Concerns that beef exports could be harmed if North Korea initiates hostilities aimed at the US pressured US live cattle and feeder cattle futures Wednesday, even though the US exports no beef to the seemingly battle-hungry country.
The issue lies with two of the US’ largest beef importing countries, Japan and South Korea. Japan’s imports of US beef were up 26.4% in the first half of this year to 402.3 million pounds, while US beef exports to South Korea were up 15.5% to 211.8 million, according to the USDA.
North Korea leader Kim Jung Un has issued repeated veiled and not-so-veiled threats against the two US beef customers. Both have even requested more arms to defend themselves in case of an attack. The island of Guam also has been mentioned this week in news reports of possible missile targets of North Korea.
STRONG H1 US RED MEAT EXPORTS
US pork and beef exports continued to trend above year-ago levels in June, capping a very strong first half. According to statistics released by USDA and compiled by the US Meat Export Federation, exports also achieved higher values on a per-head-slaughtered basis and accounted for a steady-to-higher percentage of total production.
June beef exports were the largest of 2017, reaching 109,554 tonnes – up 11% from last year and the largest June total since 2011, the USMEF said. Export value increased 10% to $602.5 million.
For January through June, beef exports were up 12% in volume (606,876 tonnes) and 15% in value ($3.35 billion) compared with the first half of last year.
Exports accounted for nearly 13% of total US beef production in June and 10% for muscle cuts only – each about even with a year ago. The ratios were the same for January through June, which was also steady with the first half of last year.
Export value per head of fed slaughter averaged $264.51 in June, up 6% from a year ago, the USMEF said. Through June, per-head export value was up 8% to $269.21.
It’s easy to see, then, why fears of military action against two of the US’ largest beef customers sent cattle investors to the sidelines. Such a shock could bring exports down sharply.
What isn’t clear, however, is just how much any military strike against Japan or South Korea actually would affect US beef exports. Market analysts say it’s likely that some pullback would occur, but the actual level might depend on the where and how much a strike might occur.
CATTLE, BEEF RECAP
The weighted average of fed cattle sold on the livestock exchange video auction Wednesday was $115.04 per cwt, down $0.96 from $116.00 last week. Cattle with 1- to 9-day delivery sold at $115.28, versus $116 last week. Those with 1- to 17-day delivery sold at $114.50, and cattle with 17- to 30-day delivery sold at $114.00.
Widely scattered cash trades were reported Tuesday at $116 per cwt on a live basis in Nebraska, steady to down $1 from last week, with a few dressed-basis trades at $185, down $2 to $3. More action took place on Wednesday from $114 to $116, mostly $115, down about $2 from last week.
The USDA’s choice cutout Wednesday was down $0.59 per cwt at $201.66, while select was off $0.25 at $196.61. The choice/select spread narrowed to $5.05 from $5.39 with 106 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $149.48 per cwt, up $0.11. This compares with Thursday’s Aug settlement at $141.52, down $4.50.