March 23, 2012

 

US beef export sales soar to 10-year high

 

 

With nearly a quarter of the tally going to drought-hit Mexico, US beef export sales last week were the highest in more than a decade, US government data showed on Thursday (Mar 22).

 

The USDA's weekly export sales data on Thursday pegged beef sales at 52,000 tonnes, the most since 96,044 tonnes were sold in December 2001.

 

Mexico, a major importer of US beef, bought 11,700 tonnes in the week ended March 15, while South Korea, another major market, booked 10,600 tonnes. The top beef market Japan bought 8,900 tonnes, USDA data showed.

 

The surge in exports surprised analysts, who had expected this year's high beef prices to slow sales, in both domestic and export markets.

 

"There was a lot of sentiment out there that exports and these high prices for beef were definitely going to ration consumer demand. The fact that we had this impressive weekly export number kind of flies in the face of that," said Tregg Cronin, analyst with Country Hedging.

 

Retail beef prices in the US hit consecutive record highs for five straight months through January, climbing above US$5 a pound. The average price eased slightly in February.

 

Tight supplies of cattle in the aftermath of a devastating drought in the southern Plains, especially in top cattle state Texas, have pushed up beef and cattle prices.

 

A drought in Mexico has cost farmers there more than a billion dollars in crop losses and set back the country's cattle herd for years. The lack of pasture forced ranchers there to sell more of their cattle to the US.

 

The export data supported Thursday's live cattle futures at the Chicago Mercantile Exchange, with the April contract rising US$0.325 to US$1.25275 cents per pound. In USDA's latest monthly report, overall beef exports in January were 182.2 million pounds, down 4% from the year before. Mexico bought 38.2 million pounds then, compared with 38.9 million in January 2011.

 

Some analysts said last week's surge in beef export sales could be an aberration, with importers possibly stepping up purchases to fill a temporary gap in supplies.

 

"It's definitely going to be a fluid situation moving forward," said Cronin.

 

Mike Zuzolo, president of Global Commodity Analytics and Consulting, called the hefty export increase "surprising" given the dollar's climb from its October lows.

 

He said the beef export sales imply that the export markets are "completely insensitive" to the change in currency and speaks to how tight beef supplies are in the US and globally.

 

"Mexico has come to the conclusion that their drought is significant enough and their feed grain prices are high enough that they don't have the animals. Also, it probably would make a lot more sense for them to cool inflationary pressures on their meat sector by importing directly the meat and skipping trying to feed out anything that they have down there," said Zuzolo.