US - USDA has released its weekly ‘US Export Sales’ report and the data presented a somewhat mixed picture for pork and beef, write Steve Meyer and Len Steiner.
The pace of pork export sales has slowed down a bit and this may affect how futures participants view the potential for pork exports going into the summer and fall.
Beef exports, on the other hand, have accelerated, as they normally do at this time of year. Below is a brief recap and implications as we see them:
Pork: Total pork export sales for week ending May 19 were 20,607 MT, the lowest monthly export volume since mid April.
This export volume is about 9 per cent lower than the average weekly volume of the previous four weeks, which may be perceived as negative.
However, one needs to consider that US slaughter and production tends to decline in the spring and summer and thus seasonally exports are lower during this time of year as well.
What is important, in our view, is to see how exports are tracking relative to overall production levels and also relative to the previous year.
So far, pork export volumes remain quite robust and a bit above the trend suggested by the latest USDA forecast.
Based on the weekly numbers we project pork April exports of fresh/frozen pork at 145,000 MT, 2.5 per cent under year ago levels while May exports are now projected at around 154,000 MT, up 15 per cent compared to last year.
This kind of export volume (remember it is just fresh/frozen) is truly impressive given that we no longer have the Russian export market available. It would be the largest monthly export volume since the fall of 2012.
What the latest weekly pork export data also shows is that market participants may have to temper a bit some of the more bullish forecasts for US pork exports to China.
Exports to that market for week ending May 19 were 3,901 MT compared to an average of around 5000 MT in the previous four weeks. But US pork exports to China are still on pace to be more than double year ago levels.
While exports to this market may slow down seasonally into the summer, US producers have now shown they are able to export significant quantities and may do so again in the fall when US slaughter numbers get back to 2.4 M/week. Right now US hog futures are priced well above levels we saw last year, in part because of expectations of much more robust exports.
The China pork export story will likely get much more traction in late summer and early fall as hog slaughter numbers start to ramp up.
Beef: The latest USDA WASDE report pegged US beef exports for 2016 to be up 8.7 per cent compared to the previous year.
Beef exports started the year quite slow but have ramped up in the last two months and we think USDA is correct to maintain a rather bullish view of US beef export potential.
Total exports of beef muscle cuts for week ending May 19 were 12,996 MT. For the last four reported weeks beef exports are up 3.7 per cent compared to the previous week and, more importantly in our view, up 10 per cent compared to the same period a year ago.
Exports growth has been broad based but led by big gains to Japan and South Korea. For the last four reported weeks exports to Japan are up 35 per cent compared to a year ago, exports to South Korea were up 19 per cent, exports to Canada were up 13 per cent and exports to Mexico were up 7 per cent. The only market that has been lagging is Hong Kong, with exports there down 33 per cent.
It is unlikely we will see much improvement in exports to Hong Kong given the effect of anticorruption measures on gray trade with China and, even more importantly, China normalization of trade with Brazil.
Based on the weekly report we project Q2 US beef exports up 4.5 per cent compared to last year. To match the USDA forecast, US beef exports in second half of the year should run about 14 per cent higher.
TheCattleSite News Desk