Optimism comes back in the US meat market
Poultry, pork and beef sectors in the US are hoping for better times in 2020 after progress in trade negotiations with Mexico, Canada and China. "The fourth quarter is certainly ending with much more optimism on trade and the economy compared to how it began. Resolution on the USMCA deal, in particular, will deliver a collective sigh of relief for many businesses across North America," believes Dan Kowalski, vice president of CoBank's Knowledge Exchange division.
The year will start with a limited U.S.-China trade deal and ratification of USMCA. The preliminary "phase one" trade deal with China will likely add some level of certainty to businesses that are looking to invest. Specific details of the deal remain unclear, but the biggest winners from the limited agreement are expected to be the grain, animal protein and dairy sectors. The U.S. cattle and beef sector managed through what was a volatile third quarter primarily driven by a fire at the Tyson Foods plant in Holcomb, Kansas. Despite the large disruption in fed cattle capacity, other plants managed to make up for the lost capacity. The outlook for the cattle and beef sector is bright for 2020 with strong domestic and international demand coupled with minimal supply growth. "The current estimates range from 2% growth down to just over flat. We expect beef supply growth to be 1%, which is largely in line with 2019 growth and also well below the growth of pork and chicken in 2020. Beef demand domestically is quite strong with the premium of beef over pork and chicken looking to set a new record high in 2019. This demand will be helped by international demand led by China’s protein shortfall caused by the outbreak of ASF. With a more normal weather environment in 2020, the U.S. cattle and beef supply chain will likely have a solid year with decent margins throughout the supply chain", said the report.
Pork production growth is expected to continue throughout the fourth quarter and most likely through 2020. With today's hog futures reflecting good margins for hog producers, the expectation is for continued growth next year. Production is forecast to increase between 4% and 4.5% for 2019 and between 3% and 4% for 2020.
"Unlike the first half of 2019, U.S. pork exports to China are finally starting to materialize in a major way with shipments in the third quarter reaching 122,000 tons versus just 24,000 tons in the same quarter last year. This helped to allow overall pork exports to increase by 17% in the quarter and the expectations are for even greater shipments in the fourth quarter. Despite this very strong level of export performance, producer profitability averaged just $15 per head in the third quarter and with only modestly positive margins expected for the fourth quarter. This rather disappointing level of profitability, in light of the robust exports, is largely due to the fact that pork production increased more than exports", according to CoBank analysis.
However, increased demand from China and other Asian countries and a reduction on tariffs may change the situation in 2020. "Exports will again be key to industry profitability in 2020 as has been the case this year. Exports to China and other Asian markets suffering from ASF will command most of the headlines but there are also export opportunities to Japan following the ratification of the U.S.-Japan trade agreement. This will bring the U.S. in line with the tariff levels of CPTPP countries and greatly improve U.S. pork export competitiveness with this key pork customer", according to the report.
Poultry export outlook got a boost in November when China announced that it would end its five-year ban on U.S. chicken imports. This was a preliminary concession by China in the lead up to the phase one agreement. The renewed trade flow could bring a meaningful boost to prices at a time when new chicken capacity continues to come online and per capita protein consumption sets new highs.
The data, analysed by Meat & Livestock Australia (MLA), shows that the last quarter was the l...
The partnership aims to facilitate access to Pronaf Mais Alimentos credit for 1,500 family farmer...
The European Commission proposed the delay in early October in response to concerns raised by mem...
