Global export volumes were up 22 percent year-over-year (yoy) for January–April of 2016, reaching 2.6 million metric tons (mmt), dominated by huge shipments out of the EU that were largely destined for China. For the top exporters – the EU, the U.S., Canada, Brazil, Chile, and Mexico – the EU share of exports jumped from 38 percent in 2014, to 42 percent in 2015, and now 47 percent for January–April 2016, while the U.S. share dropped from 35 percent, to 33 percent, to 27 percent. For the top exporters, China/Hong Kong accounted for 27-28 percent of exports in 2014-2015, and through April of this year, China/Hong Kong accounted for 41 percent of exports. Exports through April to China/Hong Kong were up 88 percent yoy at 1.09 mmt. When excluding China/Hong Kong, the top exporters shipped 1.518 mmt to the rest of the world, down 3 percent yoy. Also excluding China/Hong Kong, exports from Canada, the U.S. and Chile were down 10-12 percent while exports from the EU were up 5 percent and exports from Brazil were up 49 percent, mostly to Russia.
China/Hong Kong was the largest importer for January–April at 1.09 mmt, up 53 percent yoy (when using exports to China/Hong Kong). Japan followed with 354,374 mt, up 14 percent. Other growth markets included the U.S. at 171,870 mt, +2 percent, Korea at 165,648 mt, +3 percent, the Philippines at 88,684 mt, +30 percent, Russia at 82,691 mt, +59 percent, and Vietnam at 24,000 mt, +175 percent. Imports were lower compared to last year for Mexico at 288,000 mt, down5 percent, Canada at 57,907 mt, down 1 percent, Australia at 56,882 mt, down 4 percent, Taiwan at 27,296 mt, down 23 percent, and Singapore at 33,456 mt, down 8 percent.
In May, yoy hog prices in USD were higher in China (+39 percent) and Japan (+25 percent), while prices were fairly close to year-ago levels in Taiwan (down 1 percent), Chile (down 2 percent), and the EU (down 2 percent). Prices were lower than year-ago levels in Canada (down 4 percent), the U.S. (down 5 percent), Mexico (down 8 percent), Brazil (down 16 percent), and Korea (down 21 percent), although Korea’s prices have since rebounded.
China/Hong Kong Imports
China’s April pork and variety meat imports were close to the March record at 229,519 mt, +79 percent yoy. Hong Kong pork and variety meat imports were larger in April (84,019 mt, +17 percent), so the combined China/Hong Kong total, after subtracting re-exports, set another new monthly record at 267,450 mt, up 53 percent yoy. January-April China/Hong Kong pork and variety meat imports reached 924,861 mt, up 53 percent yoy.
Excluding variety meats, China/Hong Kong imports of pork totaled 506,656 mt, up 88 percent yoy for Jan-Apr. In April, China’s direct imports of pork cuts set another new record at 118,578 mt, with Germany and Spain as the largest suppliers, followed by the U.S.
China’s pork & variety meat imports set yet another record in May at 290,063 mt, up 26 percent month/month and up 155 percent yoy. Imports from the EU were 192,635 mt, +128 percent and from the U.S. 55,383 mt, up 216 percent yoy. For Jan-May, China imported an additional $1 billion in pork & variety meats or +495,000 mt as imports totaled 1.078 mmt, +85 percent; valued at $1.956 billion, +101 percent (partly reflecting more cuts in the mix). China’s hog prices started to ease in June, following the Dragon Boat holiday, and it remains to be seen whether the downturn will be sustained, or whether the market merely pausing, with the potential for prices to remain high through the end of the year. Most analysts think it is going to take time for China’s production to recover, with disease issues and the smaller sow herd limiting piglet supplies. But there is great uncertainty about China’s ability to maintain this record buying pace for imported pork, and weakness has been detected in the wholesale markets.
Korea’s pork and variety meat imports were steady in May, down 1 percent yoy at 42,840 mt, with decreases from the U.S. and Canada, but increases from the EU, Chile, and Mexico. Jan – May imports were still up 2 percent from last year’s strong pace at 208,488 mt, with a 13 percent increase from the U.S., but a 5 percent drop from the EU. However, quarantine inspection data might show the more realistic picture with imports through May at 138,436 mt, down 23.5 percent yoy. Of this, U.S. pork import volume was 54,739 mt, down 17 percent and with a recorded market share of 39.5 percent, followed by Germany and Spain with 16.5 percent and 13.2 percent market share respectively. The difference between official import data and quarantine inspections relates to delayed importer clearance (paying duties in the new FTA year, etc.).
Japan’s pork & variety meat imports continued to trend above year-ago levels in April at 96,652 mt, up 4 percent, with larger chilled imports, steady frozen imports, and larger volumes of ground seasoned pork. Chilled imports were up 11 percent in April (30,966 mt), and in January-April were up 23 percent to 118,528 mt, led by growth from the U.S. (69,951 mt, +32 percent yoy and above 2014 levels) and larger volumes from Canada (44,556 mt, +16.5 percent). Frozen imports were steady in April (45,209 mt) but up 11 percent through April at 166,754 mt, driven by the EU (107,863 mt, +34 percent) and Mexico (20,177 mt, +19 percent) as imports from the U.S. and Canada continue to shrink. But imports of ground seasoned pork finally rebounded in April as cheaper picnics mean it makes sense to pay the 20 percent duty rather than trying to meet the gate price. April GSP imports were up 15 percent to 13,382 mt, putting the January-April total at 41,377 mt, +9 percent. Imports from the U.S. were up 10 percent to 28,754 mt while imports from Canada were down 16 percent to 5,784 mt, but the Netherlands and Germany have also been shipping more GSP, with imports from the EU reaching 4,753 mt, up 133 percent.
Japan’s hog carcass prices jumped to $2.47/lb in May, partly seasonal, but also moving above year-ago for the first time this year, up 13 percent, even as Japan’s chilled pork imports are on a record pace through April, and domestic production was up 3 percent. April ending inventories of frozen imported pork were down 9 percent yoy at 155,000 mt. Inventories have been building since the seasonal December low, but latest levels indicate continued growth in imports, especially of frozen pork (EU) and GSP (U.S. and EU).
EU pork and variety meat exports continued at a record-breaking pace in April, with shipments totaling 355,461 mt, up 64 percent yoy. EU exports to China were up 124 percent to 180,733 mt, and exports to Hong Kong were up 117 percent to 35,824 mt. Exports in April were also up to Japan, Korea, the Philippines, the U.S., Australia, Vietnam, and Taiwan. April exports of pork, excluding variety meats, were up 81 percent to 235,095 mt, with a tripling of exports to China at 110,875 mt.
Jan – Apr exports of pork were up 44 percent to 780,343 mt. Including variety meats, total exports were up 37 percent to 1.236 mmt. China/Hong Kong was the main export destination at 710,153 mt, +78 percent followed by Japan (114,916 mt, +22 percent), South Korea (72,897 mt, down 21 percent), the Philippines (66,713 mt, +42 percent), the U.S. (39,809 mt, +22 percent), Australia (29,990 mt, down 5 percent), and Vietnam (21,254 mt, +204 percent). China/Hong Kong accounted for 57 percent of EU pork and variety meat shipments and 47 percent for just muscle cuts.
Record export volumes and much more modest production growth plus the summer seasonal factor should be fueling higher EU pig prices, which has begun to happen slowly. EU prices have continued to gain traction in June, up 9 percent month/month, and up 2 percent yoy. At 150.75 euros/100kg, ($76.77/cwt), prices are still down 8 percent from the ’10-’14 avg.
The latest European Commission estimates show that EU production finally eased in March but with continued growth in some member states, including Spain and the Netherlands. Quarter one slaughter was up just slightly from last year, below the EC forecast of +1.7 percent, and certainly a slowdown considering slaughter growth in quarter one 2015 was 5 percent. Overall, the EC still does not expect a decrease in production until the fourth quarter. There are reports indicating intra-EU demand is improving after a terrible 2015, with summer weather inspiring grilling and this should support further strength in EU pork prices.
Canada’s pork and variety meat exports were up 13 percent in April at 92,368 mt, with China surpassing the U.S. as the largest export destination, taking 28,862 mt, a six-fold increase over last year. Jan – Apr exports were also up 13 percent from 2015 at 384,063 mt. Exports were down to the U.S. (126,493 mt, down 4 percent), Japan (62,581 mt, down 3 percent), and Korea (11,07 mt, down 19 percent), but up to China (100,165 mt, +381 percent), Mexico (32,304 mt, +11 percent), and the Philippines (11,026, +28 percent). Canada’s pork production is running up about 2 percent yoy, and prices are following a similar trend as those in the U.S.
U.S. Situation and Exports
USDA’s latest forecast is for 2016 U.S. pork production to increase by 1.9 percent from 2015’s record-large production to 11.32 mmt. 2017 production is expected to increase by another 2.6 percent to 11.62 mmt. Production levels have been trending near year-ago levels for the first half of this year, but third quarter production is expected to be up 3.6 percent yoy, and fourth quarter production is expected to be up 2.2 percent yoy. As slaughter levels ramp up through the fall and winter, pork production will increase, creating larger supplies available for export.
Hog prices averaged down 34 percent in 2015 to $50.23/cwt, and prices are expected to average $48.50/cwt in 2016, down another 3 percent. In mid-June, the pork cutout was at $0.87/lb., up 3 percent from 2015, but down 30 percent from the high price level in 2014.
April pork and variety meat exports were 188,324 mt, down 6 percent from 2015’s large volume. Jan – Apr pork exports were even with last year at 563,894 mt, while variety meat exports were down 3 percent to 158,751 mt. Jan – Apr total pork and variety meat exports were even with last year at 722,645 mt. Export volumes increased to China (114,482 mt, +117 percent) and Hong Kong (62,037 mt, +34 percent), for a combined total to China/Hong Kong at 176,519 mt, +78 percent. Through April, China/Hong Kong was the top export destination for variety meats and the third largest export destination for muscle cuts. Exports to other main destinations were lower than the previous year including Mexico (213,360 mt, down 10 percent), Japan (127,808 mt, down 15 percent), Canada (63,195 mt, down 1 percent), and Korea (51,251 mt, down 35 percent).
Global beef exports were basically even with last year, at 2.355 mmt through April, as strong growth from Brazil (+14 percent) and most of the smaller exporters plus steady volumes out of the U.S. helped offset the drop from Australia (down 16 percent), India (down 5 percent), and New Zealand (down 10 percent). On the importing side, data is showing a rebound, with top importer volume at 2.2 mmt, up 7 percent yoy, driven by growth for the Greater China region (estimated at close to 600,000 mt, up 26 percent) plus larger volumes for Korea (+27 percent), Egypt (+29 percent), the EU (+5 percent), Canada (+2 percent), Chile (+24 percent), the Philippines (+3 percent), Taiwan (+10 percent), and Indonesia (+63 percent). Imports were lower for the U.S. (down 11 percent), Japan (down 6 percent), Russia (down 6 percent), Mexico (down 8 percent) and Saudi Arabia (down 11 percent).
After holding strong last year, despite widespread significant decreases in pork values, unit export values for chilled/frozen beef decreased significantly from the same period last year, across all major exporters except Argentina (where prices fell dramatically last year and have since rebounded with the new government’s pro-export policies). Otherwise export prices were down 6 percent to 15 percent, with the biggest decreases for Canada, Mexico, NZ, the U.S., Uruguay and Brazil. These values are in USD/mt, so they partly reflect weaker currencies, but they also hint at weaker global demand. Beef production is increasing in the U.S., but that is not the case for most of the rest of the world, with smaller production in South America, as well as Australia—and Japan and Korea.
China/Hong Kong Imports
China’s beef and variety meat imports remained strong in April at 48,073 mt, +31 percent with Uruguay (13,386 mt, +19 percent) becoming the largest supplier, ahead of Australia (11,280, down 19 percent) and Brazil (11,247 mt). Imports were moderately higher from New Zealand and Argentina, while imports from Canada dropped to zero, following residue issues late last year. Jan-Apr total imports were up 68 percent to 191,994 mt, with growth from all main suppliers except Australia (41,548 mt, down 2 percent).
Hong Kong imports in April rebounded to 2014 levels, at 67,603 mt, up 22 percent yoy, with larger volumes from Brazil, the U.S., Argentina, Canada, and Ireland. Jan-Apr Hong Kong imports were still down 4 percent yoy at 234,614 mt, with steady volumes from Brazil, at 129,238 mt, much larger than the 57,505 mt of Brazilian beef that went direct to China. Hong Kong imports were larger from the U.S. (44,847 mt, +9 percent), and Canada has shifted more volumes to Hong Kong (8,007 mt, +37 percent). Imports from Argentina were nearly evenly split between China and Hong Kong and up just 2 percent from last year. Hong Kong imports from Australia were also down 20 percent to 9,425 mt.
Combined China/Hong Kong beef and variety meat imports for Jan-Apr were up 19 percent to 426,608 mt, led by strong growth from Brazil (186,743 mt, +45 percent) and easily offsetting the decrease from Australia (50,973 mt, down 6 percent) plus growth from Uruguay (49,507 mt, +21 percent) and the U.S. (44,847 mt, +9 percent).
Beef and variety meat imports gained momentum in April and were up 40 percent from the previous month’s total at 58,772 mt. However, imports were still down 10 percent from last April’s surge, with growth from the U.S. (20,273 mt, +22 percent) and Canada (1,672 mt, +327 percent) partly offsetting the decrease from Australia (34,182 mt, down 23 percent). Jan-Apr imports were still down 6 percent at 172,371 mt as a 6 percent increase from the U.S. (65,129 mt) didn’t fully offset the 10 percent drop from Australia (91,866 mt). Chilled beef imports were up 5 percent through April, at 66,692 mt, with a 40 percent increase from the U.S. (26,173 mt) offsetting the 10 percent drop from Australia (37,455 mt).
Japan’s domestic beef prices remained strong in May with Wagyu carcasses averaging $10.65/lb, up 32 percent yoy and Holstein steers dipped below year-ago in yen, but were still up 8 percent in USD, at $4.50/lb. Beef production in January-April was down 5.8 percent. Feeder cattle prices are at record levels, indicating continued tight supplies. Import demand should keep improving as frozen inventories of imported beef (103,619 mt) were down 18 percent yoy in April (although still up 10 percent from April 2014).
Korea’s beef & variety meat imports maintained their strong pace in May, with imports up 31 percent yoy to 35,334 mt. Imports were larger from all suppliers, including the U.S. (13,744 mt, +51 percent) and Australia (18,623 mt, +21 percent). For Jan – May, imports were up 28 percent to 168,398 mt, including a 50 percent increase from the U.S. (64,302 mt). Imports of chilled U.S. beef were up 58 percent to 8,985 mt, on a record pace. Total chilled volume was up 28.5 percent to 24,595 mt, with Australia as the other primary supplier (15,482 mt, +16 percent). Recent record–high prices for Hanwoo have facilitated the rapid substitution for U.S. beef at the retail sector.
Australia’s exports jumped back above 100,000 mt in May, the largest this year, but remained 14 percent below last year. Exports of 100,759 mt were lower than May shipments in 2013-2015, but were still up 16 percent from May 2012, ahead of the drought-induced increase in production. May exports were lower to most markets, with the exception of steady volumes to Korea and strong increases for Indonesia ahead of Ramadan and with the additional eligible export items/larger quotas (10,384 mt, +271 percent) and the Philippines (2,496, +65 percent).
Jan – May exports of 432,852 mt were down 18 percent yoy, but still up 5 percent from the same period in 2013. Shipments to the U.S. returned to 2014 levels and were down a third from last year’s surge (121,931 mt), while exports to Japan were down 14 percent to 100,476 mt, at multi-year lows. Exports to Korea have trended steadily higher over the past several years and were up 12 percent to 69,973 mt. Australian grass-fed beef is facing stiff competition from Brazil in China (39,528 mt, down 28 percent) and the Middle East (14,935 mt, down 33 percent), after Brazil regained access to China last year and Saudi Arabia early this year.
Australia’s chilled beef exports through May were down 9 percent to 119,385 mt, mainly reflecting smaller volumes to Japan (48,095 mt, down 9 percent), the U.S. (29,377 mt, down 22 percent) and the Middle East (5,467 mt, down 32 percent), while exports trended higher for Korea (14,309 mt, +16 percent), the EU (9,094 mt, +7 percent) and China (2,571 mt, +23 percent). Australia’s cattle on feed numbers have dropped below year-ago levels (down 5 percent in the March quarter), and cattle feeding margins are reportedly negative with high feeder cattle prices, and an uptick in feed costs. This could limit Australia’s grain-fed exports in the coming months.
Australia’s cattle prices are setting new records again in late June, at A$6.40/kg, up 27 percent yoy ($2.18/lb, +23 percent), with MLA’s young cattle indicator price now above the U.S. price. Australia’s herd rebuilding is going to take time, with the significant drop in female numbers since the 2011/12 peak. At an estimated 12.3 mil head, the breeding inventory this June is down 1.3 mil head and the smallest since 2000/01. Almost one-third of the beef cow/heifer inventory was slaughtered in each of the 4 years to 2015/16, with female slaughter peaking in 2014/15 at 4.76 mil head. Besides the smaller breeding herd, seasonal conditions and their impact on reproductive rates and calves produced per cow will also determine how fast Australia can rebuild the herd. Better grazing conditions will be critical, especially in Queensland and Northern Australia. Regardless, the herd will continue to shrink in 2016/17 and then slowly rebuild in the following years. This means Australia’s exports will not reach the peak levels of 2013-2015 for several years.
U.S. Situation and Exports
U.S. beef production is increasing this year, after five years of decreased production, and production is expected to continue to grow in 2017. USDA’s latest forecast estimates 2016 production at 11.19 mmt, up 4.1 percent from 2015. 2017 production is expected to be up another 4.5 percent to 11.7 mmt, which would be the highest production level since 2013. U.S. fed beef production is currently up 4.2 percent yoy, and the availability of exportable beef supplies should continue to grow in the second half of this year. Beef production is expected to ramp up in the third and fourth quarters of this year, with third quarter production expected up 5.2 percent yoy and fourth quarter production up 3.5 percent yoy.
Steer prices averaged down 4 percent yoy in 2015 at $148.12/cwt, and prices are expected to average $127.00/cwt in 2016, down 14 percent. In mid-June, the choice beef cutout was $2.26/lb., 10 percent lower than 2015 and 5 percent lower than 2014.
April beef and variety meat export volume was 88,190 mt, down 4 percent from 2015. Jan – Apr beef exports were 240,581 mt, down 1 percent from last year, while variety meat exports were 102,595 mt, up 3 percent from last year. Total beef and variety meat exports through April were even with last year at 343,176 mt. Exports were up to Japan (73,322 mt, +3 percent) and Korea (45,591 mt, +17 percent), but down to other main destinations including Mexico (69,450 mt, down 6 percent), Hong Kong (36,543 mt, down 5 percent), Canada (34,945 mt, down 8 percent), and Egypt (31,515 mt, +9 percent).