March U.S. beef exports improve
March exports of U.S. beef increased year-over-year in volume, according to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).
Beef exports totaled 89,482 metric tons (MT) in March, up 3 percent from a year ago and pushing first-quarter volume to 254,986 MT, up 2 percent.
With lower beef prices, March export value was $483.3 million, down 8 percent from a year ago, but the highest since December. For the first quarter, export value was $1.36 billion, down 13 percent from the same period last year.
Demand for high-quality chilled U.S. beef cuts in both the retail and foodservice sectors in Asia and the Middle East are spurring the resurgence in U.S beef export volume.
For the first quarter, exports to Korea increased 25 percent from a year ago in volume, while exports to Taiwan increased 20 percent. Led by strong demand for U.S. beef tongues, beef variety meat exports to Japan were up 9 percent.
Variety meat exports to Egypt helped push first-quarter beef exports to the Middle East up 13 percent. The United Arab Emirates (UAE) is the leading market in the region for beef muscle cuts, with first-quarter exports increasing 8 percent year-over-year.
Closer to home, weakness of the Mexican peso and Canadian dollar continues to be a significant obstacle for U.S. beef. First-quarter exports to Canada declined 9 percent from a year ago in volume. Despite a rebound in beef muscle cuts, exports to Mexico were down 14 percent.
First-quarter exports equated to 12.5 percent of total U.S. beef production and 9 percent for muscle cuts only – both down slightly from a year ago. Export value averaged $243.21 per head of fed slaughter in the first quarter, down 16 percent from last year’s pace.
U.S. beef arrives in South Africa
South Africa accepted the first shipment of U.S. beef, the USDA has confirmed. The South African market had been closed to U.S. beef since 2003.
After two years of negotiations, U.S. trade representatives and South African government officials concluded an agreement on sanitary barriers and related health certificates for U.S. beef and other meats.
Last year, USDA also engaged trading partners to eliminate all remaining animal health barriers related to bovine spongiform encephalopathy (BSE) for U.S. export markets. Fourteen countries removed all BSE restrictions and granted access to U.S. beef and beef products, including Australia, Macau, Philippines, New Zealand, Singapore, Ukraine, Vietnam, Egypt, Lebanon, Turkey, Costa Rica, Guatemala, St. Lucia and Iraq. The total value of U.S. beef and beef products exported to the 14 countries lifting BSE restrictions is in excess of $180 million.
Turkey looking to boost beef production by importing feeder cattle
Turkey’s General Directorate of Agricultural Establishments (TIGEM) launched a subsidy program to assist young farmers obtain imported cattle from about 20 countries, including those sourced from the U.S. The program targets imports of up to 50,000 head of feeder and breeding cattle and bulls.
Young farmers will not receive direct subsidies, but rather are eligible to receive feeder cattle and breeding females, up to a value of $10,620.
The preferred breeds under the new subsidized program are Simmental, Brown Swiss, Charolais and Hereford, as the country strives to build populations of dual-purpose breeds. According to the program announcement, TIGEM will contract directly with livestock organizations/associations in exporting countries, without any intermediate contractor.
Holsteins, many sourced from the U.S., already make up almost all of Turkey’s dairy herd. According to USDA data, the country imported nearly 81,000 head of U.S. female dairy replacements between 2011 and 2015, with a peak of 49,764 head in 2011.
U.S. cattle exporters confirmed interest in U.S. feeder cattle by Turkey.
Tony Clayton, Clayton Agri-Marketing Inc., Jefferson City, Missouri, said Turkey was sending a team to the U.S. to inspect potential cattle for the program. However, Clayton and Gerardo Quaassdorff, DVM, sales and management consultant with TK Exports Inc., TKE Agri-Tech Services Inc., Culpeper, Virginia, warned current economic conditions are creating headwinds for U.S. sales in the short term.
Quaassdorff said currency exchange rates and geographical distance make beef cattle from Australia, Uruguay and Chile more affordable at this time.
April global beef price index up slightly
Global consumers paid a little more for beef in April, according to the latest United Nations’ Food and Agriculture Organization (FAO) Food Price Index.
The April 2016 FAO Meat Price Index rose 0.8 percent from March. Restricted supplies and an up-tick in demand from the U.S. pushed Australia’s average monthly export prices to their highest level since October 2015.
The FAO Food Price Index is a measure of monthly changes in international prices of a basket of five food commodities – cereal, vegetable oil, dairy, meat and sugar. While the overall FAO Food Price Index rose slightly in April 2016, it’s still 10 percent less than a year ago.
Beef Margin Watch: Spring ends weaker
Beef margins were generally weaker over the last half of April, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC. Cattle prices contracted, while feed costs continued to increase in response to ongoing crop concerns in South America.
Finishing margins remained deeply negative in nearby marketing periods, and deferred margins against future placements are also negative. Lower replacement costs for feeders are helping offset the full impact of weaker fed cattle prices.
Cattle prices have been under pressure recently due to weakness in beef trim values, with packers having difficulty moving the extra fat trim at a time fed cattle slaughter ramps up heading into June. This will place added pressure on demand strength during the grilling season to help clear supply.
Visit the Margin Manager website.
USDA outlook boosts production outlook, but cuts prices
Improved forage conditions combined with growing cattle supplies and heavier carcass weights will boost U.S. beef production and pressure prices lower into 2017, according to USDA’s monthly Livestock, Dairy and Poultry Outlook Report, released May 16.
National average Choice steer prices are projected to be in a range of $124 to $129 per hundredweight, falling to a range of $118 to $128 per hundredweight in 2017.
USDA raised third- and fourth-quarter 2016 beef production forecasts on expectations of higher steer and heifer slaughter, partially the result of larger calf crops in 2014 and 2015 and a more normal marketing pace during the last half of the year. U.S. 2016 beef production is now forecast is 24.8 billion pounds, up 5 percent from 2015. Higher beef production will likely carry over into 2017, up another 4 percent to 25.8 billion pounds, as expansion continues and more cattle are slaughtered at heavier weights.
More heifers going to feedlots
Given a larger 2015 calf crop and expectations of increases in the 2016 calf crop, placements of cattle in feedlots in 2016 and early 2017 are expected to be higher.
Although a large number of cattle appear to have been taken off wheat in February and March in response to more rapid wheat pasture development than is typical, decisions by some producers to graze-out wheat could have the effect of extending both the number of heavy-weight feeder cattle and the period during which they would be available for placement in feedlots.
The most recent USDA Cattle on Feed report showed March 2016 placements of 800 pound or heavier feeder cattle in the largest feedlots (1,000 head or more) were above year-earlier levels. Any additional cattle remaining on wheat pasture will likely be placed on feed in April and into early May.
For the remainder of 2016, the availability of forage will likely support placements of relatively heavy cattle in feedlots, while moderating feed prices are expected to support finishing cattle to relatively heavy weights. Cattle weights are expected to move seasonally higher during the second half of 2016, but a return to more typical marketing patterns will likely preclude year-over-year gains in carcass weights of the magnitude seen in late 2015.
With the exception of lingering drought in the Southwest, early-May precipitation improved pasture conditions and crop outlooks across the South New Mexico, Arizona and California continue to show moderate to exceptionally dry conditions.
Is a slaughter bubble coming?
The heavier cattle placed on feed in March, April and May will likely go to slaughter in August and continue through fall and possibly into winter.
The slaughter convergence of heavier cattle placed on feed this spring and lighter cattle on feed since winter has the potential to create a fed-cattle bubble, pushing second-half 2016 beef production higher.
The latest Cattle on Feed report showed year-over-year increases in both the number of heifers on feed, and a larger heifer share of total steers and heifers on feed.
These increases may point toward a potential slowdown in heifer retention for rebuilding the cow herd, implying a slower pace of herd rebuilding than previously anticipated.
Wholesale prices plummet
Wholesale beef prices have yet to gain momentum as the spring grilling season gets underway. Historically heavy slaughter weights, coupled with larger-than-anticipated weekly cattle slaughter in late April and early May, have resulted in growing weekly beef supplies, keeping wholesale beef prices under pressure.
Weak demand for ground beef products and the popular middle-meat grilling items amid expanding weekly beef production remain a negative force across the entire beef complex.
The Choice cutout price for the week ending May 6 was $205.72 hundredweight, down $9.79 from the previous week and $50.89 lower than last year.
The Select cutout was reported at $196.49 hundredweight, down $9.82 from the previous week and $48.40 below last year.
Although retailers will likely take advantage of price declines in featuring beef in June and July, lower prices for pork and chicken will remain a factor in retailer decisions.
Cattle, beef imports lower into 2017
With steep declines in cattle from Canada and Mexico, U.S. cattle imports for 2016 are forecast at 1.8 million head, 9.3 percent below year-earlier levels. The U.S. 2017 cattle import forecast is 1.7 million head, about 4 percent lower year-over-year.
U.S. beef imports for the first quarter of 2016 totaled 793 million pounds, down 10 percent compared to the same period a year earlier. Second-, third- and fourth-quarter import forecasts remain unchanged, bringing the 2016 beef import forecast to 2.9 billion pounds. Total beef imports for 2017 are forecast at 2.6 billion pounds, a 12 percent decline relative to 2016.
Read the latest USDA beef outlook report. 
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Dave Natzke
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