Beef markets likely to see more shocks, consumer prices higher

This year beef markets continue to experience shock waves from the dramatic beef production disruptions in the second quarter which are reflected in export data through July, according to Derrell Peel, livestock marketing analyst with the Oklahoma State University Extension.

He said U.S. beef exports, which dropped 31% year over year in May and 33% in June, increased sharply from June to July but remained 8% lower compared with the same period in 2019. The weekly data suggests exports continued to recover in August and are likely up year over year.

The U.S. Meat Export Federation reports July beef exports to Japan were down just 2% from last year, but are 4.3% higher year-to-date through July. Beef exports to South Korea were down 3.9% year over year in July and are down 6.8% through the year.

Peel said Japan and South Korea are the two largest beef export markets and represent 54.4% of total beef exports for the first seven months of 2020. He said Canada is now the third-largest beef export market with July exports up 10.7% and year-to-date exports up 11.8%. Mexico has dropped to number four with exports down 51.7% in July compared to last year and down 39.8% so far in 2020.

Beef exports to Hong Kong were up 14.7% in July but are down 5% year to date. July exports to Taiwan were up 8.5% year over year but are down 4.7% for the year through July. Hong Kong and Taiwan each represent a 6% share of total year to date beef exports. Beef exports to China in July were up 125.9% over last year and are up 81.5% year over year through July. China represents 1.6% of total beef exports so far in 2020.

Beef imports were up 41.1% in July from a year ago, pushing the year-to-date total up 8.5%. Beef imports were up from each of the four largest beef import sources. Canada, the largest source of beef imports, was up 12.7% in July but is down 5.8%  for the year. Mexico was up 34.3% in July compared to last year and is up 25.5% so far this year. Mexico now exceeds Australia as the number two source of U.S. beef imports. Australia was up 17.1% year over year in July but is down 2.7% for the year.

New Zealand was up 94.% in July and is up 13.3% year to date. Peel said so far in 2020, Canada and Mexico account for 44.3% of total beef imports and, combined with Australia and New Zealand, the top four sources represent 82.4% of total beef imports.

Currency exchange rates are important factors affecting international beef trade, he said. Since the COVID-19 impacts began in mid-March, the U.S. dollar has been significantly stronger compared to Argentinian, Brazilian and Mexican currencies and somewhat stronger against the Canadian, Australian and New Zealand dollars. Peel said a strong U.S. dollar is a headwind for beef exports and favors beef imports. The U.S. dollar has weakened slightly against the Japanese Yen, and the Hong Kong dollar, which does help support beef exports to those two major markets.

“Continuing COVID-19 impacts, global recession, political tensions and exchange rates will all be important in determining global beef trade in the coming weeks and months,” Peel said.

U.S. consumers are paying 12.7% more for choice U.S. round steak this month compared to a year ago. Ground beef prices are up more than 9% from a year ago, with ground chuck prices rising more than 7% in the period. Beef roast prices are up 11.7% from a year ago, according to the U.S. Department of Agriculture report on Sept. 11. While retail beef prices are up year-over-year they have declined from their peaks in June. At their widest gap this year retail prices were up 31% in June for Choice boneless chuck roasts, compared to June 2019. Ground beef prices peaked at $5.30 a pound in June, up 25.2% from the year-ago period.