Livestock

January exports of U.S. beef were significantly higher than the large totals of a year ago, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Beef exports totaled 105,486 metric tons (mt) in January, up 9 percent year-over-year, while export value surged 21 percent to $624.4 million. Exports accounted for 12.4 percent of total beef production in January, up slightly from a year ago. For muscle cuts only, the percentage exported increased from 9.5 percent to 10.1 percent. Beef export value averaged $293.06 per head of fed slaughter, up 14 percent year-over-year. For muscle cuts only, beef exports reached 80,495 mt (up 15 percent) valued at $555.7 million (up 23 percent). Pork export volume increased 5 percent to 164,189 mt, while value climbed 9 percent to $454.2 million. Beef variety meat volume fell 5 percent to just under 25,000 mt, but value increased 7 percent to $68.8 million. Pork variety meat exports dropped 16 percent in volume (39,299 mt) but still managed a 2 percent increase in value to $91.5 million. January export results were solid overall and were especially strong for muscle cuts,” said USMEF President and CEO Dan Halstrom. “Despite the decline in variety meat volume, export value continued to increase. This underscores the important contribution variety meats deliver for producers and for everyone in the U.S. supply chain.” Asian Markets Continue to Shine for U.S. Beef U.S. beef continued to gain momentum in the Japanese market, with January exports increasing 7 percent from a year ago in volume (23,968 mt) and 19 percent in value ($148.6 million). This included a 30 percent increase in chilled beef exports to 12,411 mt, valued at $92.4 million (up 38 percent). Frozen exports declined 13 percent in volume (8,141 mt) but increased slightly in value ($33.1 million). Frozen U.S. beef entering Japan is subject to a 50 percent safeguard tariff, which is scheduled to revert back to 38.5 percent on April 1, the beginning of the new Japanese fiscal year. Benefiting from a bilateral trade agreement with Japan, frozen beef from Australia is subject to a duty of 27.2 percent. This rate will decline to 26.9 percent on April 1. Other January highlights for U.S. beef included: Exports to South Korea, which reached a record $1.2 billion in 2017, increased 13 percent from a year ago to 17,133 mt, while export value soared 34 percent to $122.3 million. This included a 54 percent increase in chilled beef exports to 3,954 mt, valued at $36.9 million, up 63 percent. Through the Korea-U.S. Free Trade Agreement (KORUS), the duty on U.S. beef was reduced to 21.3 percent on Jan. 1, about 5 percentage points lower than Australia’s rate for this year and down significantly from the pre-KORUS rate of 40 percent. Following large shipments in the fourth quarter of 2017, exports to Hong Kong slowed in January, but still easily exceeded last year’s totals, increasing 41 percent from a year ago in volume (10,493 mt) and 53 percent in value ($79.8 million). Exports to China, which resumed in June after a 13-year absence, hit a new monthly high of 819 mt in January valued at $7.5 million. Exports to Taiwan posted impressive gains in January, increasing 17 percent in volume to 4,207 mt. Export value increased 41 percent to $42 million. Led by solid gains in Indonesia and Vietnam, exports to the ASEAN region climbed 22 percent in volume (3,108 mt) and 13 percent in value ($15.9 million). Strong results in Chile and Colombia fueled beef exports to South America, which increased 90 percent in volume (3,307 mt) and 65 percent in value ($13.9 million). Exports to Central America jumped 40 percent in volume (1,082 mt) and 32 percent in value ($5.9 million), led by a strong performance in Guatemala and larger variety meat shipments to El Salvador. Beef exports to Africa were mostly variety meat in 2017, but January produced a large increase in muscle cut exports to Angola and South Africa. As a result, total exports to Africa were up 19 percent in volume (954 mt) and surged 88 percent in value to $1.4 million.

USDA’s February 1 cattle on feed report tallied 11.6 million head, up 8% compared to the same period last year. January marketings totaled 1.858 million head, up 6% compared to the January total. Placements totaled 2.07 million, a 4% increase over January. During January, placements of cattle and calves weighing less than 600 pounds were 375,000 head, 600-699 pounds were 450,000 head, 700-799 pounds were 625,000 head, 800-899 pounds were 418,000 head, 900-999 pounds were 115,000 head, and 1,000 pounds and greater were 85,000 head.

Tyson Foods confirmed that plant operations at their Longsport, Ind., facility were resumed Wednesday after a shutdown on Monday and Tuesday. In an email with Tyson, communications manager Caroline Ahn, said the plant temporarily halted operations "due to a production issue. The issue has been resolved and the plant is back in operation today." Local sources said employees on the harvesting side of the facility were sent home Monday afternoon, while the "cold side" continued production. Tyson Fresh Meats employs more than 2,000 people at its Logansport facilities. The National Pork Board estimates the plant's daily slaughter capacity is 15,400 as of fall 2017.

In January, Choice Retail beef prices were $575.8/cwt, down from December but 1.7 percent above one year ago. All fresh retail beef prices were $560.4/cwt., up 2.0 percent year over year. This despite the fact that per capita beef consumption was up 2.4 percent year over year in 2017. Choice boxed beef price was $209.88/cwt. this past Friday, 10.9 percent higher compared to one year ago; while Select boxed beef price was 9.0 percent higher year over year. The current Choice/Select spread is $4.76/cwt, holding a bit stronger than the typical seasonal low spread in February. Cash fed cattle price last Friday was reported at $129/cwt., stronger for the week, and will push the weekly average even higher than the previous week, which averaged 5.3 percent over last year. Feeder prices in Oklahoma are above year ago levels, with current auction prices averaging 15-16 percent higher year over year across all feeder steer and heifer weights. The strong start for beef and cattle markets is encouraging but plenty of challenges remain in 2018. Beef production, already up over three percent so far this year is expected to be up 4.5-5.0 percent for the year. Increased beef production will result from increased cattle slaughter and likely higher carcass weights. Feedlots are carrying larger inventories of feedlot cattle into the year and the two percent increase in the 2017 calf crop ensures that feeder numbers will continue to grow in 2018. Strong domestic and international demand is critical to limit the supply pressure of growing beef production in 2018. There are several supply and demand factors that will be critical in 2018. Carcass weights will be the key to just how much supply pressure will affect beef markets in the coming year. Currently average cattle carcass weights are higher year over year as a result of heavier heifer and cow carcasses; with steers about equal to last year. Carcass weights are likely to bounce back some from last year's sharp drop but just how much will determine total beef production. Along with increased beef production, growing pork and poultry production will result in record total U.S. meat production in 2018 adding to the supply challenges for all meat industries. Uncertainty regarding trade policy continues to hang over agricultural markets and meat markets specifically. Decisions regarding NAFTA and the KORUS could have a major impact on meat trade and U.S. cattle and beef markets. Simmering trade tensions between the U.S. and China could have ripple effects across many agricultural markets. U.S. macroeconomic and global economic conditions generally could rise up to be a more prominent factor in beef markets. Recent volatility in the stock market is a reminder that external factors can jump up quickly and may impact agricultural markets. Interest rates are likely to rise faster and more in 2018. So far so good as the saying goes and 2018 could be a repeat of the better than expected conditions that characterized 2017. However, the challenges are clear as are the market risks for cattle and beef. Producers should move ahead to take advantage of opportunities that currently exist but also be prepared to go on the defense if conditions deteriorate.

South Korea has been one of the top-performing markets for U.S. beef and pork over the past year. U.S. Meat Export Federation (USMEF) Korea Director Jihae Yang explains that the U.S. industry has been very successful in rebuilding consumer confidence in U.S. beef, and that many Korean retailers and restaurants that were once reluctant to carry U.S. beef now feature it without hesitation. A good example is Costco-Korea, which last year converted the chilled beef selection in all of its warehouses from Australian to U.S. product. U.S. beef export to Korea were up 3% year-over-year in volume (to 184,152 metric tons) and jumped 15% in value to a record $1.22 billion. Chilled beef exports achieved even more rapid growth, increasing 73% in volume (45,153 metric tons) and 78% in value ($405.8 million) compared to 2016. Yang also discusses the success of U.S. pork exports to Korea, which soared 28% in volume (to 173,182 metric tons) in 2017, valued at $475 million – up 30% year-over-year and the second-highest on record. Korea' s per capita pork consumption set another new record last year, with demand fueled in part by a growing preference for protein-centric convenience foods and home meal replacement items.

Surrounded by mountains in a remote part of southwestern China, Xinguangan's first large-scale, modern pig farm is getting ready to produce its first offspring. By the end of the year, 10,000 sows will live inside two huge barns on this 73-hectare (180-acre) site, producing up to 280,000 piglets annually, or about 20,000 tonnes of pork. The farm, big even by American standards, is one of a record number of large-scale projects that will be built in China this year as it shifts a big chunk of its pork production from backyard pig pens to automated, intensive hog barns of the kind widely used in the United States. Some in the industry estimate it could build several hundred sow farms with about 5,000-8,000 head this year, even more than last year, accelerating the transformation of the world's biggest pork industry. Larger, more standardised farms are also paving the way to a more sophisticated market, with China approving this week a live hog futures contract to help farmers hedge price risks. But there are also doubts about China's ability to pull off such a rapid leap from age-old traditional methods to cutting-edge industrial production, given the shortage of experienced people and the high risk of disease. "Industrialization has never been this big before," said Martin Jensen, executive partner at Carthage & MHJ Agritech Consulting, which runs large farms for Chinese clients and trains staff. The overhaul comes as hundreds of thousands of backyard farms are shuttered, too small to bear the cost of meeting new pollution standards. This is opening up room for megafarms using new methods and imported genetics to boost productivity and cut costs. Higher output from these farms will tame China's notorious pork price volatility, raise food safety standards, and improve the environment, say experts. In the long-term, it also could turn China's pork producers into international competitors, offering quality, competitively priced meat to regional markets. "As more large firms enter the market, food safety will increase and costs will drop. Global competitiveness will increase and China will certainly export," said Fang Shijun, chief researcher at research firm Huitong Data. Fang predicts a growing surplus of pork from 2018 to 2020, as production grows amid slowing domestic demand. Industry Upheaval Modernizing China's pig farms is a massive undertaking. More than half the country's almost 700 million pigs are produced on family farms, which slaughter fewer than 500 a year. Though many have switched from feeding kitchen scraps to protein-rich soymeal, productivity still lags Western farms. Costs are among the world's highest, thanks to heavy dependence on imported soybeans. Recent policy has driven many small farms out however, exacerbating an earlier market rout. A nationwide crackdown on farm pollution intensified during 2017, forcing hundreds of thousands of pig farms to shut. Many were smaller farms without the funds or land to build waste treatment facilities. "We didn't expect it (to be so strict)," said Wang Chuduan, animal science professor at China Agriculture University. "The impact was very obvious." A government blueprint for the industry's development also encouraged expansion in the northeastern corn belt while restricting livestock farming in populous coastal regions. That further encouraged more intensive production by China's new corporate farmers, flush with money raised on the stock market and fueled by 2016's record hog prices. Since 2016, almost 70 billion yuan ($10.94 billion) in new farm investment has been announced by 26 listed companies, according to analysts at ZhuE, a trade website. Chinese worker with pigs Farmer Shi Hongwei feeds his pigs in Xiaoxinzhuang village, Hebei province, China. REUTERS/Dominique Patton New Genetics, Equipment Imported genetics are boosting productivity. Breeding pigs supplied by U.K.-based Genus and others from Canada, France and the United States produce a higher number of piglets per litter, more lean meat and grow faster than China's once-common native breeds. Genus, which sells its PIC-brand pigs to firms like Xinguangan, reported an 80 percent jump in profits from the China market in its 2017 financial year, and is currently stocking a new breeding farm in southern China to add to three others it runs in the country. "We're behind demand. The orders people are asking for, no-one can really do it," said David Casey, product performance director for Asia at Genus. He cited a new client who wants to build eight 5,000-head sow farms this year, requiring 35,000 young sows in September. Getting the best out of the genetics requires following best practices. On the Wuxuan farm, technicians in an on-site laboratory scrutinize samples from every batch of semen collected from boars, checking motility levels and other indicators that boost chances of pregnancy. Boars in well-run facilities can service up to 200 sows, twice as many as the average farm in China, said Casey, thanks to work done in such labs. Fast-expanding pig firm Guangxi Yangxiang is replacing male breeding stock at the end of every year, instead of every two to three years like many others. "That guarantees that the genetics we're using are the newest. Genetics are continually improving," said Guangxi Yangxiang Co Ltd Vice President Gao Yuanfei. Steep Learning Curve Such rapid scaling up faces many potential pitfalls however. Investment costs are high, particularly under new environmental laws. Farms will spend 30 yuan per sow on waste treatment alone, said Professor Wang. Preventing disease is challenging in China, where diseases already eradicated in other countries are still prevalent, and the huge number of livestock and its proximity to people raises the risk of contamination. Once disease enters an intensive farm, it can kill hundreds of animals in days. Even farms supplying new farms with young sows have been hit by disease, reducing already short supplies. Most daunting perhaps is the shortage of trained workers. "Raising pigs is no longer how it was in the past, for farmers with no professional knowledge," said Fang, the analyst. Most of Xinguangan's staff are university graduates but even so, awareness of animal health is low, said Hong Haozhou, consulting vet from Carthage & MHJ Agritech. Drugs are not always issued in the right way and biosecurity measures do not always focus on the biggest risks. "From the hardware perspective, there's not much difference (from Western farms)," said Hong. "You've got automatic feeders, temperature control systems, automatic fans, everything is the same as international farms. But it's the internal problems, like insufficient understanding of healthy development of pigs." For now, Xinguangan is managing to keep disease at bay. Workers spend 48 hours in quarantine before entering the farm to prevent transmission of disease, and then live on site for weeks at a time. Like in the United States, feed trucks deliver meal over a fence to stop vehicles from contaminating the site with disease from other farms. Offspring from the sow farm will go to separate locations for fattening to reduce the risk of spreading disease between animals, adding extra complexity to managing the operation. "Our construction model and our production process is completely based on studying the U.S.," said Chen Gang, who oversees Xinguangan's pig farming operations in the Guangxi region.