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LIVESTOCK MARKETS: Strong finish for 2016 red meat exports

Asian markets drive strong beef export growth.

U.S. pork and beef exports wrapped up an excellent 2016 performance with very strong December results, according to statistics released by the U.S. Department of Agriculture and compiled by the U.S. Meat Export Federation (USMEF).

Pork export volume reached a record 2.31 million metric tons in 2016, up 8% year over year and 2% above the previous high in 2012. Export value increased 7% from a year ago to $5.94 billion. December pork exports totaled 222,635 mt, up 18% year over year, at a value of $564.2 million, up 20%.

Exports accounted for 25.8% of total 2016 pork production and 21.5% for muscle cuts — up from 24.2% and 20.8%, respectively, in 2015. December ratios were 28% for total production and 23% for muscle cuts only — up significantly from December 2015. Export value per head slaughtered averaged $50.20 in 2016, up 4% from the previous year. The December average was $56.06, up 24%.

Beef exports increased 11% in volume to 1.19 mmt and 1% in value to $6.34 billion versus 2015. December exports totaled 116,847 mt, up 24% year over year. This was the largest monthly volume since July 2013 and the largest ever for December. Export value was $619.1 million in December, up 22%.

Exports accounted for 13.7% of total beef production in 2016 and 10.5% for muscle cuts — up from 13.1% and 10%, respectively, in 2015. December exports accounted for 15.6% of total December beef production and 12.1% for muscle cuts only — each up more than two percentage points from a year ago and the highest since 2011. Export value per head of fed slaughter averaged $262.17, down 6% from 2015, but the December average was $301.97 — up 14% and the highest in nearly two years.

Pork to Mexico sets fifth straight volume record

A remarkable second half pushed 2016 pork export volume to Mexico to its fifth consecutive record at 730,316 mt — breaking the previous record by 2%. Export value to Mexico totaled $1.36 billion, up 7% year over year and the second highest on record, trailing only the $1.56 billion mark reached in 2014.

“At this time of record-large pork production, it would be hard to overstate the importance of Mexican demand to the U.S. industry,” USMEF president and chief executive officer Philip Seng said. “This is especially true for hams, as we are locked out of Russia — once a large destination for U.S. hams — and China's demand for imported hams has moderated in recent months. So, now more than ever, we need strong demand from our key customers in Mexico, and they have responded with extraordinary results. December exports to Mexico accounted for nearly $16 per head, and that's absolutely critical to the entire U.S. pork supply chain.”

Although down from the high levels seen earlier in the year, December pork exports to China/Hong Kong still were 40% higher in volume (47,242 mt) and 42% higher in value ($96 million) year over year. For the full year, exports to China/Hong set a new volume record of 544,943 mt, up 61%, and broke the $1 billion mark for the first time, rising 53% to reach $1.07 billion.

Other 2016 highlights for U.S. pork exports include:

  • Japan remained the leading value destination for U.S. pork, although exports fell 5% in volume to 387,712 mt and dropped 2% in value to $1.56 billion compared to 2015. However, chilled exports to Japan set a new record of 218,211 mt, up 8%.
  • Led by a record performance in Central America and a fourth-quarter surge in Colombia and Chile, USMEF reported that exports to the Central/South America region increased 11% in volume to 135,954 mt and rose 9% in value to $334.5 million.
  • Pork shipments increased to both Australia and New Zealand as the export volume to Oceania rose 10% to reach 69,963 mt and the value was up 3% to $197.3 million.
  • Exports to the Dominican Republic set another record in 2016, topping the previous year's totals by 10% in volume at 25,591 mt and 6% in value at $56.4 million.
  • Fueled by increases in China/Hong Kong and Canada and steady exports to Mexico, USMEF said pork variety meat exports jumped 20% in volume to 523,199 mt and 24% in value to $999 million — just short of the record levels reached in 2014.

Asian markets drive strong beef export growth

Driven by strong demand for higher-value chilled cuts, USMEF reported that beef exports achieved new value records in South Korea and Taiwan in 2016 and saw a strong rebound in Japan.

In Korea, December beef exports soared by 81% in volume to 20,333 mt and 88% in value to $130 million versus a year ago, capping a remarkable year in which total exports rose 42% to 179,280 mt at a value of $1.06 billion — up 31% from a year ago and breaking the previous value record by more than 20%. Korea's per capita beef consumption in 2016 set a new record of 34 lb. (carcass weight), so the U.S. not only gained market share but also capitalized on the market's overall growth.

Beef exports to Taiwan were also strong in December, with export value hitting its highest level ever, at $43.3 million. Full-year exports to Taiwan were up 25% in volume to 44,053 mt and 14% in value to $362.8 million.

Exports to Japan in 2016 were the largest of the post-bovine spongiform encephalopathy era, at 258,653 mt, up 26% year over year. Export value totaled $1.51 billion, up 18%. Chilled beef exports to Japan totaled 112,334 mt, up 44% from 2015.

“In addition to the strength of the U.S. dollar, U.S. beef overcame other severe challenges in these north Asian markets and achieved remarkable results,” Seng said. “Despite facing higher tariff rates in Japan compared to Australian beef, U.S. beef displaced its competition and won back significant market share."

He added that "the investment the U.S. industry made to rebuild consumer confidence in Korea is paying tremendous dividends, especially in the retail sector. We're seeing U.S. beef featured regularly by retailers who were once reluctant to carry the product.”

Other 2016 highlights for U.S. beef included:

  • Beef exports to Mexico increased 7% year over year in volume to 242,373 mt, although value fell 11% to $974.9 million. While challenged by a weak peso, USMEF said Mexico remains a key destination for muscle cuts such as shoulder clods and rounds, as well as for beef variety meat.
  • Led by strong growth in Chile and a doubling of exports to Colombia, beef exports to South America increased 6% in volume to 22,810 mt but dropped 2% in value to $92.7 million. According to USMEF, the region should see further growth in 2017 with the reopening of Brazil.
  • Exports to Central America were up 7% in volume to 12,745 mt, with top market Guatemala up 1% and exports to Honduras nearly doubling. Export value was $71.8 million, up 1%.
  • Fueled by a resurgence in Indonesia and solid growth in Vietnam, USMEF reported that beef exports to the Association of Southeast Asian Nations region were up 41% in volume to 29,920 mt and 15% in value to $156.9 million. Indonesia expanded access for U.S. beef in early August, so despite being closed to many products through the first seven months of the year, USMEF said U.S. exports to Indonesia set a new value record of $39.4 million.
  • Beef variety meat exports increased 10% in volume to 341,433 mt and rose 4% in value to $902.2 million in 2016. Liver exports increased 12% to 81,727 mt and reached a broader range of markets. “While liver exports to Egypt — the largest destination for U.S. livers — increased 4%, further growth was achieved in Central and South America and with the reopening of South Africa to U.S. beef,” USMEF noted.

Market recap

The February fed cattle futures market was mixed this week. Nearby contracts closed lower Monday at $116.425/cwt. but finished higher Thursday at $117.65/cwt.

March feeder cattle futures followed the same trend. Nearby contracts closed lower Monday at $123.525/cwt. but recovered somewhat, closing higher Thursday at $123.625/cwt.

For the beef cutouts this week, Choice and Select were lower at $188.71/cwt. and $185.82/cwt., respectively.

February lean hog futures continued to climb higher this week. Nearby contracts closed higher Monday at $71.35/cwt. and Thursday at $74.225/cwt.

Pork cutout values were lower Thursday. The wholesale pork cutout decreased to $84.73/cwt. Loins and hams closed lower at $73.68/cwt. and $60.78/cwt., respectively, while bellies closed higher at $182.68/cwt.

Hogs delivered to the western Corn Belt were higher this week, closing at $70.78/cwt. on Thursday.

The U.S. Department of Agriculture reported the Eastern Region whole broiler/fryer weighted average price at 85.76 cents/lb. on Feb. 3.

According to USDA, egg prices have been steady, with a weak to lower undertone. Offerings and supplies have been moderate to heavy. Demand has been light to moderate.

Large eggs delivered to the Northeast were lower at 78-82 cents/doz. Prices in the Southeast and Midwest were also lower at 81-84 cents/doz. and 73-76 cents/doz., respectively. Large eggs delivered to California fell to $1.51/doz.

For turkeys, USDA said the market was mostly steady, with light to moderate offerings. Demand has been light to good. Prices were unchanged at 96 cents to $1.05/lb. for both hens and toms.

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