US - USDA has released its weekly update on US pork and beef exports, for week ending October 18, write CME analysts Steve Meyer and Len Steiner.
- Total exports of fresh/frozen beef muscle cuts last week were 10,292 MT compared to an average of 11,640 MT the previous four weeks. Exports to Japan are showing notable improvement, with exports in the last four reported weeks up 41 per cent from the same period last year. Exports to Mexico during the last four weeks are down 27 per cent from a year ago, however and exports to South Korea also have turned negative. Overall beef exports in the last four weeks are up just 3 per cent compared to last year.
- Total exports of fresh/frozen pork muscle cuts were 17,964 MT. In the previous four weeks pork exports averaged 17,955 MT. Exports to China continue to be robust at 2,977 MT compared to minimal exports last year. However, exports to Mexico have been quite disappointing. In the last four weeks exports to Mexico have averaged around 4600 MT compared to 6,842 MT for the same period last year.
Now that we have the latest export numbers the question remains— what do they really tell us? As with most things, context matters.
USDA does an excellent job each month to provide the market with this context in the form of the WASDE report (for those new to it, just google USDA WASDE).
On page 32 of that report, USDA presents a balance sheet for the four meat proteins. We will review pork but the same can be done for beef and chicken.
The balance sheet adds up expected production levels (a function of breeding inventories and production growth trends), it projects the total volume of imports for the year and then how much pork is expected to go to other markets. Starting and ending inventories also need to be considered to make it all work.
The weekly export number above are a bit of a reality check for that forecast number that USDA plugs in the balance sheet.
Each week analysts see if the trend implied by weekly exports is starting to diverge from that USDA forecast. If it does, then it has implications for supply availability in the domestic market and, ultimately, expected price levels.
USDA forecasts pork production for 2016 at 25.048 million pounds. This is on a dressed carcass basis.
Imports are expected to be around 1 billion pounds and exports are expected to be 5.125 billion pounds.
But pork is not traded on a carcass basis. Some of it is boneless cuts, some of it can be half or full carcasses.
USDA has detailed calculations (and they show you this on their website) for converting all these various cuts and products into a carcass weight equivalent. They all need to be apples to apples in the balance sheet.
The chart shows the trend in US pork exports on a product weight basis. On a dressed basis the chart would look similar but the units would be different. We show the numbers on a product weight basis because that’s how the weekly report is presented.
One more complicating factor is that the weekly data does not capture all pork that is exported. So we need to first examine how the weekly report relates with the monthly data and then see what kind of volume it implies.
Based on our calculations, and this is not precise to be sure, we conclude that the weekly pork export data implies that monthly exports in January were up 8 per cent compared to a year ago and February exports will likely be up about 4 per cent from last year. Those two data points are included in the chart.
The WASDE report shows that overall US pork exports in 2016 are expected to be up 3.7 per cent and, based on that alone, we could say January and February data imply a stronger growth rate.
We would not go that far, however. While pork exports in February indeed are higher than a year ago, they are still somewhat disappointing considering the level of production.
Do not forget that we are bringing each week almost 2.3 million hogs and the dressed carcass weight is around 214 pounds. This is notably higher than what we saw in 2011, 2012 or 2013.
The USDA pork forecast number for 2016 may be somewhat conservative but so far the weekly export numbers do not really give evidence to change that stance.
Imports are also something to keep in mind. In the past this was a bit of an afterthought, most pork came from Canada and it did not change that much. USDA expects pork imports for 2016 to decline by 111 million pounds.
But the shift in exchange rates may have a lot to say about the level of imports. In 2015 the US imported a quarter of a billion pounds of pork more than in 2010.
About 60 per cent of that growth came from Canada but imports from the EU, especially Poland, accounted for the additional 100 million pounds.
So we leave you with one thing. The weekly export numbers issued today do little to change the current forecast for pork exports in 2016 and one is well served to put that export number is context.
TheCattleSite News Desk