Mexico and Canada in 2015 were, respectively, the No. 1 and No. 4 volume destinations for U.S. beef exports. So it’s no understatement to say that the integrated North American market is vital for the health of the U.S. cattle/beef industry. It thus came as something of a shock that exports the first two months of the year were so weak.
Exports to Mexico in January and February fell 18 per cent in volume (31,850 metric tons) and fell 28 per cent in value (US$143.4 million). Exports to Canada were down 11 per cent in volume (17,532 mt) and down 25 per cent in value (US$104.7 million). The U.S. Meat Export Federation, which compiles the data, gave no reason for the weakness in exports to Canada. But it made it clear that the weak Mexican peso offset any decline in U.S. prices.
Fortunately, export volumes were higher to most Asian markets and steady elsewhere. But they were not enough to offset the volume declines in North America. Total February beef exports were 83,203 mt, up slightly from last year but their value dropped 18 per cent to US$437 million. January-February exports were up two per cent in volume (165,504 mt) from a year ago but fell 16 per cent in value to $$875.1 million. Indications were that volumes improved somewhat in March and April but that values remained depressed.
The meagre year-on-year growth in volume is probably more troubling than the value decline. The U.S. is producing more beef than last year so there’s more to sell on the domestic market than a year ago. That’s one reason why the weekly comprehensive beef cut-out (comprised of cuts and grinds) was running 13 per cent below last year in mid-April. But these lower prices did not stimulate the kind of increase in export volumes that packers had expected.
The lower export values in part reflect the lower prices. They might also reflect the product mix of exports, which can vary considerably from month to month. For example, a month of big sales of short ribs would bring a higher value for the month than if the big seller was short plates. Even the price of short ribs has declined from 2014, a reflection of how international trading conditions can affect wholesale beef prices.
USDA Choice short ribs averaged around US$5 per pound in 2014, going as high as US$5.50. But the price fell back to US$3.50 after Australia received a reduction in its export tariff in Japan. The price then recovered to US$4.25 to US$4.50 after Australian production declined sharply at the start of this year.
Meanwhile, the U.S. industry’s current preoccupation is over the grilling season, when Americans fire up their barbecues and buy their favourite steaks. Some market bulls had hoped the early Easter this year would mean grilling would start earlier and give a boost to retail beef demand. But April began as it always does, with only modest retail feature activity. It didn’t help that sizable parts of the country were still experiencing snow and blizzards.
As in past years, more aggressive retail featuring was likely only begun in the last week of the month. One reason for the modest features in April was that boxed beef prices (cuts and grinds) ran up unexpectedly from mid-February until late March. This made it difficult for retailers to set aggressive features for April. Boxed beef prices by early April had declined sharply, which will allow retailers to feature beef more aggressively from the start of May into June. Cattle feeders hope this will mean an uptick in fed cattle prices, as they had fallen for two weeks in a row as April began.