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Delayed November data show red meat exports mixed

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Beef exports continue at record pace; headwinds weigh on pork exports.

U.S. beef exports continued on a record pace in November, while pork exports trended lower year over year, according to statistics released by U.S. Department of Agriculture and compiled by the U.S. Meat Export Federation (USMEF). November export data were released about one month later than usual due to the recent government shutdown, USMEF noted, adding that year-end 2018 data are expected to be available in early to mid-March.

USMEF reported that beef exports totaled 112,842 metric tons in November, up 1% from a year ago, while value climbed 6% to $709.2 million. For January through November, exports reached 1.24 million mt, up 8% year over year and 6% above the record pace of 2011. At $7.63 billion, beef export value was up 16% and has already broken the full-year record of $7.27 billion set in 2017.

Beef export value per head of fed slaughter is also on a record pace, averaging $322.97 in November, up 5% from a year ago, and was $320.72 during the first 11 months of 2018, up 14%. Exports accounted for 13.1% of total November beef production and 10.9% for muscle cuts, both steady with November 2017. For January through November, exports equated to 13.4% of total production and 11.1% for muscle cuts — up from 12.8% and 10.3%, respectively, in 2017.

“These numbers highlight the strong international demand for U.S. beef as exports are accounting for a larger share of growing U.S. production and are fetching higher prices, with some U.S. cuts trading at record prices in Asia,” USMEF said.

November pork exports totaled 206,852 mt, down 8% year over year, while value fell 12% to $538.7 million as retaliatory duties in key markets continue to generate headwinds for U.S. pork. For January through November, exports were steady with the 2017 record pace at 2.23 million mt, and value was down 1% to $5.86 billion.

According to USMEF, trade barriers are also pressuring pork export value on a per-head basis. In November, export value per head slaughtered was $48.80, down 16% from November 2017. Through the first 11 months of 2018, per-head export value averaged $51.46, down 3%. Exports accounted for 24.5% of total November pork production and 22% for muscle cuts, down from 27.7% and 24.1%, respectively, in November 2017. For January through November, exports equated to 25.7% of total pork production, down from 26.5% in 2017, and 22.4% for muscle cuts, up slightly.

USMEF president and chief executive officer Dan Halstrom noted that "2018 was truly a remarkable year for U.S. beef exports, which shattered previous records in both volume and value and reached new heights in several of our top markets. In the first half of the year, pork exports were also on a very positive trajectory, but unfortunately, U.S. pork has been heavily targeted for [trade tariff] retaliation. We remain hopeful that these disputes can be resolved soon so that U.S. pork can get back on a level playing field with its competitors."

Beef export growth widespread

According to the latest data, November was another strong month for U.S. beef exports to the key Asian markets of Japan, South Korea and Taiwan, while exports to the Association of Southeast Asian Nations (ASEAN) region also increased sharply.

For January through November, beef export highlights include:

  • Exports to leading market Japan were up 7% year over year in volume to 306,603 mt and 10% in value to $1.93 billion. However, USMEF said market access to Japan is a major concern for the U.S. beef industry, as key competitors recently joined Australia in benefiting from an 11% tariff advantage through the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP). U.S. beef remains subject to the 38.5% tariff rate and to Japan’s quarterly safeguard mechanisms. Competitors’ tariffs will decline again on April 1, the start of the Japanese fiscal year. The Trump Administration has announced its intention to negotiate a trade agreement with Japan, but formal negotiations have not yet begun.
  • U.S. beef has already shattered the previous yearly value record in Korea, with export value soaring 45% to $1.6 billion, while volume was up 32% to 220,770 mt. Although Korea’s imports from Australia and New Zealand also edged higher in 2018, U.S. market share increased significantly – reaching nearly 50% in volume and 56% in value. Through the Korea-U.S. Free Trade Agreement (KORUS), the duty rate on U.S. beef to Korea is 18.7% this year, down from 40% prior to implementation.
  • Exports to Taiwan were up one-third from the record totals posted in 2017, reaching 53,626 mt with a value of $495.7 million -- a record for the sixth consecutive year. The U.S. holds more than 75% of Taiwan’s chilled beef market, the highest of any Asian destination.
  • Beef exports to Hong Kong were 4% lower year over year in volume at 109,082 mt, but export value still climbed 13% to $865.3 million. Exports to China totaled 6,567 mt and were valued at $55.1 million. U.S. beef regained access to China in mid-2017, making year-over-year comparisons difficult, but in the second half of 2018, export volumes to China were higher year over year in every month except September, and November exports reached a new monthly high of 890 mt despite an additional 25% retaliatory duty.
  • Led by strong increases in the Philippines and Vietnam and slightly higher shipments to Indonesia, beef exports to the ASEAN region climbed 19% year over year in volume to 45,255 mt and 31% in value to $252.4 million.
  • Although beef exports to Mexico were up just 1% year over year in volume to 218,281 mt, export value to Mexico climbed 8%, to $966.7 million and will exceed $1 billion for the first time since 2015. The hike in value reflects a strong year for beef muscle cut exports to Mexico, which increased 7% in volume to 130,330 mt and 11% in value to $759.2 million.

Korea, ASEAN, Latin America, Oceania bright spots for pork

After a very solid start to 2018, November pork exports to leading volume market Mexico were lower year over year for the sixth consecutive month, dropping 14%  to 61,344 mt, while value fell 30% to $97.1 million. This pushed the January-to-November export volume slightly below the 2017 record pace to 717,618 mt, down 1%, while value was down 11% to $1.22 billion.

"The good news is that the U.S. continues to export strong quantities of hams, picnics and other pork cuts to Mexico," Halstrom said. "The bad news is that instead of generating positive returns for the U.S. industry, 20% of these sales go directly into the Mexican Treasury in the form of tariffs. This is why it is critical that the dispute over steel and aluminum tariffs be resolved as soon as possible."

January-to-November pork exports to China/Hong Kong were down 29% year over year in volume to 324,623 mt and fell 19% in value to $790.2 million. This region is by far the largest destination for U.S. pork variety meat, and these exports also declined 29% in volume to 209,090 mt and dropped 17% in value to $555.5 million because the 62% tariff rate makes it very difficult for U.S. pork to compete in China.

According to USMEF, the combination of retaliatory tariffs in China and Mexico contributed to sharp decreases in ham and picnic primal values, down 19% and 22%, respectively, from June through December compared to the same period in 2017. The decrease in values for these two primals averaged $9.95 per head for those seven months.

China’s retaliatory tariffs have also heavily affected prices for pork offals, USMEF said, and have forced some products into rendering due to the lack of alternative markets. Lost value for feet and picnic hocks was at least $1.80 per head, and losses are even worse when including products that have been rendered. USMEF said the cost of these retaliatory tariffs has been lost value of at least $11.75 per head on just hams, picnics and feet, or roughly $860 million in industry losses from June through December 2018.

Other key details from the January-to-November pork export results include:

  • Although November results trended significantly lower, pork exports to leading value market Japan were up 1% year over year in both volume, at 364,114 mt, and value, at $1.5 billion. Similar to beef, market access disadvantages in Japan are a major concern for the U.S. pork industry due to Japan’s implementation of CPTPP and its economic partnership agreement with the European Union. The most immediate impact of these agreements is expected in Japan’s imports of ground seasoned pork and processed pork products as duties on those products are phased quickly to zero, while the U.S. pays 20%.
  • Korea stands out as the largest driver of growth for U.S. pork exports in 2018, with volume up 41% to 216,899 mt and value climbing 44% to $603.8 million – already shattering previous full-year records set in 2011. “Unlike the situation at that time, when Korea was struggling with a widespread outbreak of foot and mouth disease, Korea’s domestic production was up 4% in 2018. So, the surge in exports to Korea is being driven by exceptional consumer demand and growing consumption,” USMEF said, adding that most U.S. pork entering Korea also benefits from duty-free treatment under KORUS.
  • Led by strong growth in Colombia and Peru and a second-half rebound in Chile, pork exports to South America have already topped the records set in 2017, increasing 24% year over year in volume to 120,059 mt and 17% in value to $292.3 million. Colombia is an especially important destination for hams and picnics at a time when Mexico and China are imposing higher duties.
  • In Central America, pork exports were higher year over year in mainstay markets Honduras and Guatemala and posted very strong growth in Panama, El Salvador, Nicaragua and Costa Rica. Export volume to the region was up 15% to 74,980 mt, breaking the 2017 record. Export value was up 12% to $176.8 million and will set a new record when December results are included.
  • Pork exports to the Dominican Republic have also exceeded previous yearly highs, with volume up 37% year over year to 39,453 mt and value jumping 29% to $85.7 million.
  • With solid growth in both Australia and New Zealand, pork exports to Oceania were up 12% in volume to 77,336 mt and 10% in value to $224.3 million. This region is also a key destination for U.S. hams with retaliatory duties in place in Mexico and China.
  • Strong performances in the Philippines and Vietnam drove pork exports to the ASEAN region 46% higher in volume to 63,978 mt and 33% higher in value to $158.6 million. Pork variety meat exports to ASEAN were especially strong, more than doubling year over year in both volume, up 138% to 26,626 mt, and value, up 115% to $42.7 million.

Variety meat demand bolsters November lamb exports

Driven by a sharp increase in variety meat shipments to Mexico, November exports of U.S. lamb were the largest of 2018 in both volume, up 167% year over year to 1,387 mt, and value, up 39% to $2.4 million. Lamb muscle cut exports trended lower in November to 232 mt, down 18%, and were valued at $1.46 million, down 3%.

For January through November, lamb exports reached 11,758 mt, up 77% from a year ago, and were valued at $21.4 million, up 21%. While most of this increase was due to strong variety meat demand in Mexico, muscle cut exports posted solid gains in the Caribbean, the United Arab Emirates, Taiwan and the Philippines.

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