NEW YORK: I dislike the term “perfect storm” because it is too frequently used and too casually applied to many situations. However, it is an appropriate description of international cattle and beef trade in early 2015.
Several factors joined forces simultaneously to seriously impact beef exports and imports so far this year. Total beef production decreased nearly 6 percent in 2014 and resulted in dramatic increases in U.S. cattle and beef prices. A rapidly strengthening U.S. dollar in the second half of the year further exaggerated prices with respect to U.S. exports and imports, making U.S. exports more expensive and imported beef more attractive in the U.S. market.
Beef exports were mixed to major export destinations in 2014, compared to 2013, with increased exports to South Korea (up 19 percent); Hong Kong (up 16 percent) and Mexico (up 8 percent) offsetting decreased exports to Canada (down 22 percent) and Japan (down 1 percent) and holding total exports to a less than 1 percent decrease.
Total 2014 beef imports were up 31 percent, year over year, with increases from all major import sources. The majority of U.S. beef imports are processing beef, largely for ground beef, the demand for which was enhanced in 2014 by a 14 percent drop in U.S. cow slaughter.
The West Coast dock slowdown in late 2014 culminated in severe disruptions in meat exports by January of this year. The combination of adverse economic values and hampered logistics dealt a serious blow to beef exports in January. Total exports in January were down 19 percent year over year with decreased export quantities to all major beef export destinations.
Interestingly, the dock situation seemed to have less impact on beef imports, which jumped dramatically in January. January beef imports were up 64 percent over January 2013, led by Australia (up 124 percent); New Zealand (up 38 percent); Mexico (up 35 percent) and Canada (up 18 percent). Increased beef imports reflect continued strong demand for lean beef, primarily for ground beef.
U.S. cattle imports were up 16 percent in 2014 from one year earlier as U.S. cattle market prices and the strengthening dollar attracted more cattle form Canada and Mexico. Total feeder cattle imports were up 20 percent.
Anticipated increases in heifer retention in Canada and Mexico may limit cattle exports from both countries to the U.S. in 2015.
Despite tight cattle numbers and potential heifer retention, strong U.S. cattle prices and weaker Canadian and Mexican currencies keep the incentives to export cattle to the U.S. strong.
Moving forward in 2015, it’s not clear whether the dollar will continue strengthening relative to other currencies but U.S. beef and cattle prices will remain high in any event. The surge in beef imports from Australia has been fueled by drought-forced liquidation and unsustainable levels of Australian beef production.
Though some of the factors adversely affecting beef trade may improve, it is likely that U.S. beef exports will continue weak and drop more in 2015 while beef imports will likely remain elevated.
