U.S. Beef Exports Remain Firm Despite a Strong US Dollar
Tuesday, July 13th, 2010
The US dollar has gained ground against other currencies in the last six months as instability in global equities has caused investors to withdraw from some of the riskier markets and put their money in US$ denominated assets. The US dollar index, a weighted average exchange value of the US dollar vs. other major currencies, has gained more than 6% since January and in June was higher than the previous year.
The increase in the value of the US dollar tends to discourage US meat exports as it effectively increases the price of US beef, pork or poultry even when the price of those goods in the US remains unchanged. Indeed, part of the reason for the sharp pullback in cattle and beef futures back in May was due to expectations for softer exports in the second half of the year.
Since then, however, US beef exports have remained firm, driven primarily by strong shipments to South Korea, Russia, Japan and Hong Kong. The data comes from the weekly USDA export sales report and it includes only exports of fresh, chilled or frozen cuts of beef, no processed, cooked or other beef products. Also, the data is in Metric Ton and represents shipped weight values.
As a reference, one full truckload of beef represents a little over 18 MT. In just the last week of June, US shipments to S. Korea were reported to be 3100 MT, or the equivalent of 171 full truckload containers - not an insignificant amount. Overall, beef exports remain strong in a number of areas and they continue to grow. South Korea has been the main contributor to this growth. During the period Jan 1 - June 24, total beef exports to S. Korea were some 44,500 MT (based on the weekly sales report), some 21,655 MT or 94% higher than during the same period a year ago. So far, the growth in exports to S. Korea has contributed 41% to the overall increase in US beef exports.
Shipments to this market dipped only briefly in May following the sudden collapse in the value of the Korean Won but have recovered and are currently at the highest point for the year. Shipments to S. Korea seasonally improve into Q3 so we may see even higher weekly shipment levels before the year ends. Russia also has emerged as a growth market for US beef.
Traditionally Russia sources most of its beef in South America, especially Argentina and Brazil. Argentina has the largest per capita beef consumption in the world and in an effort to control domestic beef prices, Argentine authorities have limited the amount of beef available for export. This has decimated their industry, which is what happens when you play with incentives and sent Russian buyers to other markets, including the US. Japan and Hong Kong round out the other important growth areas so far this year - highlighting the importance of Asia for US beef.