With much of the value of US meat production tied to exports, it’s not surprising that a work slowdown by West Coast longshoremen concerns some agricultural economists.
The slowdown at 29 US West Coast ports has been in place since Oct. 31 after the Pacific Maritime Association, and the International Longshoreman and Warehouse Union could not agree on terms of a new contract. The previous contract expired July 1.
Roughly 10% of US beef production, 22% of US pork production and 20% of US chicken production is exported each month, so any pause in the flow of product through US ports is an issue. University of Missouri economists Ron Plain and Scott Brown said the issue has crisis potential.
The USDA said there were 441 million pounds of beef in cold storage on Jan. 1, up 10.9% from Dec. 1. Although this was down 0.4% from a year earlier, it likely should have been down even more.
Commercial cattle slaughter last year totaled 30.1706 million head, down 7.1% from 2013 and the lowest since 1963.
That implies that year-over-year supplies of beef in cold storage are being augmented by unshipped inventories of beef, and anecdotal reports indicate this is happening.
BOXED BEEF PRICES DECLINE
If beef supplies are backing up in the freezers because of delayed exports, prices for fresh beef should be going down, all other things being equal, and prices are weakening.
After dropping sharply last week, the USDA reported very steep declines on Monday. Its choice boxed beef cutout value fell $3.71 per cwt from Friday to $247.70, and its select cutout value plummeted $4.53 to $240.26.
Sales into the spot market were very good with 140 loads of fabricated product moving.
However, things in the beef market often are not what they seem.
USDA statistics show a seasonal decline for beef prices into February. Product values last year were more volatile than the average of the previous five years as supplies of fed cattle tightened. Cattle supplies remain tight so prices for beef could be expected to remain volatile as well.
FAS STATS INCONCLUSIVE
USDA Foreign Agricultural Service export statistics are inconclusive on the matter.
Total fresh, chilled or frozen muscle cuts of beef exports last year totaled 680,200 tonnes, which included any unshipped orders from the previous year. This is down from 695,000 tonnes in 2013, but shipments to Asian destinations, those most likely to have been affected by a port slowdown, were up, except for those to Vietnam.
It could be argued that beef shipments through West Coast ports were speeded up because shippers and buyers worked to get ahead of a pending labor action, and that the slowdown began so late in the year that FAS statistics haven’t caught up. Many traders will be watching this drama unfold in coming weeks for statistical proof of a beef export backlog.
CASH CATTLE MARKETS UNTRADED
Cash cattle markets this week have yet to trade. No packer bids were reported through Tuesday, although feedlot asking prices were holding around $162 per cwt on a live basis and $260 on a dressed basis. Cattle traded last week from $158 to $160 live and $256 to $257 dressed.
Cattle feeders are holding tough on prices, feeding cattle to heavier weights, as they try to wrestle a few more dollars out of each animal sold for slaughter. Yet packers are working to maintain a margin as beef prices drop.
The CME Feeder Cattle Index closed at $215.36 through Monday, down $2.25 from the previous day. The Index continues to hold a significant premium to the Jan futures contract, which expires Thursday.