Exports Are Important
In last week’s column, you read more about the record high cattle prices we are enjoying, so this week I was reading about meat exports and meat imports of U.S. beef. Both are important, as they can both hurt or enhance the price of meat and that usually depends on the rate of the U.S. dollar.
Out in the hills, the talk is still, “How high can calf and yearling prices go?”
A report I read this past week from Drovers CattleNetwork said, “Prices paid to cattle producers increased 1.1 percent from January to February and 14.9 percent since this time last year, and that the USDA is projecting an eight to nine percent increase in prices paid to cattle producers in 2014.”
On the price of food, Drovers said, “The latest Consumer Price Index from USDA indicates that all food prices increased 0.3 percent from January to February 2014 and 1.4 percent compared to February 2013 price levels.”
For this year the USDA predicts that all food prices will increase between 2.5 and 3.5 percent, which is normal, but the continuing drought in California could blow that away.
On meat prices, Drovers said, “The prices for meat increased 1.7 percent from January to February and 3.6 percent since February 2013. For beef and veal specifically, which are at or near record prices around the country, the price index increased four percent from January to February of this year and 5.4 percent from February 2013 to February 2014. According to USDA, this represents the largest monthly increase in beef prices since November 2003 and is due to an increase in exports, a decrease in imports and a smaller U.S. cow herd.”
Imports for cattle are down 32.6 percent from Mexico because of their drought conditions and are up 25.7 percent from Canada, but as you can see, Canada can’t make up the difference.
U.S. cattle imports are expected to decline in 2014 to 1.95 million head, four percent lower than in 2013. The question I have is, are the imports keeping beef prices down enough to where the consumer will still buy hamburger and other beef products? The bigger question is at what point will beef products become too high for the average family? I’m not sure we will get to that point. My reasoning is that gasoline prices a few years ago went up, and then down, then up more and more. The average family drives just as much and keeps buying SUVs and other low gas mileage vehicles. Maybe the high prices for beef will not deter their buying habits. We hope not.
On the export side, U.S. beef exports rose five percent in 2013, with the Asian markets growing the most. Japan relaxed their beef import restrictions in 2013 and shipments of beef rose 49 percent, and exports to Hong Kong continued to grow during 2013, following a trend that has seen exports grow at an average rate of 68 percent over the past five years. Lately, U.S. beef export sales and beef shipments have continued to decline, we hope that is a short term trend.
The two countries that we export the most beef to are Canada and Mexico. We also send tons of beef products, like tongues, hearts, livers and short ribs, to many countries as value-added products. All of these beef products pick up as the value of the dollar goes down.
It is the revolving wheel. What’s good is bad, and what’s bad is good.