Current Situation and Analysis - 2/6/2020

Friday, February 7, 2020
RECORD PORK EXPORTS…AGAIN

December trade statistics were recently released which finalize the 2019 year. Pork exports were record large at 6.3 billion lbs. (carcass weight) for 2019, exceeding the prior year’s record by 7.6% (444.9 million lbs.). Beef exports totaled 3.0 billion pounds, down 4.1% from the prior year. Broiler meat exports were 7.1 billion pounds, up marginally by 0.6% from last year.

Mexico remained the top destination for U.S. pork exports with almost 1.6 billion pounds shipped, down 11.7% from 2018. Shipments to Japan were 1.1 billion pounds (down 5.7%) making it the number two destination. China emerged as the number three market at just over 1.0 billion pounds, more than three times the amount shipped in 2018. Of the total shipments to China, 46.7% (472.8 million pounds) were shipped in the fourth quarter. South Korea and Canada were the number four and five markets, respectively, with shipments of 624.8 million pounds and 554.9 million pounds.

The strong pork exports were much needed considering pork production was record large at 27.6 billion pounds for 2019, a 5.0% increase over 2018. Nearly 22.9% of the pork produced in 2019 was exported, the highest since 2012. Export growth exceeded the increase in production which helped manage domestic supplies, but per capita pork consumption (retail weight) was 52.3 pounds per person, the highest in two decades. In 2020, pork production is forecast to grow 3.8% to 28.7 billion pounds, while exports are forecast to increase by 10.7% to 7.0 billion pounds. This equates to about 24.4% of the pork produced in 2020 that will need to be exported.  This includes a slight increase in domestic per capita consumption to 52.7 pounds per person.

In 2019, total beef exports were 3.0 billion pounds, down 4.4% (138.5 million pounds) from 2018. But 2019 was the second-highest annual export amount behind the record 3.2 billion pounds in 2018. Japan was the top destination at 796.7 million pounds (down 10.0%), while shipments to South Korea rose 7.1% to 683.3 million pounds. Shipments to Mexico, Canada, and Hong Kong were all down: totaling 424.5 million lbs. (down 5.4%), 268.1 million lbs. (down 10.6%), and 231.3 million lbs. (down 24.7%), respectively. Beef 2019 shipments to China were a record at 32.1 million pounds, a 45.9% increase from last year, but China only accounted for 1.1% of total U.S. beef exports in 2019.

Broiler meat exports totaled 7.1 billion pounds, a marginal increase (0.6%) over the prior year. Mexico easily captured the top spot with 1.5 billion pounds (up 4.9%) shipped in 2019. Gains were made to both Cuba and Taiwan, the number two and three markets, at 484.3 million lbs. (up 12.5%) and 455.2 million lbs. (up 3.7%), respectively. Remarkably, no broiler meat shipments were reported to China for December, following their drop of the nearly five-year-long ban on all shipments of U.S. poultry due to HPAI.

SHEEP & LAMB INVENTORY SHRINKS

Despite ending the year with higher feeder lamb prices, ewe flocks did not signal they were expanding in 2020.  All sheep and lambs on January 1, 2020 fell 30,000 head compared to last year, a 1% decline and the smallest inventory number on record.   The breeding herd was flat, but ewes 1 year and older saw a small decline.  Lamb producers in Colorado, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, and Tennessee increased the number of replacement lambs held, but that total was only 10,000 head above last year, or up 2%.  Market lambs in categories under 105 pounds showed decreases from 3-7% below a year ago, leading to the total market lamb figure slipping 2% from last year. Over 105 pounds was the only category showing an increase, up 5%.

Dressed weights indicate smaller market lambs were being slaughtered in the fourth quarter of 2019.  Dressed weights for lamb yearlings averaged 63.7 pounds, compared to 67.7 pounds in 2018.  Federally inspected lamb and yearling slaughter was below a year ago for the 2nd half of 2019, but on the balance of the year slaughter volume was up 13,000 head. Smaller ewe flocks over the last two years has limited gains in market lambs, even with higher lambing percentages in 2016-2019. 

Easter is scheduled earlier this year than 2019, which should increase slaughter rates in the first quarter.  Slaughter lamb prices have been climbing since the first of the year and will likely peak in March. A smaller ewe flock is expected to support higher feeder and slaughter lamb prices in 2020.  LMIC estimates slaughter lamb prices on an annual basis to be 4-5% higher in 2020 over last year and feeder lambs to post similar gains.  Small gains in the ewe flock could result in larger slaughter in 2021.  The fires in Australia will limit imported lamb to some extent offering an opportunity for domestic producers.

CATTLE INVENTORY UPDATE

The January 1 Cattle Inventory report showed the U.S. beef cow herd has stopped expanding.  All cattle and calves were down 0.4% from last year, but one of the more notable changes was the change to beef cow inventory, down 1.2%.  Beef cow replacements showed a smaller number, -1.9%, although was larger than pre-report analysts’ expectations that expected more than a 3% decline in beef replacement heifers.  The calf crop was also revised smaller to 0.7% below a year ago from the 0.5% estimate made in July 2019.  Oddly, heifers, steers, and bulls under 500 pounds were reported as higher, up 1.4% above last year.

Not all states showed contraction.  Wisconsin increased beef cow numbers by 7%, Utah was up 5%, Nevada increased 3%, and North Dakota was up 2%. Mississippi, Missouri, West Virginia, North Carolina, and Wyoming increased about 1%.  Declines in the beef cow herd centered on the Southern Plains region:  Kansas lost the largest number of beef cows, down 96,000 head, followed by Texas, down 85,000 head, and Oklahoma lost about 50,000 head. South Dakota lost 45,000 head, and Arkansas, Colorado, Illinois, Iowa, and Montana saw 20,000 head or more declines.

Beef cow slaughter has been high in January, as well, pointing towards further liquidation. Actual slaughter data is available through the 25th of January at the time of this writing and showed year to date beef cow slaughter is up 27,000 head. LMIC has forecast the beef herd inventory will proceed through a rather meandering contractionary period, but if these levels continue the beef herd could shrink faster than originally thought.