THE live cattle and wholesale beef markets are looking to the Labor Day holiday on September 2 to give them a boost. But any improvement from holiday meat demand may provide only a temporary lift to beef product values, say analysts. That’s because Labor Day sees retailers mostly featuring hamburger patties, hot dogs and chicken items. They are already featuring chicken at the expense of beef. Any slack in beef demand is being made up mostly by the chicken complex, says Andrew Gottschalk, HedgersEdge.com. During a period when incomes are being squeezed, the absolute price difference overtakes consumers’ preference in food choice and chicken wins this battle. Competition for the consumer’s dollar is likely to intensify from here, he says. Beef demand may begin to see some seasonal but limited support. Consumer spending is a mixed bag, with earners in the upper half of incomes in a favorable posture. The other half of the earners are seeing their disposable income squeezed, which can easily last throughout this month, he says.
Gottschalk notes that the beef complex posted record high retail beef prices last month. The Choice retail beef price averaged $8.43 per lb, up $0.31 per lb from the prior month and up $0.12 per lb from last July. The All Fresh price averaged $8.15 per lb, up $0.15 per lb from the prior month and up $0.36 per lb from a year ago. Ground beef during July averaged $5.50 per lb, up $0.03 per lb and $0.40 per lb from the prior month and last July, respectively. Pork prices in July averaged $4.92 per lb, up $0.04 per lb from June and up $0.22 per lb from last July. In contrast, the composite broiler price averaged $2.41 per lb, up one cent from June and down nine cents from last July. Consumers can purchase 3.5 lbs of chicken versus one pound of Choice beef. Given the income squeeze on many consumers, is it any wonder why chicken sales are booming, he says.
The comprehensive boxed beef cutout the week before last averaged $314.44 per cwt, up four cents from the prior week. Of note was that forward sales represented 24.2% of the total volume and export sales represented 21.7%. These were the largest percentages in many weeks. Meanwhile, the week saw the 5-area steer price average $191.34 per cwt, down $3.11 per cwt from the prior week. The dressed price averaged $304.01 per cwt, down $5.59 per cwt. The only cash trade of note through Wednesday last week was of 1058 head selling in Nebraska at $298 per cwt dressed. A few cattle sold in Iowa at $188-190 per cwt live.
CATTLE ON FEED FORECASTS
David Anderson, Texas A&M University: COF 99.9%, placed 104.0%, marketed 108.5%; Kevin Coburn, S&P Global Commodity Insights: COF 99.5%, placed 98.6%, marketed 108.4%; Tyler Cozzens, Livestock Marketing Information Center: COF 100.1%, placed 104.4%, marketed 107.9%; Andrew Gottschalk, HedgersEdge.com: COF 100.2%, placed 105.6%, marketed 109.0%; Rich Nelson, Allendale Inc: COF 100.1%, placed 101.9%, marketed 107.8%; Lori Porter, Allegiant Commodity Group: COF 99.8%, placed 103.3%, marketed 108.0%; Mike Sands, MBS Research: COF 100%, placed 105%, marketed 108%
UNCHANGED COF TOTAL: The August 1 Cattle on Feed (COF) total was virtually unchanged from a year earlier, as this Friday’s COF report will show. July had two extra slaughter days than last year, so July marketings were flat with last year after taking the two days into account. The decrease in the COF total from April 1 to August 1 was 760,000 head versus a decrease of 625,000 head during the previous five-year average, says Andrew Gottschalk, HedgersEdge.com. Front-end fed cattle supplies on August 1 were estimated to be 2.642M head, 11.1% above the previous year. Carcass weight data confirms that this category of cattle is front-end loaded by approximately 265,000 more cattle than last August, he says.
BEEF EXPORTS CONTINUE RESURGENCE
U.S. beef exports continue their resurgence after a slow start to the year. Latest data reveals that overseas buyers are paying quite a bit more for U.S. beef than they did two years ago. June exports reached the highest value in nearly two years, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Exports totaled 110,155 metric tons (mt) in June, down 4% from a year ago but the second largest of 2024. Export value reached $938.3M, up 3% year-over-year and the highest since August 2022. Through the first half of the year, beef export value climbed 5% from a year ago to $5.22 billion despite a 4% decline in volume (643,733 mt), says USMEF.
June beef exports performed very well in Japan, which was great to see given the significant headwinds U.S. beef has faced there this year, says USMEF President and CEO Dan Halstrom. Export value also rebounded nicely in Korea and shipments to Taiwan and Canada were outstanding. This made for another strong month in terms of export value per head slaughtered, which was nearly $460 in June, he says. Despite a difficult economic climate, Japan has reclaimed its position as the largest volume destination for U.S. beef in 2024. June exports increased 8% from a year ago to 22,308 mt, the largest since March 2023. Export value reached $181.5M, up 9% and the highest since August 2022. Through the first half of the year, exports to Japan were still 2% below last year at 127,020 mt but export value climbed 6% to $978.2M, says USMEF.
While U.S. beef maintains a strong retail presence in Japan, foodservice demand has benefited from a huge jump in tourism, says USMEF. The number of foreign visitors entering Japan this year is expected to approach a record 35M. Japan’s inventories of imported beef at the end of June were nearly 9% lower year-over-year, suggesting further import demand should be expected in the second half of 2024. June beef exports to Taiwan reached 7318 mt, up slightly from a year ago but the highest since April 2022 and the third largest on record. Export value increased 18% to $80.1M, also the third highest on record. While first half exports to Taiwan were 9% below last year at 30,710 mt, export value edged 2% higher to $334.8, says USMEF.
Exports Surged To Canada
Beef exports to Canada posted impressive gains in June, with value reaching its highest level in ten years at $116.5M, up 29% from a year ago, says USMEF. June volume was up 17% to 11,854, the highest in nearly nine years. Through the first half of the year, exports to Canada dipped slightly in volume (51,438 mt, down 1%) but climbed 12% in value to $469M.
June exports to Korea totaled 19,378 mt, down 9% from a year ago, says USMEF. But export value rebounded to $190.4M, up 2% from a year ago and a 13% increase from the previous month. Korea is the leading value destination for U.S. beef in 2024, with first half export value increasing slightly from a year ago to $1.1 billion despite a 13% decline in volume (116,338 mt).
Although June beef exports to Mexico were below last year’s volume (17,150 mt, down 5%), value still increased 1% to $98.8M, says USMEF. The June slowdown was in variety meats, as muscle cut volume was up 4% to 8293 mt. Mexico’s demand for U.S. beef soared in the first half of the year, with beef and beef variety meat volume climbing 13% to 113,473 mt, while export value jumped 19% to $662.8M. U.S. beef’s momentum in Mexico was fueled in part by a strong peso in the first half of the year, says USMEF. The recent decline in buyers’ purchasing power and heightened economic uncertainty could impact the market in coming months. But beef supplies remain tight in Mexico due to severe drought, it says.
Beef exports to the Middle East have rebounded impressively in 2024, says USMEF. This trend continued in June, with shipments reaching 4270 mt, up 22% from a year ago. Export value increased 25% to $20.8M. Led by larger variety meat exports to Egypt and stronger demand for muscle cuts in the United Arab Emirates, Kuwait, Qatar, Bahrain, and Oman, January-June exports to the region soared 31% in volume (28,195 mt) and 33% in value ($127M) from a year ago.
Caribbean Exports Rose 35%
June beef exports to the Caribbean totaled 2711 mt, up 35% from a year ago, while value climbed 19% to $22M, says USMEF. They were led by strong demand in the Dominican Republic and a surge in shipments to Cuba. First half exports to the region increased 28% from a year ago in volume (17,485 mt) and 14% in value ($143.8M). They were also bolstered by record variety meat shipments to Trinidad and Tobago and strong demand for variety meat in Jamaica.
Colombia’s ban on imports of U.S. beef originating from states with cases of highly pathogenic avian influenza (HPAI) in dairy cows continues to take a toll on export volumes, says USMEF. June exports fell 77% from a year ago to just 91 mt. Exports to Colombia were strong in the first quarter but have been restricted since April, pushing first half exports 22% below last year at 2224 mt, while export value fell 13% to $13.4M. Fortunately, Colombia is the only trading partner to impose HPAI-related restrictions on U.S. beef, says USMEF.
Beef export value equated to $459.21 per head of fed slaughter in June, up 13% from a year ago, says USMEF. The January-June average was $418.37 per head, up 6% from the first half of 2023. Exports accounted for 15% of total June beef production and 12.8% for muscle cuts only, up from 14.3% and 12%, respectively, a year ago. The January-June ratios were 14.1% of total production (down from 14.4% a year ago) and 11.8% for muscle cuts (down from 12.2%).
Pork Values Remain Ahead Of Record
While June pork exports were lower year-over-year, shipments through the first half of the year remained ahead of the record value pace of 2023, says USMEF. June pork exports totaled 224,392 mt, down 9% from a year ago and the lowest since September, while export value fell 5% to $659.7M. But January-June volume still reached 1.52M mt, 3% above the first half of 2023, while export value increased 5% to $4.26 billion. June was a slower month in a few of the key destinations for U.S. pork, including Mexico and Colombia, where exports have been on a blistering pace and buying accelerated again in July, says Halstrom. But June was another terrific month for U.S. pork in Korea, where exports could be record large this year. Shipments also trended higher year-over-year to Central America and Canada, and it was encouraging to see export value per head slaughtered hold firm in the $66 per head range, he says.
Pork exports to leading market Mexico cooled modestly in June, with volume down 3% from a year ago to 83,007 mt, says USMEF. But export value still edged higher, increasing 4% to $187.4M. January-June exports to Mexico remained well ahead of last year’s record pace, up 6% in volume (563,200 mt) and up 13% in value at $1.2 billion. Mexico’s domestic hog prices surged last month and weekly export data suggest that U.S. pork exports to Mexico also accelerated in July. Mexico suspended imports of all Brazilian poultry in mid-July following a finding of the Newcastle virus, which contributed to high poultry and turkey prices in the market. In early August, Mexico resumed imports of Brazilian poultry from all states except Rio Grande do Sul.
Korea’s demand for U.S. pork remained robust in June, with exports climbing 20% from a year ago to 17,327 mt, while export value increased 30% to $64.2M, says USMEF. January-June exports to Korea soared 33% above last year’s pace at 135,419 mt, while value was 38% higher at $459.6M. By comparison, when pork export value to Korea peaked in 2018, the first half value total was $386.5M. The U.S. industry has capitalized on higher pork consumption in Korea but is also capturing larger market share. U.S. share of Korea’s imported pork market climbed from 26% in the first half of 2022 to 38% this year. With the persistently weak yen making Japan a more price-sensitive market, pork exports there took a step back in June. Shipments fell 12% from a year ago to 28,498 mt, while value was down 10% to $118.7M. January-June exports to Japan were down modestly from a year ago, falling 3% in volume (181,550 mt) and 2% in value ($737M). The Bank of Japan’s recent interest rate increase and signals of a possible U.S. rate cut in coming weeks provided some positive movement for the yen, which has strengthened from 160 per U.S. dollar in mid-July to around 145 this week. Inventories of imported pork at the end of June were down 14% from last year, says USMEF.
PORK AND CHICKEN SHINE FOR JBS
THE pork and chicken divisions of protein giant JBS SA accounted for 75% of the company’s EBITDA in its 2024 second quarter. This more than made up for EBITDA for JBS North America Beef of only $29M, versus $87.5M a year ago. But that was an improvement on the $9.8M loss it reported for the first quarter. Beef revenue in the quarter totaled $5.992 billion versus $5.811 billion a year ago. JBS overall had EBITDA of $1.894 billion, more than twice as large as the $902.8M of a year ago. Net income was $328.8M and net revenue was $19.284 billion versus $18.252 billion.
JBS’s global multi-protein platform has enabled it to mitigate the natural cycles in its sectors and maintain a healthy cash generation, says global CEO Gilberto Tomazoni. EBITDA came primarily from Pilgrim’s Pride, Seara and JBS USA Pork. JBS Brasil and Australia also delivered strong performances. JBS’s poultry and pork businesses have benefited from lower grain prices and a better balance between supply and demand, he says. With strong results in the U.S., Mexico and Europe, Pilgrim’s exceeded market expectations, recording the best results in its history for a quarter. EBITDA was $782.8M versus $375.3M in 2023’s second quarter, with a 17.2% margin. A clear focus on operational excellence, discipline in executing the key customer strategy and its diversified portfolio allowed Pilgrim’s to efficiently ride the positive market momentum, he says.
Beef margins in North America in the quarter continued to be pressured by the cattle cycle and weaker demand given the inflationary scenario in the U.S., says JBS. Cattle prices remained at high levels, growing 5% year-over-year in the quarter. As the price of cattle represents approximately 85% of the cost of the goods sold and the selling price of meat remained stable in the annual comparison, profitability came under pressure in the period. Despite this, JBS remains focused on its operational and commercial execution to protect its profitability. Among the ongoing initiatives are improved pricing, the optimization of its product mix, an increase in carcass yields and greater capture of plant efficiency, it says.
JBS Australia reported EBITDA of $225.8M versus $143.5M a year earlier. Revenue totaled $1.652 billion versus $1.509 billion. A strong growth in sales from its beef business compared to last year reflected the increase in volumes sold, says JBS. The improvement in beef’s EBITDA margin reflected lower cattle purchase prices, given the greater availability of animals due to the more favorable cattle cycle. According to Meat & Livestock Australia, the price of cattle in Australia fell 4% year-over-year in the quarter. JBS also operates pork processing, aquaculture and prepared foods businesses in Australia. All were profitable in the quarter.
USA Pork’s margin increased from 4.4% to 11.1% year-over-year. Net revenue was $2.162 billion, up 22% on $1.777 billion a year ago. EBITDA was $240.3M versus $78.0M last year. Average wholesale pork prices increased 17% year-on-year in the quarter, driven by strong demand in a seasonally stronger period, says JBS. This increase is explained by the substitution of beef consumption for pork due to the increase in beef prices in the U.S. Pork exports in the quarter increased by 8%, especially to Mexico, South Korea, Australia and Colombia. In addition to the improvement in commercial dynamics, profitability in the quarter was positively impacted by lower grain costs, continuous efforts aimed at expanding its value-added portfolio and the consistency of commercial, operational and logistical execution, says JBS.
Reflecting Pilgrim’s much improved result, JBSraised its stake in Pilgrim’s by $107.2M. JBS purchased the remaining stock belonging to founder Lonnie “Bo” Pilgrim at roughly $5.69 per share, according to a securities filing last week. It raised its stake in Pilgrim’s from 68% to 75.3%, thus strengthening its bet on a U.S. chicken market that had been struggling with rising feed costs. The acquisition represents another show of confidence in the U.S. chicken sector, says JBS’s Jerry O’Callaghan. With low costs and growing exports from the U.S., JBS believes there is great potential to raise margins, he says. Pilgrim’s, the second largest poultry processor in the U.S., lost nearly $500M last year as it struggled with rising feed costs and weak chicken prices.