July 2014 Articles

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U.S. Protein Exports Weaker Year-to-Date in 2013

Department of Agricultural Economics and Agribusiness LSU AgCenter
After setting a record in 2011, U.S. beef exports have not fared as well in 2012 and so far in 2013. Declining domestic production results in higher prices both in the U.S. and overseas which allows the ability of U.S. competitors to provide less expensive alternatives. Through the first four months of 2013, beef exports are 3.8% lower than the same period last year. Even with the lower level of beef exports, approximately 9% of domestic beef production will be exported in 2013. Additionally, 2012 and forecasts for 2013 are still in the top ten years for total U.S. beef exports since 1955. Exports are always subject to political considerations and this year is no different. The prime example is the decision by China and Russia to ban imports of U.S. beef and pork due to the feed additive ractopamine. This decision has contributed to pork imports seeing a 15% decline in the first four months this year. Pork exports to China and Russia are down 48% and 77%, respectively. Beef exports to Russia have been closed since March, and are essentially 100% lower than the same time period last year. Broiler chicken exports are approximately 1% higher than a year ago. Although Japan has intentionally tried to weaken its currency to improve growth and control inflation, U.S. beef exports have not suffered as they have increased 44% for the first four months of 2013. Beef exports to Japan in March and April were at least 70% above the corresponding month in 2012, as the U.S. is now able to export beef from cattle that less than 30 months of age. Domestic Japanese production is expected to see significant declines in the next few months that will allow U.S. beef exports to remain competitive despite the Japanese stimulus making imports more expensive combined with higher U.S. beef prices from lower U.S. production. U.S. beef exports to Japan may not stay at the same level of March and April, but certainly could continue to be a bright spot for the remainder of 2013. Any discussion of beef exports must include retaliatory efforts of Canada and Mexico due to the U.S. mandatory country of origin labeling (mCOOL) law. Canada recently announced the items it will add additional tariffs to pending approval by the World Trade Organization. Mexico has not released its list of items as of yet, but may have a blanket tariff assessed to U.S. goods. These tariffs likely won’t take effect until 2014 at the earliest, but are not ideal for two of the most important export markets for U.S. beef. Exports to Canada have been 18% higher year-to-date in 2013 while exports to Mexico are down 28%.
The overall weakness in the U.S. beef export situation has been reflected in the fact that beef primal cuts such as the brisket, chuck, and round haven’t contributed to the year-on-year growth in the cutout value as the loin and rib primals. Additional evidence is present in the lack of strength in the Select cutout value which can be an important indicator for certain export markets. With boxed beef prices coming off their seasonal peaks, this may be supportive to the overall export market. For the week ending June 14th, total exports of boxed beef set a record. This may indicate that exports to Mexico may pick up due to increased demand for the chuck. Although weak exports are contributing to lower than previously forecasted fed cattle prices, byproduct values continue to run ahead of last year. USDA NASS June Cattle on Feed Report summary: Pre-Report Estimates
1,000 head % of Prior Year Avg. Range
Placed in May 2,049 98.3 95.9 84.3 – 99.8
Marketed in May 1,948 96.6 97.9 97.0 – 101.1
On Feed June 1 10,736 96.9 96.5 94.3 – 97.6
This month’s USDA NASS Cattle on Feed was neutral to slightly bearish. Placements were on the high end of the pre-report estimate range, Cattle placed weighing less than 700 pounds were 22% lower than a year ago while cattle weighing more than 700 pounds were 13% higher. The higher placements of cattle weighing more than 700 pounds pulled the estimated placement weight up over 21 pounds from a year ago. Placements of cattle weighing at least 800 pounds pulled the average up as Texas and Kansas increased placements of this weight by 55,000 and 40,000, respectively. Marketings are the second lowest since the current series began in 1996 (same number of slaughter days in May 2012 and 2013). The House defeated the proposed 2013 Farm Bill by 39 votes this week. This version of the Farm Bill did include money for the Livestock Indemnity and Livestock Forage Programs. It is uncertain as of this writing what Congressional leaders will do with the current 2008 Farm Bill extension passed in January that expires at the end of September