On March 24, the US and Japan reached an agreement to increase the three-trigger safeguard mechanism required for Japan to implement a higher tariff on US beef, said Brenda Boetel, agricultural economist at the University of Wisconsin-River Falls, in a letter to Extension agents called In The Cattle Markets.
The Livestock Marketing Information Center publication said, the three-trigger, as opposed to one, safeguard mechanism will reduce the probability that Japan will impose higher tariffs on US beef, limiting market access.
FOREIGN MARKETS VITAL
Foreign markets are essential for US beef, pork and poultry producers, Boetel said.
In 2021, the US exported 925,127 tonnes of chilled and frozen beef muscle cuts, she said. The US exported 12.3% of total beef and veal production in 2021, up 1.5% over 2021. Global sales were valued at more than $10 billion in 2021, with Japan being one of the largest markets, taking $2.4 billion.
With declining beef production and increased prices, 2022 exports likely will contract about 4% year over year, Boetel said. Although exports will be lower, they still may be historically high and continue to support cattle prices.
CONSTRICTING FACTORS
The bigger trade concern for cattle currently is the indirect effects from decreased trade opportunities for poultry because of Highly Pathogenic Avian Influenza and the decreased export potential for as China pulls back, she said.
Unlike the 2014/2015 HPAI outbreak, which resulted in substantial embargoes and lower exports of US poultry products, the effect on poultry trade thus far has been lower, Boetel said. In 2015, layers accounted for the large majority of lost birds, totaling about 12% of inventory. Turkeys grown for meat also were largely affected.
Losses of broiler chickens were less than 0.01% of the inventory, she said, but the US saw an almost 14% decline in the export level of broilers and a decline in retail prices for broilers of almost 4%. Given the increased supply available in the US and the lower price, US poultry consumption increased by almost 7%.
As of February, broiler exports were up 1.7%, Boetel said. However, the first case of HPAI was in February. Limitations on exports will be different in 2022 as now only exports from a defined region that pose a risk of spreading the disease can be limited.
If HPAI continues to expand though, the effect on trade will grow, and the potential to affect beef prices will continue to increase, she said.
Beef is the highest priced animal protein in the US and given the expected decline in production and continued strong trade, retail prices likely will continue rising, Boetel said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $141.48 to $143.00 per cwt, compared with last week’s range of $137.84 to $141.52. FOB dressed steers, and heifers went for $217.03 to $219.93 per cwt, versus $216.67 to $220.09.
The USDA choice cutout Wednesday was down $1.11 per cwt at $268.82, while select was off $2.68 at $256.53. The choice/select spread widened to $12.29 from $10.72 with 119 loads of fabricated product and 18 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.50 to $1.60 a bushel over the May futures and for southwest Kansas were unchanged at $0.10 over May, which settled at $8.15 3/4 a bushel, up $0.11 3/4.
No live cattle contracts were tendered for delivery Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $154.66 per cwt up $0.17. This compares with Wednesday’s Apr contract settlement $157.50, up $0.85.