The US Dollar Index has been rising since July 1, with the exception of a downturn late September/early October, yet the effect on meat exports appears to be nil. The greenback took another bounce after Tuesday’s elections.
Normally, if the currency of a selling country rises, it makes its exports more expensive to foreign buyers. The result usually is lower exports because the buyer cannot afford to pay more for the same volume of goods.
In the case of the US Dollar Index, which is a measure of the US Dollar against a basket of other currencies, the value has risen 9.82% to a high of $87.57 Tuesday from a low of $79.74 July 1. All things being equal, this would make US meat 9.82% more expensive for foreign buyers than it was on July 1.
But all things aren’t equal.
BEEF PRICES DYNAMIC, UP FROM JULY
Domestic and export beef prices are dynamic markets most easily measured by the daily cutout values calculated by the USDA. On July 1, when the US Dollar Index began its most recent long-term climb, the weekly choice cutout had already begun a counter-seasonal rise to its annual high and was listed at $247.80 per cwt.
From there, the cutout moved to its 2014 high of $262.26 set the second week of August. From there, the price declined and has moved broadly sideways since early September.
However, the choice cutout remains above its July 1 benchmark price. Last week, the USDA quoted it at $249.50 per cwt.
That means for the last four months, foreign buyers of US beef were faced with higher product prices, a condition that was exacerbated by the rising US Dollar value.
The pork cutout is much lower than it was on July 1, although it saw a fall rally that set the third highest price peak of the year in October. USDA figures show the weekly pork cutout in early July at $132.89 per cwt, on its way to the annual high of $136.11 the third week of July. The latest weekly cutout value was $98.51, a 25.9% decline from July 1.
Pork production is growing as the industry gains control of the PED virus.
BBEF, PORK EXPORTS BOTH RISE
All that would imply a foreign buyer bias toward pork and away from beef, but that has not been the case. It’s true that pork exports are up, but so are beef shipments.
In a conference call Tuesday, USMEF President and CEO Philip Seng said US beef exports are up 3% in volume this year through Septmber, while pork shipments are up 6%. He expressed surprise at the strength of demand for US meats.
It may be that October beef and pork exports will decline in response to the rising US Dollar, but current shipment trends give no hint of this.
USDA stats compiled by the USMEF show year-to-date beef shipments of 890,276 tonnes, 3% more than the 861,715 tonnes the previous year. These exports were worth $5.178 billion, 15% more than the $4.517 billion in the previous year.
Year-to-date pork exports of 1.645 million tonnes were 5% more than the 1.572 million shipped in the 2013 period. These exports were worth $5.046 billion, 14% more than the $4.420 billion last year.
With the US Dollar continuing to gain strength amid safe-haven concerns about other world economies, it’s safe to say foreign buyers likely will have to dig a little deeper into their wallets to import US beef and pork. Whether that will impair future sales seems questionable in light of export performance through September.