Fri, 06 Apr 2018
US - Through the first quarter US beef imports are up about 6 per cent compared to the same period a year ago. However, the pace of imports has slowed down in recent weeks and we expect only a modest increase in Q2, reports Steiner Consulting Group, DLR Division, Inc.
We also agree with the USDA forecast for only a slight increase in imports for all of 2018. So far the gains in imports have been driven by Canada, which accounted for about 2/3 of the overall increase.
Poor pasture conditions forced Canadian cow-calf operators to push more calves into feedlots last summer and fall, bolstering the supply of cattle on feed at the end of the year and fed cattle slaughter.
Canadian feedlot placements between May and September of last year increased by 32 per cent y/y and on 1 December the feedlot inventory was up 12 per cent compared to the same period a year ago.
The larger inventory contributed to the 7 per cent increase in Canadian steer/heifer slaughter YTD. Fed beef production during this period has averaged around 36 million pounds per week, 7 per cent above year ago levels.
The rapid pace of slaughter in the last three months and lower placements have reduced on feed inventories in Canada. On 1 March the total inventory in Alberta and Saskatchewan lots was estimated at 897k head, 2.8 per cent higher than a year ago.
Imports from Mexico continue to increase as production there has been steadily expanding. Through 24 March beef imports from Mexico were higher than those from Australia (see table).
In recent years Mexico has emerged as a key beef supplier to the US. While we do not have specifics on the kind of product coming into the US we think it is mostly beef cuts rather than grinding beef.
Imports from grinding beef suppliers have been lower than a year ago. Spot supplies of lean and extra lean beef are tight, causing imported grinds to trade at a premium to domestic.
New Zealand beef imports are up thanks to a surge in shipments late last year. New Zealand supplies should improve seasonally in Q2 but will likely remain near year ago levels as more of their production goes into China.
Australian total beef exports in the first quarter were 237,683 MT, 10 per cent higher than the same period a year ago.
Shipments to the US during this period were 49,830MT, 2 per cent lower than the same period a year ago. On the other hand, Australian beef exports to China in Q1 reached 31,000 MT, a 27 per cent increase from year ago levels.
Australian beef exports to Japan in Q1 were 2 per cent higher than a year ago while exports to South Korea were up 8 per cent. Australian beef faces lower tariffs in Asian markets relative to US product.
A recent USDA/FAS document nicely summarized the difference in tariffs that US and Australian beef face in Asia and we have included that USDA summary at the bottom of the page.
The signing in March of the revised Trans Pacific Agreement (TPP-11) is expected to further lower tariffs for Australian beef.
Under that agreement, the Japanese beef tariff of 38.6 per cent is expected to decline to 9 per cent over the next 15 years while Canada is expected to phase out its 26.5 per cent tariff in the next five years.
Summary prepared by USDA/FAS and published in the semi-annual Australian livestock situation report.
You can read the full report by clicking here.