CME: Outlook for Livestock, Dairy and Poultry Unchanged03 June 2013
US - Amid the lively debate over the sale of Smithfield Foods to Shuanghui Holdings and its impact on US pork exports, USDA’s Economic Research Service and Foreign Agricultural Service issued their quarterly Outlook for US Agricultural Trade, write Steve Meyer and Len Steiner.
The report included a $2.5 billion reduction in forecast total US agricultural exports for fiscal year 2013 (which ends September 30) from the February forecast. The total value of US ag exports is now expected to be $139.5 billion, $3.7 billion or 2.7 per cent higher than in FY 2012. The year-on-year reduction is driven primarily by lower wheat and corn exports following last year’s short corn crop. USDA’s forecast of FY 2013 livestock, poultry an dairy exports is unchanged at $30.1 billion.
USDA’s forecasts for FY ag imports was reduced as well, from $112.5 billion in February to $111 billion in yesterday’s report. That figure is still $7.6 billion (7.4 per cent) higher than last. The combination of reductions to both exports and imports leaves the United States’ FY 2013 agricultural trade balance at $28.5 billion, $1 billion lower than the February estimate and $3.9 billion lower than in 2012. Note that the record for ag trade balance was in 2011 at a whopping $42.9 billion. This year’s figure is forecast to be one third lower than that record.
We found USDA’s discussion of economic conditions to be quite interesting. That is especially true for their discussion of the primary risk to their forecasts: The possibility of “an indirect currency war as nations undertake large-scale monetary expansion in order to reduce the risk of a growth slowdown.” USDA considers this a risk with low probability. It never says so directly but we think the statement primarily ad- dresses the changes we have seen since September in the value of Japan’s yen. The yen bottomed the week of September 28 at 77.8 per dollar. Last week it took 101.6 yen to purchase one US dollar, a devaluation of just over 30 per cent. Last week’s figure was the lowest value of the yen versus the dollar since October 2008. The US, of course, has little room to criticize Japan’s actions and we don’t interpret USDA’s statements as being critical. It is simply a statement about risk given that both the US and now Japan have taken steps to keep their currencies low and thus stimulate their economies. The question posed by USDA is whether more countries will do the same. We would add: Is monetary easing by any country actually monetary easing if everyone does it?
USDA expects world economic growth to hit 2.5 per cent this year, up from last year’s 2.3 per cent but still short of the 2.9 per cent growth rate of 2011. The 2011 figure, of course, was relative to a still- depressed world economic output level of 2010.
USDA’s outlook for livestock, dairy and poultry exports was unchanged in yesterday’s report relative to Feb- ruary. Total animal product exports are expected to reach $30.1 billion, up 1 per cent from FY 2012. Actual exports from 1 October 2012 through March are up 0.8 per cent from the same period one year ago.
Forecast FY 2013 pork exports were reduced by $300 million to $5 billion. USDA cited weaker Asian and Mexican demand and “SPS (sanitary and phytosanitary) restrictions in Russia” as the reasons. Russia’s banning of US pork, beef and turkey over ractopamine usage technically qualifies, we suppose, as a SPS issue since it is allegedly a food safety issue. We still have our doubts on that reasoning.
Estimated beef exports for F?Y 2013 were raised marginally from $5.0 to $5.1 billion. USDA cited improved market access in Japan (the change in age requirements being a major factor, we think) and Hong Kong and “strong demand in other key markets” as the drivers of the increase. The down side for beef is, of course, the situation with Russia. The new forecast would put FY 2013 exports 7 per cent larger than in FY 2012.
Forecasts for exports of beef and pork variety meats and poultry products were unchanged from their February levels. Hide and skin exports were increase d by $200 million to $3 billion for this year. That would mark growth of 8.5 per cent versus the 2012 level. And dairy product exports were increased by $300 million or 6 per cent from the February forecast due to strong global demand, drought in Oceania and lower EU output.
TheCattleSite News Desk