Beef demand, exports support prices, analyst says
By Ron Sterk, Food Business News
ORLANDO, FLA. — Although beef, pork and poultry production are forecast record high in 2019, beef appears most likely to hold its value, Adam Stout, risk management consultant, INTL FCStone, said March 5 at the INTL FCStone Global Market Outlook conference.
The U.S. cattle inventory has been expanding since bottoming in 2014, Mr. Stout said, but the growth trend is slowing as indicated by higher cow slaughter and a larger mix of heifers in the slaughter mix, and 2019 or 2020 likely will be the last year of growth in the cycle. The 2018 calf crop was up 2% from 2017 and the highest in 11 years, and Jan. 1 cattle on feed also were up 2% from a year earlier and were the highest in seven years. But cattle placed in feedlots have been down for four consecutive months through December and likely will be down again in January, he said. Cattle marketings should be strong until April or May, and then begin to slow down into the summer, he said.
Weather has been “horrible” for feeding cattle, trimming average weights by 9 lbs as of Feb. 4 and probably by 11 lbs more recently, Mr. Stout said, which has fueled recent price strength. As a result, about 1% of beef production has been lost, which means the U.S. Department of Agriculture’s forecast of a 3% increase in 2019 beef production from 2018 may be “a little high” but still a record.
Strong beef cutout values have been supported by relatively strong domestic and export demand, he said. Beef exports to Japan and Mexico both were up 7% in 2018, and exports to South Korea, which overtook Mexico as the No. 2 importer behind Japan, soared 37%.
“Exports were the biggest story of 2018,” Mr. Stout said. “We’re looking at another year of record exports in 2019.”
The picture for pork varies considerably from that of beef.
“Wholesale pork prices have been under incredible pressure, especially in the past month,” Mr. Stout said, citing “production and export questions.” The market has struggled with ample supplies even as exports have increased, he said. Year-to-date hog slaughter was up 5%, but the pork cutout has declined 15%. He expects hog slaughter to ease but still remain above year-ago levels.
Exports have increased but not as much as was hoped, Mr. Stout said. Pork exports to South Korea soared 39% in 2018, but shipments to Mexico and Japan each declined 1% and to Hong Kong/China dropped 14%. The United States “missed out on a pretty big opportunity in 2018” as pork consumption in Mexico increased 5% annually but domestic production there was up only 2%, he said.
Affecting pork globally was the African Swine Fever outbreak in China, which Mr. Stout called the “biggest story in livestock and meat over the past several decades,” noting...