Feedlot

Beef exports were sharply lower in the latest trade data for May. Decreased beef exports was due to COVID-19 related disruptions in beef production and likely in part due to decreased international beef demand. Total beef exports in May were down 30.9% year over year bringing the year to date total for the first five months of the year down 1.9% compared to last year.

May exports to Japan, the number one U.S. beef export market, were down 26.3% year over year. Beef exports to number two market South Korea were down 21.7% year over year in May. Exports to Mexico, recently the number three beef export destination, were down a whopping 78.0% from one year ago in May. On a monthly basis, Mexico dropped to sixth place in May. Beef exports to Hong Kong were up 19.9% year over year in May, the only major market to show an increase for the month. May exports of beef to Canada were down 17.6% compared to one year ago. Beef exports to Taiwan were down 31.8% year over year in May. China, though still a minor market for U.S. beef exports, was up 176.7% year over year in May and represented a monthly record of 2.5% of total U.S. beef exports.

It is not clear how much of the drop in May beef exports was due to reduced supply and how much was due to reduced demand because of global recession. Beef production dropped 19.7% in April followed by a 19.9% drop in May. There is little doubt that May beef exports were curtailed in part simply due to a lack of available product. No doubt, some export orders were simply unable to be filled in May. It is likely, however, that part of the decrease in beef exports was due to macroeconomic weakness in some countries combined with higher U.S. beef prices. Choice boxed beef prices increased to a monthly average of $263.35/cwt. in April, up from the March level of $228.05/cwt. May Choice boxed beef prices increased to $420.00/cwt., up 84.2% over the March levels.

The drop in beef exports to Mexico, in particular, is very concerning. It is doubtful that reduced supply alone explains the 78.0% drop in May beef exports to Mexico. Mexico is experiencing a sharp recession compounded by a weaker Mexican Peso in April and May (with some recovery in June). In 2019, Mexico accounted for 14.0% of total U.S. beef exports for the year, but in May only amounted to 4.4% of total monthly exports. May exports of pork to Mexico were down 21.9% and broiler exports were down 27.6%, highlighting the overall demand weakness in Mexico.

Beef production recovered significantly in June, to approximately 97% of year ago levels, and Choice boxed beef prices dropped back to an average of $242.30/cwt. June beef exports will likely bounce back significantly from the May drop but it will be important going forward to monitor both the residual impact of the April/May processing disruptions and the ongoing global economic weakness to see how beef export prospects develop in the second half of the year.

Derrell S. Peel is a livestock marketing specialist for Oklahoma State University.

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