USDA released the latest U.S. red meat trade data this week. At first glance the beef results were not especially favorable, but a closer look at the numbers makes them look more encouraging. The pork data seemed more supportive of the bullish cause, but appears mixed when examined more closely. The release stated September U.S. beef exports at 214.59 million pounds, which represented a monthly decline of approximately 13.4 million. In one sense that result wasn't all that bad, since the August total was the largest since October 2014. The magenta line on the following chart puts the monthly totals in perspective, and suggests the downtrend in place from mid-2013 to early 2016 has ended.
The lower lines on the chart depict the totals for three of the four big buyers of U.S. beef. Japan clearly remains our best customer, with last year's easing of its restrictions on those imports appearing to boost its purchases. But the most surprising result on the chart may be the ongoing increase in buying from South Korea. Despite the ferocious opposition of its domestic livestock industry, its imports have clearly been trending higher over the past three years. In fact, South Korea's purchases have outstripped those of Mexico since May. It is clearly our second largest customer at this point.
Another reason for optimism about the latest beef data emerges from the seasonal chart above. That is, while the September total clearly fell short of the August high, the drop at least partially resulted from a seasonal slowdown. Indeed, the monthly drop looks rather small when compared to the August-September decline implied by the five-year average. The disparity between this latest figure and its 2015 counterpart is also rather dramatic.
A look at the trade balance between U.S. beef exports and imports also yields a potentially significant shift. This third chart shows the U.S. became a net beef exporter in late 2010, only to see the long-term uptrend in international shipments reverse in 2011. Imports once again began routinely exceeding exports in early 2014 and have generally remained larger since that time. Imports topped exports once again in September, but the late-summer total only slightly exceeded exports. Ultimately, these results suggest the domestic beef situation could get considerable relief from the shift in trade flows.
U.S. pork exports slipped about 600,000 pounds from August to 415.741 million in September. Given the bearishness dominating the hog and pork sector in recent weeks, that looks like good news, but it becomes much less impressive when viewed in a seasonal context. We'll return to this point momentarily. The following chart shows total U.S. pork exports have been trending higher since late 2014. In fact, one could argue that they're on track to top their record highs in 2017 or 2018.
This chart also depicts Mexico's slow but steady emergence as the largest buyer of U.S. pork. The September total reached 144.1 million pounds, which fell only slightly short of the 148.5 million-pound record from December 2015. The blue line illustrating sales to China and Hong Kong reflects a huge disappointment to the U.S. industry this year. That is, after climbing sharply through early 2016, exports to China (and likely trans-shipments through Hong Kong) slowed significantly during summer. Hopes that those totals would retest the highs of 2008 and 2011 were obviously dashed, with the market suffering considerably as a consequence. The industry can realistically maintain its hopes for improving Chinese buying as more producers move away from the use of growth promotants (in order to gain access to the Chinese market).
This last chart illustrates one of the more negative aspects of the report. That is, while the September total clearly came in above both year-ago and 10-year average levels, the monthly decline was contra-seasonal in nature. That is, the 10-year average suggests a normal August-September increase of approximately 6.0 million pounds, with the September 2015 surge exemplifying a much better result. The fact that the persistent price losses suffered through late summer didn't spur a stronger demand response from export customers had to disappoint the industry. Still, given the huge production totals expected this fall, as well as the big price losses suffered since early summer, U.S. pork exports certainly seem likely to improve on both a cyclical and seasonal basis."