CME: Pork Shipments in May Indicate Robust Growth

US - The latest official monthly export data available is for the month of March and we will have to wait until 2 June for the April data to become available, reports Steiner Consulting Group, DLR Division, Inc.
calendar icon 26 May 2017
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Fortunately in recent years USDA has increased visibility of trade flows and market participants have a better sense of this very important demand component. Yesterday morning USDA released its weekly export sales report for the week ending 18 May (see link at the bottom for the direct source to this report). Below is a brief recap of highlights/implications:

Beef: Total beef shipments for week ending 18 May 18 were 13,593 MT, which is in line with the average weekly shipments in the last four weeks and also up about 3 per cent compared to the same four week period a year ago.

Japan and South Korea have been the key drivers for US beef exports this year and they remain quite important. In the last four weeks, shipments to Japan are down 8 per cent compared to the same period a year ago while shipments to S. Korea are up 4 per cent for the same reference time.

It is important to note that the weekly sales data only covers muscle cuts and it is on a product weight basis. All the production numbers we get from USDA, however, are on a carcass weight basis so how do these weekly numbers match up?

Based on the weekly export data so far, we are projecting beef exports in April to be around 202 million pounds and beef exports in May to be around 223 million pounds (carcass wt). This would imply a 12.9 million pound (+6.9 per cent) increase in April and 6.5 million pound (+2.9 per cent) increase for May.

While the increase in exports is not as substantial as it was in the first quarter (average increase was 39 MM pounds), it is still significant considering that beef production in the last two months has not increased much compared to year ago levels.

When we add in the fact that April and May beef imports continued to decline from a year ago, we are looking at a situation where overall domestic beef availability may have declined during these two months.

April production data was released this afternoon so we will have more to say about availability in April and May in today's DLR. If there was one negative in the recent export data report it had to do with new sales, which continue to decline and imply lower exports in June and July.

Pork: Pork exports likely decelerated in April but so far May shipments indicate very robust growth to key markets such as Mexico, Japan and China.

Shipments of pork muscle cuts for week ending 18 May were 21,870 MT, down about 3 per cent than average weekly shipments in the last four weeks.

Despite the softer shipments for the latest week, we still project pork exports for May to be around 495 million pounds.

This is based on the expectation that weekly shipments will be around 22,000 MT next week and probably a bit less the week after (due to holiday).

If we are right about the May projection, it would imply a 36 million pound increase (+8 per cent) compared to year ago levels.

Our current working projection is for US pork production to be around 2.04 billion pounds in May. This would put pork exports at 24 per cent of total production.

For now, pork export numbers imply robust export demand for pork, with the recovery in China sales particularly encouraging.

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