USDA reports positive but context needed

28 April 2016


The recently released Cold Storage and Cattle On Feed reports from the US Department of Agriculture contain some points that are supportive of higher prices for the beef industry, but these need to be looked at in the context of external factors that could limit their impact. The Steiner Consulting Group analyses the reports, and some key points are highlighted below.

One of the most supportive points noted from the Cold Storage report was the decline in the volume of boneless beef in US cold stores. This was just under 212,000 tonnes at the end of March – 5% lower than the end of February, and 9% lower than the end of 2015. The large drop in total imported beef, especially Australian product, so far in 2016 is a contributing factor to the lower stocks, while there has also been reasonable usage of fat trim through the first quarter.

Pork stocks appear to also be supportive of meat prices in the short term, with volumes in cold stores below both year-ago and month-ago levels. Poultry, on the other hand, remains well stocked, with forecasts for production to continue running high, putting downward pressure on meat prices.

The Cattle On Feed report showed that US feedlots placed 4.6% more cattle during March than the same month last year. This would normally suggest cattle futures prices should weaken, but most analysts reportedly expected more cattle to be placed than that. Countering this, however, is the fact that the monthly feedlot survey only accounts for feedlots with greater than 1,000 head capacity, so smaller, more opportunistic feedlots are missed – there may be more cattle in smaller facilities this year.

Taking this into the broader industry situation, there is still a very large amount of meat in storage, and continuing to be produced. US exporters are still not trading as strongly as they would like (due to relatively strong US$ and various trade restrictions), resulting in more meat remaining on the domestic market. At present, there is little to indicate a strong upward movement in meat prices in the US – beef or otherwise – without some extra strength in other overseas markets to help relieve some supply pressure.

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