see more US beef go to Mainland China directly. Japan remains the top market for US beef, purchasing 20,554 MT in January, 9 per cent more than the previous year.

The value of US beef exports to Japan in January was $125.5 million, a 26 per cent increase from the previous year and a clear indication of the robust demand for US beef in export markets. Exports to South Korea on a volume basis were 16,033 MT, 19 per cent higher than a year ago. The value of US beef exports to South Korea was $116.5 million, 39 per cent higher than last year.

Exports of fresh/frozen and cooked pork in January were 164,188 MT, 5.4 per cent higher than the previous year. The value of US pork exports in January was $454.2 million, 8.5 per cent higher than a year ago.

Mexico is the largest market for US pork in terms of volume, purchasing 59,445 MT in January, 1 per cent higher than a year ago. Pork exports to Japan were 34,181 MT, 12.7 per cent higher in volume terms.

The value of US pork exports to Japan was $144.4 million, 17.8 per cent higher than a year ago. Based on weekly exports we think February pork shipments are on track to be 5-6 per cent above last year while beef exports are on track to increase 9 per cent vs. year ago levels.

There is plenty of uncertainty about meat trade going forward, especially as some of our trading partners look to respond in kind to any US efforts to raise tariffs on their goods. It is hard to say how this will all play out but the reality is that the US is a large net exporter of meat protein and a slowdown in trade is generally bearish for US meat prices.

The chart above provides a summary of red meat and poultry trade in 2017 expressed in US$ terms. Dollar sales of US pork and chicken products into export markets are significantly higher than the amount that we purchased from other countries. But there is a larger point that should be made.

The United States for a long time has believed that a capitalist system is superior to other forms of economic management as it encourages individual freedom to innovate and trade. Over time, this tends to encourage development and makes all consumers better off.

A tariff system ultimately is an expression of a statist (i.e. government) approach to the economy. It is true that some countries do not share our view of a capitalist system but that does not mean we become more like them.

It is also true that some countries, by virtue of their lower labor costs and weak domestic demand, have run trade surpluses. But most people in this planet live outside US borders. If we want our economy to grow we need to figure out how to sell more to them rather than prevent them from selling less to us.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

TheCattleSite News Desk

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