Agricultural News
Cheap Yankee Dollar Keeps US Beef a Bargain in Key US Beef Export Destinations
Mon, 16 May 2011 15:03:29 CDT
International trade continues to grow and play an increasingly important role in the U.S. cattle and beef market. At a time when domestic beef demand is still struggling, OSU Extension Livestock Market Economist Dr. Derrell Peel says that demand for U.S. beef in export markets continues to grow. The most recent monthly trade data show that beef exports in March jumped 47 percent compared to one year ago. Beef exports for the first three months of the year are up 32 percent over last year. This rapid export growth is a pleasant surprise as exports were expected to grow only moderately over last year's 19 percent year over year increase over 2009. March beef exports were led by a dramatic jump in exports to South Korea and a strong increase to Japan as well as increased exports to Canada and Mexico.
For the year to date beef exports are up to all major markets with the exception of Vietnam (currently the fifth largest beef export market) and Taiwan (currently the sixth largest export market). At the current first quarter pace, South Korea would replace Mexico as the largest U.S. beef export market. The Mexican economy continues to struggle but year to date beef exports are up slightly. Also at the current pace, Japan would rise to third place with Canada dropping to fourth place as a U.S. beef export destination. Exports continue to be supported by a weak U.S. dollar, which has protected foreign buyers from much of the higher beef prices seen in the U.S. Additionally, strong exports reflect growing international beef demand and decreased production from some other major beef producers including Canada and Australia. International market strength is further indicated by record high beef by-products values, which are largely driven by exports demand for hides and offals.
Beef imports continue to decrease thus far in 2011. Beef imports for March were down 21 percent from 2010 and for the year to date are down over 19 percent. Beef imports are down only slightly from New Zealand but are down sharply from Canada and Australia, the two major beef import sources. Beef imports continue to be very limited from Brazil. Among smaller importers, beef imports are up from Mexico, Argentina and Uruguay. U.S. beef imports continue to be limited as strong international demand provides alternative markets for world beef producers and the weak U.S. dollar limits the attractiveness of the U.S. market.
Live cattle imports may be playing a particularly important role in feeder cattle markets this spring. Mexican cattle imports were up 18 percent in March and are up 35 percent for the first three months of the year. Most Mexican cattle imports are lightweight feeders and usually enter stocker production prior to feedlot placement. However, there are indications that many, if not most, of the increased Mexican cattle imports this year are being placed directly in feedlots. The upcoming May cattle on feed report is expected to show large placements that are largely the result of drought liquidation in the Southern Plains but secondarily by increased Mexican cattle imports. This is offset to a degree by smaller cattle imports from Canada. Nevertheless, total feeder cattle imports, combined with decreased veal slaughter, may explain more than one third of increased feedlot placements through April. This estimate is based on preliminary weekly import data and expected April feedlot placements. It is unlikely that the current pace of Mexican cattle imports can be maintained for the entire year but strong U.S. feeder cattle prices remain an important incentive for Mexican cattle to move north. The drought that is affecting Texas and surrounding regions also has extended in to northern Mexico in recent months. This may spur additional cattle exports if dry conditions in northern Mexico persist past May, which is normally the end of the dry season.
Our thanks to OSU Beef Market Economist Dr. Derrell Peel for his latest market analysis that comes from the weekly electronic newsletter, Cow Country News.
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