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CME: Import Targets Look Likely to Be Missed

02 July 2013

US -Will 2013 US beef imports increase compared to the previous year? Earlier in the year, the expectation was for imports to post a healthy +15 per cent increase over year ago levels, driven by an expected shortage of lean grinding beef in the US as well as expected higher slaughter rates in markets such as Australia and New Zealand, write Steve Meyer and Len Steiner.

Mexico beef shipments, which rose sharply last year, were also expected to continue to grow given very strong beef prices in the US market and weak domestic demand. Six months into this year, however, the imported beef picture appears quite different and those early expectations likely will warrant a significant revision.

Based on US Customs data, entries of fresh/ frozen imported beef through the end of June were actually down 2.2 per cent from a year ago. There is a distinct seasonality in US beef imports, with imports in the first six months of the year outpacing imports in Q3 and Q4. As a result, it will be very difficult to hit the +15 per cent increase target.

So far this year, imports of New Zealand beef have increased sharply, in large part due to a spat of dry weather in late February and March which forced producers to cull dairy animals early and, in some cases, to send to market a few more animals than they normally would. Entries of New Zealand beef through June 24 were 104,512 MT, 23.4 per cent more than the same period a year ago.

Through the first six months of the year, New Zealand was the top supplier of imported beef to the US (see charts). But New Zealand supplies will decline sharply in the second half of the year and we actually expect second half shipments to be lower than what they were a year ago.

There is a strong seasonality in New Zealand slaughter, which declines from around 70,000 head per week in early May to around 10-15,000 head per week at the end of August. As a result, beef shipments in July - October are dramatically lower. This year will be no different and the early culling likely will reduce the number of dairy animals coming to market in the coming weeks.

Beef supplies in Australia there have increased sharply, with weekly cattle slaughter since April averaging up 21 per cent from the previous year. Despite the sharp increase in slaughter, Australian beef exports to the US have actually declined compared to a year ago. Through the end of June, entries of Australia beef were 86,859 MT, down 14.3 per cent from a year ago. And it does not appear that Australian beef availability will increase any time soon.

We expect Australian June beef exports to the US to be down 8 per cent from the previous year even as overall beef exports in June will increase by some 13 per cent. Indeed, in the past three months, Australian total beef exports have increased by almost 17 per cent while exports to the US have declined 5 per cent. Strong demand from other markets, particularly China, has reduced product availability for the US market.

While the US dollar has strengthened vs. the Australian dollar, the shift in currencies was negated by the counter seasonal decline in US grinding beef prices in Q2. At this point it is difficult to say
whether the Chinese appetite for Australian beef will decline later in the year.

If it does not, then Australian beef shipments to the US market will likely remain limited.
Imports of Canadian beef have been declining steadily in recent years, in part reflecting the reduction in Cattle supplies there.

While imports of Canadian beef could increase in the second half of the year, total annual volume in 2013 will likely be lower than in 2012. Uruguay is shipping more beef to the US market but it has now filled almost 60 per cent of its annual quota so growth will be limited there as well. Imports from Mexico are up 19 per cent but the volume is not big enough to offset the declines from top suppliers.

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