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USDA Releases Long-term Trade Projections

USMEF Economist Erin Borror

USMEF Economist Erin Borror

by Erin Borror, USMEF Economist

USDA recently released its long-term meat and poultry trade projections, in conjunction with last week’s USDA Outlook Conference. Please note that these projections are in carcass weight basis, so they do not include variety meat. The projections were based on preliminary 2014 export data compiled in November. USDA also does not factor in potential trade from new trade agreements such as the Trans-Pacific Partnership or from other policy changes.

Over the next 10 years, USDA expects the largest growth in pork imports to be in China, Mexico, South Korea and Hong Kong. Relatively flat imports are projected for Japan, and a significant decline is anticipated in Russia. For pork exporters, widespread growth is expected with U.S. exports projected to increase 19 percent, the EU, 21 percent, Canada, 9 percent and Brazil, 44 percent. Further country-specific details are available here.

The long-term projections for beef trade show strong growth over the next 10 years across all major importers, including North Africa and the Middle East, Hong Kong, Russia, China, Korea and Mexico. USDA expects a slight increase in Japan’s imports and a decrease for the European Union. Corresponding with the expected growth in African and Middle Eastern imports, USDA expects the strongest export growth from India – up 78 percent. Projections are also optimistic for the United States (+34 percent) and Brazil (+32 percent), Australia’s exports are forecast to decline 10 percent from their 2014 peak. More country-specific details are available here.

For poultry, USDA expects strong growth in most major import markets, including the Middle East, Africa and Mexico. A slight decline is expected for Japan and a significant decrease is projected for Russia. Brazil is expected to lead export growth, followed by the United States. A slight decline in EU exports is projected. More details are here.

Compared to these projections, USMEF is a bit more optimistic about U.S. beef and pork export potential, with growth in the range of 40 to 50 percent expected over the next ten years. There are, however, many uncertainties facing the U.S. industry this year, not to mention over the longer term. Beef exports in the coming year are expected to hold relatively steady with 2014, with modest growth expected for Japan, Korea and Taiwan. Exports to Canada and Mexico will be challenged by the strong U.S. dollar and historically high U.S. beef prices, while demand in Hong Kong is a factor to watch carefully.

With Australia receiving widespread rains over key beef-producing regions, its cattle slaughter should slow with improved grazing conditions. In the first two months of the year, Australia’s cattle prices jumped more than 50 percent to reach record levels, even as slaughter levels remained elevated. Tighter beef supplies are anticipated in the months ahead, with Meat and Livestock Australia forecasting a 14 percent decline in production and a 20 drop in exports this year – depending on rain and pasture conditions. The anticipated decline in exports is across most major markets, although U.S. imports of lean grinding material are expected to remain strong.

The outlook is less certain for pork, but USMEF still expects growth in U.S. pork exports this year. Ample supplies of affordable European pork are expected to continue to weigh on the Asian markets, with the weak Euro adding to Europe’s competitiveness. The Russian market is not expected to reopen anytime soon, further bolstering the availability of EU pork. However, U.S. hog prices are now lower than those in the EU, meaning U.S. pork should be nearing a price-competitive advantage in some markets.

As usual, China is a major question mark on the import demand side. The run-up to Chinese New Year did not include any increase in pork prices, which is not a good sign for Chinese demand. Domestic pork supplies remain ample and prices for imported variety meat were also weak ahead of the holiday. China’s pork producers lost money for much of last year, but it is not yet clear whether a significant number sold hogs. Investment in commercial hog production continues and feed demand appears robust, so there is no indication of a looming shortage of Chinese pork. It is possible that China will produce less pork in the second half of the year, as its Ministry of Agriculture claims that sow numbers have declined significantly. But at least to this point the market is not showing any bullish signs.

For U.S. pork exports, another record year is projected for Mexico, while demand in Korea is expected to remain strong and exports to Japan should be relatively steady. Growth will continue for Central/South America and likely the ASEAN region, benefiting from more moderate U.S. prices.