Rabobank Foresees Tough US Beef Export Market

Rabobank’s Third Quarter Beef Quarterly report expects US beef exports to remain challenged while Brazilian beef exports could rise.

“With little change expected in major beef-trading economies in the coming quarter, other than the possibility of the US Federal Open Market Committee raising interest rates, a strong US currency is expected to continue to affect global beef trade,” said Angus Gidley-Baird, senior animal protein analyst at Rabobank, in the report.

New Zealand and Australia beef exports to the US also are nearing their limits and could reach their end during the fourth quarter, the bank said.  Meanwhile, global economic conditions including weakening currencies in other countries in relation to the US dollar are changing the face of world beef trade.

 

STRONG US DOLLAR VS WEAKER GLOBAL CURRENCIES

 

It’s no surprise to say that a strong us dollar led to a reduction in US exports and an increase in US imports, but many may not take into account that a weakening Chinese economy and devaluation of the yuan are doing their parts at curbing beef prices there as well.  In addition the devaluation of the Brazilian real is expected to support Brazilian exports in coming months, including beef.

During the third quarter, emerging-market currencies have been hit particularly hard, exacerbating the problem of US exports.

Since New Zealand and Australian beef exports to the US are reaching quota limits, the availability of supply in the US will result in some short-term softening in the New Zealand and Australian markets, the bank said.

What’s more, there has been little progress in trade talks this quarter that might lead to more beef trade for those countries.  Australia has negotiated a Free Trade Agreement with China, but the industry is still awaiting parliamentary processes to enact the agreement.

Brazil continues to move toward a trade protocol with the US, and the Trans Pacific Partnership remains in the negotiation phase.

As the US and EU continue their embargoes on certain Russian products over Russia’s continued support of Russian separatists in Ukraine, Russia has extended its ban on agricultural products from the EU, the US, Canada, Norway and Australia for another year.  This market remains closed to US beef.

 

BEEF, VEAL EXPORTS DROP BELOW AVERAGE

 

Total US beef and veal exports tended to follow the 2009-2013 average through June and then drop in July, according to USDA Economic Research Service and Foreign Agriculture Service statistics.  While first-half activity tended to follow the average, July’s drop mirrored last year’s action.

US beef and veal exports tend to peak in July and fade from there with a strong dip in September, and since this year’s export pattern followed the average up until the June peak, the September dip may show up again this year, especially in light of the reshuffling of currency values.

 

CASH FED CATTLE TRADE STILL QUIET

 

No cash cattle trading was reported in the Plains states or Western Midwest through Tuesday.

Cattle bids were posted in Iowa at $198 per cwt on a dressed basis although asking prices were not revealed.  In the Plains, packer buyers were not bidding, and asking prices were reported around $133 per cwt on a live basis.

Cash cattle prices last week were down $6 to $7 per cwt with action in Iowa at $126 to $128 on a live basis with dressed action at $203 to $205.  Nebraska trades were reported at $129 to $130 live and $208 down to $202 dressed.  Trading also was reported in Kansas and Colorado and Texas at $128 to $130.  In all cases, the lower prices came later in the week.

The USDA reported lower boxed beef prices again Tuesday with its choice cutout down $1.63 per cwt at $209.31 and select off $1.73 at $207.69 with 131 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $190.46 per cwt, down $0.87.  This compares with the Oct settlement Tuesday of $180.82, down $4.45.