December 13, 2012

In 2013, an increasingly larger share of US beef, pork, and poultry production now goes to export markets as beef exports will account for 10% of US beef production, while pork and broiler exports will account for 24% and 20% of production, respectively.

This is based on the latest USDA December estimates.

The announcement by Russia recently that it would stop purchases of US beef and pork unless such shipments are accompanied by a USDA certification that the product is free of ractopamine, is only the latest reminder of the inherent vulnerability of export demand. It is a key wild card that introduces significantly more price risk and volatility.

According to USDA's October trade data released Tuesday (Dec 11) total beef and veal exports for the month were 73,397 tonnes, down 2,711 tonnes or 4% from a year ago. It was the 10th consecutive month that US beef exports have posted an over-year decline, driven in large part by a sharp reduction in trade with Mexico, S. Korea and Vietnam. Beef price inflation has caused Mexican buyers to replace beef purchases with more pork and chicken. Beef exports to Mexico in October were just 7,366 tonnes, 5,192 tonnes or 41% less than a year ago.

On the other hand, US pork exports to Mexico increased by 10,489 tonnes or 35% compared to last year and broiler exports were 17,255 tonnes or 48% larger than last year. Beef exports to Asia have been mixed. October shipments to South Korea were 6,926 tonnes, 2,426 tonnes or 26% smaller than a year ago. Exports to Vietnam declined 1,835 tonnes or 47% from last year. The reduction in exports to Vietnam comes at a time when China has accelerated its overall beef exports.

While China continues to limit its purchases of US beef, it has accelerated beef purchases from Australia and New Zealand, with China becoming the fourth largest market for Australian beef in October and November. But despite the reductions in exports to these key markets, not all is negative for US beef. Some markets continue to grow. Canada was the largest market for US beef in October, importing about 17,968 tonnes of beef, 4,639 tonnes or 35% more than the same period a year ago.

On the other hand, US imports of Canadian beef declined 12,341 tonnes or 57%. This was in part due to the suspension of shipments from the XL plant in Alberta although the overall trend has been for Canada to export less beef to the US and import more. Beef exports to Russia in October were 6,424 tonnes, about 1,724 tonnes or 37% larger than a year ago.

US pork exports in October were 168,913 tonnes, about 7,000 tonnes or 4% larger than a year ago. US pork exports increased despite a 62% decline in shipments to China/Hong Kong. Exports to most other markets increased. Exports to Russia were 11,450 tonnes, 5,435 tonnes or 90% larger than a year ago. Year to date exports to Russia account for about 1.3% of all US pork production compared to 0.8% of US pork production in all of 2011. US broiler exports for the month were 290,145 tonnes, 15,637 tonnes or 5% smaller than a year ago. Higher exports to Mexico were offset by big declines in exports to Hong Kong (- 76%), S. Korea (-44%), Japan (-76%) and Russia (-15%).