Dollar May Be Cutting Beef Exports

The US Dollar Index hasn’t been this high since August last year and may be behind the current slump in beef export sales.

Net beef export sales of 7,300 tonnes for delivery yet this year were down 23% during the week ended Aug. 14 and down 41% from the prior four-week average as the US Dollar rises in value, according to the USDA’s Foreign Agricultural Service.

Actual weekly exports of 13,500 tonnes were down 4% from the previous week and 7% from the prior four-week average, FAS said.

The US Dollar Index, which is a comparison of the US Dollar’s value against a basket of other currencies and therefore is a good indicator of relative value, rose Thursday to a high of 82.42 and has set new highs going back for more than a year for the last three days.  Value, volume and open interest all picked up sharply in June as ISIS was ramping up attacks in Iraq and Israel and Hamas intensified their attacks on each other.

Investors fled to the relative safety of the US Dollar, which is good for Dollar investors but not so good for those trying to export goods and services to other countries since it increases the de facto cost to potential buyers.  In the wake of the beheading of photojournalist James Foley, further flight to safety is being seen.

The US Meat Export Federation compiles monthly export totals from the Commerce Department and thus are less up-to-the-minute with their statistics, but total beef and beef variety meat exports through June amounted to 585,953 tonnes with a value of $3.3 billion.  This was up 8% in volume from 542,560 tonnes and up 16% in value from $2.8 billion a year earlier.

A rising US Dollar value could cut into that in coming months, and FAS figures show the decline likely is beginning.




A slump in beef export interest may also be tied to high prices.  Wholesale beef prices are backing down from record highs but remain historically high, and the pullback may be giving foreign buyers ideas that even lower prices are in store.

The USDA’s beef cutout value moved lower again Thursday, with the choice cutout reported at $250.46 per cwt, down $1.09 for the day, and off $6.28, or 2.45%, from $256.74 a week ago.  Select beef, at $240.82 Thursday, was down $2.25 from Wednesday and down $7.75, or 3.12%, from $248.57 a week ago.

Thursday, 125 loads of fabricated product were sold into the spot market after 177 loads were sold on Wednesday.  The choice/select spread widened to $9.63 as the percentage of choice cattle slaughtered declines against the number of cattle grading select.

The declines in beef prices are coming in spite of lower slaughter rates.  Week-to-date slaughter was pegged by the USDA at 451,000 head, compared with 456,000 during the same period last week and 491,000 in the year-ago period.

That lowered slaughter rate is coming at a time when fed cattle supplies are up because of higher first-quarter placements that were fed to heavier weights.




Slaughter cattle supplies are expected to tighten in coming months as feedlot placements fall significantly below year-ago levels.

The USDA releases its monthly Cattle-On-Feed report today, and a Reuters survey shows traders and analysts expect July placements to fall 9.1% below a year ago as high-priced calves discourage feeders from buying them to refill pens.

Feeder cattle prices are being driven by tight supplies after years of drought, although feeder cattle are slipping now as buyers recheck their breakeven calculations and conclude current values do not offer them a profit opportunity.

The CME Feeder Cattle Index for the seven days ended Wednesday was $218.27 per cwt, down $1.19, compared with Thursday’s Aug futures settlement of $215.20, up $0.25.