July 14, 2020

 

USMEF: Production challenges, economic headwinds slow US red meat exports in May

 

 

US beef and pork exports trended lower in May, due in part to interruptions in slaughter and processing, according to data released by USDA and compiled by the US Meat Export Federation (USMEF).

 

Beef exports dropped well below year-ago levels and recorded the lowest monthly volume in 10 years. Pork exports remained higher than a year ago but were the lowest since October 2019.

 

"As protective measures related to COVID-19 were being implemented, plant disruptions peaked in early May with a corresponding temporary slowdown in exports," said USMEF president and CEO Dan Halstrom. "Unfortunately, the impact was quite severe, especially on the beef side. Exports also faced some significant economic headwinds, especially in our Western Hemisphere markets, as stay-at-home orders were implemented in key destinations and several trading partners dealt with slumping currencies."

 

Halstrom noted that the recent rebound in beef and pork production will help exports regain momentum in the second half of 2020. The global economic outlook is challenging, but he looks for export volumes to recover quickly in most markets as US red meat remains an important staple, not only in the United States but for many international consumers as well.

 

"In what has been a remarkably turbulent year, consumer demand for US red meat has proven very resilient," he said. "Now that production has substantially recovered, the US industry is better able to meet the needs of both domestic and international customers. While the foodservice and hospitality sectors face enormous challenges, they are on the path to recovery in some markets while retail demand remains strong. Retail sales have also been bolstered by a surge in e-commerce and innovations in home meal replacement, as convenience remains paramount."

 

May beef exports were down 33% from a year ago to 79,280 tonnes, with value falling 34% to US$480.1 million, as shipments were higher than a year ago to Hong Kong and China but trended lower to most other markets. For January through May, beef exports fell 3% below last year's pace in volume (512,596 tonnes) and 5% lower in value (US$3.14 billion).

 

Exports accounted for 12.5% of total beef production in May and 10.5% for muscle cuts only, down from 14.6% and 12.0%, respectively, in May 2019. For January through May, exports still accounted for slightly higher percentage of both total beef production (14.1%, up from 14%) and muscle cut production (11.6%, up from 11.3%) compared to last year. Beef export value per head of fed slaughter averaged US$282.48 in May, down 10% from a year ago. The January-May average was US$318.87 per head, up 3%.

 

May pork exports totaled 243,823 tonnes, 12% above a year ago but down 13% from the monthly average for the first quarter of 2020. Export value was US$620.9 million, up 9% year-over-year but 16% below the first quarter monthly average. May exports increased year-over-year to China/Hong Kong, Taiwan and Vietnam, but trended lower to Mexico, Japan, Canada and South Korea. For January through May, exports were 30% ahead of last year's pace in volume (1.35 million tonnes) and 37% higher in value (US$3.53 billion).

 

Exports accounted for 36.2% of total pork production in May and one-third of muscle cut production, up substantially from last May's ratios (27.3% and 23.3%, respectively). For January through May, exports accounted for 33% of total pork production and 30% for muscle cuts, also up significantly from last year (25.4% and 22.1%, respectively). Export value per head slaughtered averaged US$72.30 in May, down only slightly from the April record and 32% higher than a year ago. The January-May average was US$67.33 per head, up 38% year-over-year.

 

Few bright spots for May beef exports, but China's growing demand encouraging

 

The US-China Phase One Economic and Trade Agreement has provided much-needed momentum for US beef exports to China, which totaled 1,671 tonnes in May (up 205% from a year ago), valued at US$13.2 million (up 187%). The agreement's red meat trade provisions took effect in late March, and in just a short time helped January-May exports to China reach 4,926 tonnes (up 66% from a year ago) valued at US$38.9 million (up 71%).

 

"Phase One provided significant market access gains for US beef, finally putting the US industry in position to compete in the world's fastest growing beef market," Halstrom said. "These early results are really just a small preview of what we expect to see as China's foodservice sector regains momentum and US beef production returns to its normal level."

 

Beef exports to Hong Kong also trended higher in May, reaching 8,397 tonnes (up 10% from a year ago) valued at US$68 million (up 8%). For the first five months of the year, exports still trailed last year's pace by 11% in volume (31,610 tonnes) and 10% in value (US$270.6 million).

 

Led by growth in South Africa, Gabon, Angola and Cote d'Ivoire, Africa continues to emerge as a key destination for beef variety meat in 2020. May variety meat exports nearly doubled in both volume (2,692 tonnes, up 99%) and value (US$2 million, up 94%) from a year ago and for January through May, exports totaled 12,783 tonnes (up 123%) valued at US$9.6 million (up 115%).

 

Other January-May results for U.S. beef exports include:

 

- May exports to leading market Japan dipped 33% from a year ago in volume (19,986 tonnes) and 36% in value (US$121.9 million). But exports through May remained ahead of last year's pace, increasing 5% in volume (134,138 tonnes) and 2% in value (US$841.7 million).

 

- Exports to South Korea were also hit hard in May at 18,319 tonnes, down 20% from a year ago, with value dropping 27% to US$120.4 million. Through the first five months of the year, export volume to South Korea was steady with last year's record pace at 101,664 tonnes but value declined 3% to US$719.2 million.

 

- US beef is also coming off a record year in Taiwan. Despite lower results in May, exports to Taiwan remained 2% ahead of last year's pace at 24,889 tonnes, with value slightly lower at US$215.8 million (down 1%).

 

The combination of lower US production, COVID-19 related restrictions and a slumping peso hammered May exports to Mexico, with volume plunging 65% to just 6,989 tonnes, valued at US$25.5 million (down 72%). For January through May, exports to Mexico were down 21% to 77,037 tonnes, valued at US$356.9 million (down 23%).

 

Despite trending lower in May, beef exports to Canada remained substantially ahead of last year's pace at 46,762 tonnes, up 15% from a year ago, while value increased 16% to US$307.3 million. Demand for beef variety meat has been especially strong in Canada, with exports jumping 33% to 4,332 tonnes, valued at US$8.6 million (up 44%).

 

African swine fever still fueling pork demand in China, Hong Kong, Vietnam

 

China and Hong Kong continued to drive pork export growth in May, though January-May exports also remained higher year-over-year to several other key markets. May exports to China/Hong Kong pulled back from recent record highs but still reached 112,820 tonnes, up 148% from a year ago, valued at US$259 million (up 188%). Through May, exports to China and Hong Kong tripled last year's pace at 526,273 tonnes (up 203%), valued at US$1.25 billion (up 284%).

 

Pork exports to Japan trended lower in May but January-May shipments remained 7% ahead of last year's pace at 169,912 tonnes, valued at US$704 million (up 10%). Chilled pork accounts for more than half of US exports to Japan, much of which is high-value product destined for retail. Japan's import data (also through May) showed a 4% increase in US chilled pork at 88,217 tonnes. Japan's imports of US ground seasoned pork increased 43% to nearly 50,000 tonnes, while value soared 69% to US$150 million. US share of Japan's ground seasoned pork imports climbed to 79%, up from 57% last year.

 

"Having US pork back on a level tariff playing field in Japan has been especially important in these challenging times," Halstrom said. "Without the US-Japan Trade Agreement, which took effect January 1, US pork would still be at significant disadvantage compared to European and Canadian pork – something we absolutely could not afford in what has traditionally been our leading value market."

 

Other January-May results for U.S. pork exports include:

 

- Although May pork exports to Mexico did not slump as badly as beef, volume was still down 28% from a year ago to 37,715 tonnes, with value dropping 40% to US$58.8 million. This pushed January-May exports 3% below last year's pace at 275,823 tonnes, though value was still up 4% to US$472.4 million. Mexico's pork production has been increasing and domestic pork prices moved lower this spring. This has increased price-driven competition in the market, especially with a historically weak peso and reduced consumer spending. With this in mind, July 1 implementation of the US-Mexico-Canada Agreement is especially important for reassuring customers in Mexico and Canada that duty-free trade guided by science-based regulations will continue.

 

- Demand for US pork in Chile has soared in 2020, with exports climbing 26% from a year ago to 21,643 tonnes, valued at US$605 million (up 30%). For muscle cuts only, exports accelerated at an even faster pace, surging 35% to 19,207 tonnes valued at US$53.4 million (up 51%).

 

- Led by outstanding growth in Nicaragua and El Salvador, exports to Central America increased 2% to 38,283 tonnes, with value up 8% to US$95.4 million. Exports also trended higher to Honduras, the region's leading destination for US pork.

- As Vietnam continues to struggle with African swine fever, its demand for US pork has increased dramatically. Exports increased 129% to 7,050 tonnes, valued at US$15.5 million (up 141%). On July 10, Vietnam will reduce its most-favored-nation tariff rate on frozen pork muscle cuts from 15% to 10%, which will further boost the competitiveness of US pork.

 

- USMEF