CME: 2012 Pork Production Estimates Down
US - The latest USDA WASDE report included some significant revisions to projections for US beef, pork, and poultry supplies in 2012, write Steve Meyer and Len Steiner. USDA currently expects a significant reduction in beef and broiler supplies for 2012 and only modest increases in pork output. Changes in trade flows are expected to further amplify the impact of the lower production levels and lead to significant declines in implied per capita disappearance.
While often seen as a measure of demand, in our view the per capita disappearance (consumption) essentially is a measure of product availability in the domestic market.
Two things are worth highlighting in this regard: a) the decline in domestic per capita disappearance will continue to underpin the outlook for higher protein prices in 2012; and b) as consumers shift to lower priced protein items, it is likely we will see even more significant price inflation for things such as ground beef, pork trim and chicken dark meat and trimmings.
Here’s a recap of the USDA projections:
Beef: USDA currently projects total US beef production for 2012 at 25.135 billion pounds, 1.285 billion pounds or 4.9 per cent lower than the previous year.
This projection is about 30 million pounds lower than the September number. The biggest change in the beef balance sheet for next year concerns expectations for trade flows. USDA reduced its forecast for US beef imports in 2012 by a whopping 320 million pounds or 13.2 per cent.
As a result, instead of a 15 per cent increase in beef exports that was projected in September, USDA now thinks US beef imports in 2012 will be only marginally higher than in 2010 and about 1.6 billion pounds lower than their peak in 2004.
Beef exports for 2012 were raised by 180 million pounds and USDA expects total US beef shipments in 2012 to reach 2.755 billion pounds, about one per cent higher than 2011 levels.
The shift in trade patterns has turned the US into a net beef exporter. In 2011, the US is projected to have a net positive beef trade balance of 728 million pounds and for 2012 the beef trade balance is expected to be a net positive 665 million pounds.
The US has traditionally been a net beef importer of beef, reaching a high beef trade deficit of 3.2 billion pounds in 2004.
Combined with lower production levels, USDA now projects per capita beef disappearance in 2012 (retail equivalent) at 54.4 pounds, 5.9 per cent lower than in 2011 (when we had record beef prices) and 12.9% lower than in 2007 (prior to the recession).
Pork & Broilers: USDA changes to the pork balance sheet were not as significant as with beef.
USDA now forecasts US pork supplies in 2012 will reach 23.074 billion pounds, 110 million pounds larger than the September forecast.
Modest increases in sow inventories (and implied farrowings) as well as strong productivity gains in the pork industry likely prompted these revisions.
While USDA still expects pork exports to surpass five billion pounds in 2012, the forecast was about 40 million pounds lower than the earlier estimate.
Overall, USDA expects pork exports in 2012 to account for 22 per cent of all US pork production.
One of the biggest changes in the USDA forecast came on the broiler front.
Drastic production declines in the broiler industry caused USDA to reduce its forecast for 2012 broiler production by 470 million pounds.
USDA now expects total US broiler production in 2012 to be 36.604 million pounds, 0.9 per cent lower than in 2011. Even that forecast, however, may be too optimistic considering the poor margins implied by current feed prices.