Strong competition, labor situation stunted meat exports in first half

Strong competition, labor situation stunted meat exports in first half

U.S. Meat Export Federation says performance was expected to be a little better in the first half, but several factors limited meat exports

June export data, released by USDA and compiled by the U.S. Meat Export Federation, reflected a challenging first half of 2015 for U.S. pork and beef exports.

Related: April U.S. meat exports finally see West Coast port situation relief

June pork exports totaled 174,554 metric tons, down 4% from a year ago. With pork prices down significantly from last year's high levels, June export value fell 22% year-over-year to $454 million.

For the first half of 2015, pork exports were down 5% in volume (1.09 million mt) and 16% in value ($2.88 billion).

Beef export volume in June was down 8% from a year ago to 96,716 mt, while export value fell 9% to $578.9 million.

U.S. Meat Export Federation says performance was expected to be a little better in the first half, but several factors limited meat exports

This was the second consecutive month that export value fell below last year's level, resulting in first-half value being steady with 2014's pace at $3.26 billion. First-half volume was down 10% to 527,109 mt.

"We were aware that exports would be facing obstacles in 2015, and that keeping pace with last year's record performance would be difficult," said Philip Seng, USMEF president and CEO.

"The first-quarter slump was partially due to the West Coast port labor impasse, as well as intense competition from countries that continue to recognize opportunities in several markets. We were expecting to see a stronger rebound in the second quarter – and that did not materialize," Seng said.

Market factors
While marketing budgets remain flat, competitors are beefing up efforts to capture larger shares of the red meat market, Seng said.

Competition continues to be a major factor, along with a strong U.S. dollar that is providing a price advantage for several competitors with slumping currencies. The European Union, for one, has been aggressive in targeting specific markets, and large supplies of European pork are making it into the coveted Asian market.

This development is due in large part to the closure of Russia, traditionally the EU's largest pork export market. Russia's suspension of pork imports from the EU – originally due to African swine fever but reinforced by a trade embargo related to the conflict in Ukraine – has now lasted more than 18 months.

Related: U.S. meat industry open to international expansion

Australian beef production was expected to ramp down in 2015 as the industry entered herd-rebuilding mode after several years of poor grazing conditions. But with disappointing rainfall in Australia and attractive slaughter cattle prices, beef production and exports remained record-large through the first half of the year – though some slowdown was seen in July.

First half U.S. pork export highlights >>

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Mexico, Korea were first-half bright spots for U.S. pork
June pork exports to Mexico were the largest since March, up 13% from a year ago to 62,112 mt. While first-half export value ($619.3 million, down 18%) reflected lower prices for hams and other cuts typically shipped to Mexico, export volume remained very strong (353,296 mt, up 6%).

Pork exports to South Korea moderated in June to 12,512 mt, up 55% from a year ago but the smallest volume since November 2014. June export value was $33.1 million, up 17%. Korea's first-half performance was stellar, with volume increasing 40% to 108,198 mt and value up 35% to $318.2 million.

Other first-half results for U.S. pork exports included:
• Japan remained the leading value destination for U.S. pork, despite a 20% decline from last year's pace to $835.4 million. Export volume to Japan fell 13% to 221,776, as Japan's total imports also slowed.

• Exports to the China/Hong Kong region fell 17% in volume (157,860 mt) and 22% in value ($330.9 million) from a year ago as the U.S. industry continues to lose market share due to lack of China-eligible supplies and the small number of plants approved to serve China. Demand for imported pork in China is on the rise due to an uptick in domestic prices and tight domestic supplies, but these opportunities are mostly being seized by European suppliers.

• Exports to Canada held up relatively well, considering the weakness of the Canadian dollar versus the U.S. dollar. Export volume was down 6% to 95,443 mt while value fell 10% to $382.7 million.

• Small markets performing well in the first half included the Dominican Republic (up 31% in volume to 13,006 mt and 11% in value to $29.6 million), Honduras (up 22% in volume to 10,119 mt and 3% in value to $21.7 million), Chile (up 10% in volume to 7,146 mt and 25% in value to $20.4 million), and Guatemala (7,072 mt, up 20% with value at $19.7 million, up 11%). June results were particularly impressive for Chile, as volume nearly doubled from a year ago to 1,237 mt and value was up 57% to $3 million.

"Our limited access to China has become a major obstacle for U.S. pork, especially with competition intensifying in so many other global markets," Seng said. "It's a situation that absolutely must be addressed in order for U.S. exports to regain momentum."

January-June pork exports accounted for 25% of total production and 21% for muscle cuts only (down from 28% and 24%, respectively, in the first half of last year). Export value averaged $50.85 per head slaughtered, down 22% year-over-year and 5% lower than in 2013.

Results for mid-year 2015 beef exports >>

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Beef exports strong to Korea and Taiwan, but most markets lower year-over-year
Beef exports to Korea overcame a slow start in 2015, finishing the first half up 8% in volume (61,190 mt) and 12% in value ($423.7 million). June exports were the largest in more than two years at 12,622 mt (up 30%) valued at $81.8 million (up 17%).

"The Korean market could see a brief downturn in July, as economic activity slowed severely in June due to the outbreak of Middle East respiratory syndrome," Seng cautioned. "This had a very negative effect on hotel and restaurant traffic and caused a backup in beef inventories. But consumer activity has since recovered, so the impact of MERS on exports should be short-lived."

First-half beef exports to Taiwan were up 2% in volume (16,506 mt) and 13% in value ($150.5 million). June was an especially strong month, hitting a record volume of 4,185 mt (up 32% from a year ago) valued at $33 million (up 13%).

Other first-half results for U.S. beef exports included:

• Exports to Japan were down 2% from a year ago in both volume (109,010 mt) and value ($676.7 million) – a respectable performance considering the slow start to the year (due in part to port congestion, which slowed demand for chilled beef) and the tariff advantage now enjoyed by Australian beef following implementation of the Japan-Australia Economic Partnership Agreement. U.S. beef remains subject to a 38.5% tariff in Japan, while import tariffs on Australian chilled and frozen beef are now 31.5% and 28.5%, respectively.

•           Exports to Mexico fell 7% in volume (108,112 mt) and 2% in value ($534.1 million) as the weakness of the peso versus the U.S. dollar has had a growing impact on beef demand in recent months.

•           The Hong Kong market began to slow near the end of 2014, and that trend continued in the first half of the year, with exports falling 18% in volume (59,045 mt) and 12% in value ($434.4 million).

•           Buoyed by strong demand in the Dominican Republic, exports to the Caribbean were up 3% in volume to 11,893 mt and 16% in value to $83.2 million.

January-June beef exports accounted for 13% of total production and 10% for muscle cuts only (down from 14% and 11%, respectively, in the first half of last year). Export value averaged $291.70 per head of fed slaughter, up 7% year-over-year.

Source: USMEF

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