Sponsored by
Vol. 14, No. 128 / June 30, 2016
Performance of US$ vs. Currencies of Major Meat Trading Partners/Competitors
Currency markets reacted violently to the surprising Bri sh
140%
vote to leave the European Union. Now that the dust has se led
NEGATIVE FOR US
somewhat and lawyers have taken over (ain’t that the case with 130%
MEAT EXPORTS
anything), it appears that things are not exactly black and white. If
anything, it appears this issue could drag out for a while with plenty of 120%
room for maneuvering and nego a on on both sides. The Bri sh pound
110%
has yet to recover but the US dollar index is on its way down and other
emerging market currencies have recovered somewhat. The reason this 100%
is an important issue for livestock markets is obvious to those that have
been tracking this industry for a while—a big chuck of our customers are 90%
outside of US borders. And when the dollar becomes stronger suddenly
POSITIVE FOR US
80%
MEAT EXPORTS
the price of US products goes up, making our beef, pork or chicken less
compe ve rela ve to other expor ng na ons. When the US dollar 70%
goes up the US market also becomes more a rac ve to ship to. The
Jun-15
Jul-15
Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16
result is a shi in the rela ve flow of products into the US, ul mately
impac ng returns of US livestock and poultry producers.
US BEEF, PORK AND CHICKEN EXPORTS. MILLION POUNDS
USDA currently projects steady gains in US beef, pork and
chicken exports in 2016 and 2017. The increase in exports reflects the
vs. CAD
vs. AUD
vs. Br. Real
vs. EURO
vs. YEN
Jun-16
Source: USDA
9,000
BROILERS
BEEF
PORK
8,000
7,000
6,723
6,000
MILLION POUNDS
Much has changed in the last 12 months on the currency
front and generally for the be er for the US meat industry. The top
chart to the right shows the performance of the US dollar rela ve to the
currency of na ons with which we trade significant volumes of beef,
pork and chicken. We o en hear about the dollar ge ng stronger or
weaker but the reality is that there is no such thing. The value of the US
dollar is always measured rela ve to specific currencies, or in currency
pairs. Even the so called US dollar index only reflects the value of the US
dollar rela ve to a very small basked of currencies, dominated by the
Euro. So how to read the above chart? Take for example the value of
the US dollar vs. the Japanese Yen. Currently is takes about 102.5
Japanese Yen to buy $1 of US beef. Last year, it took about 125 Yen to
purchase the same amount. In other words, the purchasing power of
the Japanese Yen has increased and a Japanese importer now can afford
to buy more US product without having to spend more. Suddenly for
that Japanese buyer US beef is on sale with an 18% off s cker, just due
to the currency shi alone. Add on top of this the decline in ca le prices
in the US and higher product availability and one can understand why
the US market has once again become very a rac ve if you are a beef
buyer in Japan. Last year US beef exports struggled in the third and
fourth quarter, which in turn contributed to the drama c decline in fed
ca le values in the fall. Feedlot supplies got backed up (for a variety of
reasons) last fall and the lack of a vibrant export market made a bad
situa on worse. This year, however, it appears that exports should
benefit from the fact that the US dollar is heading lower. The Brexit vote
had the poten al to once again push the US dollar up, hence all the
a en on from livestock futures par cipants in recent days.
vs. MXN
6,905
6,319
5,000
4,941
5,198
5,300
2,449
2,580
4,000
3,000
2,000
2,266
1,000
0
2010
2011
2012
2013
2014
2015
2016F
2017F
fact that US produc on for all proteins is expected to increase in the
short to medium term. Lower feed grain prices and posi ve margins
have fueled expansion and exports should help soak up some of the
addi onal supply. Trade appears to be a focus of the presiden al
campaigns this fall and we have no interest in wading in poli cs in this
report. However, the reality is that the US is a large net exporter of
agricultural products. It is also a large net exporter of meat products. In
2015, exports accounted for 21.3% of all pork produc on, 17.3% of all
chicken produc on and 10% of beef produc on, fueling much of the
growth in US livestock industry in the last 20 years. See page 2 for a
graphical representa on of that change.
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Disclaimer: The Daily Livestock Report is intended solely for informa on purposes and is not to be construed, under any circumstances, by implica on or otherwise, as an offer to sell or a solicitaon to buy or trade any commodi es or securi es whatsoever. Informa on is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or
possible where projec ons of future condi ons are a empted. Futures trading is not suitable for all investors, and involves the risk of loss. Past results are no indica on of future performance.
Futures are a leveraged investment, and because only a percentage of a contract’s value is require to trade, it is possible to lose more than the amount of money ini ally deposited for a futures
posi on. Therefore, traders should only use funds that they can afford to lose without affec ng their lifestyle. And only a por on of those funds should be devoted to any one trade because a
trader cannot expect to profit on every trade.
Page 2
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Vol. 14, No. 128 / June 30, 2016
US MEAT IMPORTS AND EXPORTS IN 2015
mil lbs.
EXPORTS
8,000
6,000
4,000
2,000
0
IMPORTS
-2,000
-4,000
-6,000
-8,000
Beef
Pork
Broilers
Turkey
COMPARISON OF INCREASE IN COMBINED BEEF, PORK, BROILER AND TURKEY PRODUCTION,
IMPORTS AND EXPORTS FROM 1990 TO 2015
100,000
90,000
1990
2015
80,000
MILLION POUNDS
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Production
Imports
Exports
The Daily Livestock Report is made possible with support from readers like you. If you enjoy reading this report and would like to
sustain it going forward, consider becoming a contributor by going to our website: www.DailyLivestockReport.com
Thank you for your support!