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CME: Beef Demand High This Year

30 October 2018

US - Red meat and poultry production numbers were published last Thursday and this helps add a few more data points to the supply/demand picture for the month of September, according to Steiner Consulting Group, DLR Division, Inc.

It is not complete, however, as we still do not know the trade data for the month. Those numbers will be available in early November.

Below are a few highlights and implications about consumption last month:

Total beef production was estimated at 2.158 billion pounds, 3 per cent lower than the previous year. The decline in production was largely due to one less slaughter day last month, however. We currently expect both imports and exports to be modestly higher in September, with imports about 13 million pounds less than exports.

Adjusting for net trade and ending stocks, we think per capita beef consumption (retail basis) was around 4.53 pounds per person, 3.1 per cent less than a year ago. However, it is important to recognize the effect of the one less slaughter day in the monthly production and consumption figure.

The monthly number is a somewhat arbitrary number. What we really want to know is if the consumer, on a daily basis, is eating more or less than they were last year. Adjusting for the one less production day, per capita consumption in September was actually 2 per cent higher than a year ago.

The reason we are spending time on this is because it is important to sometimes look behind the headline data and understand what they really mean and what they are telling to us. Between January and September beef production was 20.009 billion pounds (carcass wt basis), 2.9 per cent higher than a year ago.

The number of production days during this period was exactly the same as it was last year (191) so the number reflects the true increase in production during this time. However, the amount available to the consumer during this period was less than that because beef exports this year have outpaced imports.

We estimate that beef imports Jan-Sep were up just 9 million pounds while exports were up 270 million pounds or 13 per cent. When we adjust for the trade difference, the total amount of beef in the domestic market Jan-Sep was up by less than 1 per cent.

Beef demand is up this year, evidenced by the higher prices paid vs. the increase in production, but it is export demand that has been a key driver during this entire period.

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