Thursday February 7 Ag News

November Beef Exports Remain on Record Pace; Headwinds Weigh on Pork Exports

Editor’s note: November export data was released about one month later than usual due to the recent government shutdown. Year-end 2018 data is expected to be available in early-to-mid March.
U.S. beef exports continued on a record pace in November while pork exports trended lower year-over-year, according to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports totaled 112,842 metric tons (mt) in November, up 1 percent from a year ago, while value climbed 6 percent to $709.2 million. For January through November, exports reached 1.24 million mt, up 8 percent year-over-year and 6 percent above the record pace of 2011. At $7.63 billion, beef export value was up 16 percent and has already broken the full-year record set in 2017 ($7.27 billion).

Beef export value per head of fed slaughter is also on a record pace, averaging $322.97 in November (up 5 percent from a year ago) and $320.72 during the first 11 months of 2018 (up 14 percent). Exports accounted for 13.1 percent of total November beef production and 10.9 percent for muscle cuts, both steady with November 2017. For January through November, exports equated to 13.4 percent of total production and 11.1 percent for muscle cuts – up from 12.8 percent and 10.3 percent, respectively, in 2017. These numbers highlight the strong international demand for U.S. beef as exports are accounting for a larger share of growing U.S. production and are fetching higher prices, with some U.S. cuts trading at record prices in Asia.

November pork exports totaled 206,852 mt, down 8 percent year-over-year, while value fell 12 percent to $538.7 million as retaliatory duties in key markets continue to generate headwinds for U.S. pork. For January through November, exports were steady with 2017’s record pace at 2.23 million mt and value was down 1 percent to $5.86 billion.

Trade barriers are also pressuring pork export value on a per-head basis. In November, export value per head slaughtered was $48.80, down 16 percent from November 2017. Through the first 11 months of 2018, per-head export value averaged $51.46, down 3 percent. Exports accounted for 24.5 percent of total November pork production and 22 percent for muscle cuts, down from 27.7 percent and 24.1 percent, respectively, in November 2017. For January through November, exports equated to 25.7 percent of total pork production (down from 26.5 percent in 2017) and 22.4 percent for muscle cuts (up slightly).

"2018 was truly a remarkable year for U.S. beef exports, which shattered previous records in both volume and value and reached new heights in several of our top markets," said USMEF President and CEO Dan Halstrom. "In the first half of the year, pork exports were also on a very positive trajectory but unfortunately U.S. pork has been heavily targeted for retaliation. We remain hopeful that these disputes can be resolved soon, so that U.S. pork can get back on a level playing field with its competitors."

Asian markets set pace, but beef export growth widespread
November was another strong month for U.S. beef exports to the key Asian markets of Japan, South Korea and Taiwan, while exports to the ASEAN region also increased sharply. For January through November, beef export highlights include:
-    Exports to leading market Japan were up 7 percent year-over-year in volume (306,603 mt) and 10 percent in value ($1.93 billion). But market access to Japan is a major concern for the U.S. beef industry, as key competitors recently joined Australia in benefiting from an 11 percentage point tariff advantage through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). U.S. beef remains subject to the 38.5 percent tariff rate and to Japan’s quarterly safeguard mechanisms. Competitors’ tariffs will decline again on April 1, the start of the Japanese fiscal year. The Trump administration has announced its intention to negotiate a trade agreement with Japan, but formal negotiations have not yet begun.
-    U.S. beef has already shattered the previous yearly value record in Korea, with export value soaring 45 percent to $1.6 billion, while volume was up 32 percent to 220,770 mt. Although Korea’s imports from Australia and New Zealand also edged higher in 2018, U.S. market share increased significantly – reaching nearly 50 percent in volume and 56 percent in value. Through the Korea-U.S. Free Trade Agreement (KORUS), the duty rate on U.S. beef to Korea is 18.7 percent this year, down from 40 percent prior to implementation.
-    Exports to Taiwan were up one-third from the record totals posted in 2017, reaching 53,626 mt valued at $495.7 million (a record for the sixth consecutive year). The U.S. holds more than 75 percent of Taiwan’s chilled beef market, the highest of any Asian destination.
-    Beef exports to Hong Kong were lower year-over-year in volume (109,082 mt, down 4 percent), but export value still climbed 13 percent to $865.3 million. Exports to China totaled 6,567 mt valued at $55.1 million. U.S. beef regained access to China in mid-2017, making year-over-year comparisons difficult. But in the second half of 2018, export volumes to China were higher year-over-year in every month except September, and November exports reached a new monthly high of 890 mt, despite an additional 25 percent retaliatory duty.
-    Led by strong increases in the Philippines and Vietnam and slightly higher shipments to Indonesia, beef exports to the ASEAN region climbed 19 percent year-over-year in volume (45,255 mt) and 31 percent in value ($252.4 million).
-    Although beef exports to Mexico were up just 1 percent year-over-year in volume (218,281 mt), export value to Mexico climbed 8 percent (to $966.7 million) and will exceed $1 billion for the first time since 2015. The hike in value reflects a strong year for beef muscle cut exports to Mexico, which increased 7 percent in volume (130,330 mt) and 11 percent in value ($759.2 million).

Bright spots for U.S. pork include Korea, ASEAN, Latin America and Oceania
After a very solid start to 2018, November pork exports to leading volume market Mexico were lower year-over-year for the sixth consecutive month (61,344 mt, down 14 percent) while value fell 30 percent to $97.1 million. This pushed January-November export volume slightly below the record pace of 2017 at 717,618 mt (down 1 percent) while value was down 11 percent to $1.22 billion.

"The good news is that the U.S. continues to export strong quantities of hams, picnics and other pork cuts to Mexico," Halstrom said. "The bad news is that instead of generating positive returns for the U.S. industry, 20 percent of these sales go directly into the Mexican Treasury in the form of tariffs. This is why it is critical that the dispute over steel and aluminum tariffs be resolved as soon as possible."

January-November pork exports to China/Hong Kong were down 29 percent year-over-year in volume (324,623 mt) and fell 19 percent in value ($790.2 million). This region is by far the largest destination for U.S. pork variety meat, and these exports also declined by 29 percent in volume (209,090 mt) and dropped 17 percent in value ($555.5 million) as the 62 percent tariff rate makes it very difficult for U.S. pork to compete in China.

The combination of retaliatory tariffs in China and Mexico contributed to sharp decreases in ham and picnic primal values (down 19 percent and 22 percent, respectively, from June through December, compared to the same period in 2017). The decrease in values for these two primals averaged $9.95 per head for those seven months. China’s retaliatory tariffs have also heavily impacted prices for pork offals and have forced some products into rendering due to the lack of alternative markets. Lost value for feet and picnic hocks was at least $1.80 per head and losses are even worse when products that have been rendered are included. The cost of these retaliatory tariffs has been lost value of at least $11.75 per head on just hams, picnics and feet, or roughly $860 million in industry losses from June through December 2018.

Other key details from the January-November pork export results include:
-    Although November results trended significantly lower, pork exports to leading value market Japan were up 1 percent year-over-year in both volume (364,114 mt) and value ($1.5 billion). Similar to beef, market access disadvantages in Japan are a major concern for the U.S. pork industry due to Japan’s implementation of CPTPP and its economic partnership agreement with the European Union. The most immediate impact of these agreements is expected in Japan’s imports of ground seasoned pork and processed pork products as duties on those products are phased quickly to zero, while the U.S. pays 20 percent.
-    Korea stands out as the largest driver of growth for U.S. pork exports in 2018, with volume up 41 percent to 216,899 mt while value climbed 44 percent to $603.8 million – already shattering previous full-year records set in 2011. Unlike the situation at that time, when Korea was struggling with a widespread outbreak of foot-and-mouth disease, Korea’s domestic production was up 4 percent in 2018. So the surge in exports to Korea is being driven by exceptional consumer demand and growing consumption. Most U.S. pork entering Korea also benefits from duty-free treatment under KORUS.
-    Led by strong growth in Colombia and Peru and a second-half rebound in Chile, pork exports to South America have already topped the records set in 2017, increasing 24 percent year-over-year in volume (120,059 mt) and 17 percent in value ($292.3 million). Colombia is an especially important destination for hams and picnics at a time when Mexico and China are imposing higher duties.
-    In Central America, pork exports were higher year-over-year in mainstay markets Honduras and Guatemala and posted very strong growth in Panama, El Salvador, Nicaragua and Costa Rica. Export volume to the region was up 15 percent to 74,980 mt, breaking the 2017 record. Export value was 12 percent higher at $176.8 million, and will set a new record when December results are included.
-    Pork exports to the Dominican Republic have also exceeded previous yearly highs, with volume up 37 percent year-over-year to 39,453 mt and value jumping 29 percent to $85.7 million.
-    With solid growth in both Australia and New Zealand, pork exports to Oceania were up 12 percent in volume (77,336 mt) and 10 percent in value ($224.3 million). This region is also a key destination for U.S. hams when retaliatory duties are in place in Mexico and China.
-    Strong performances in the Philippines and Vietnam drove pork exports to the ASEAN region 46 percent higher in volume (63,978 mt) and 33 percent higher in value ($158.6 million). Pork variety meat exports to the ASEAN were especially strong, more than doubling year-over-year in both volume (26,626 mt, up 138 percent) and value ($42.7 million, up 115 percent).

Variety meat demand bolsters November lamb exports
Driven by a sharp increase in variety meat shipments to Mexico, November exports of U.S. lamb were the largest of 2018 in both volume (1,387 mt, up 167 percent year-over-year) and value ($2.4 million, up 39 percent). Lamb muscle cut exports trended lower in November at 232 mt (down 18 percent) valued at $1.46 million (down 3 percent).

For January through November, lamb exports reached 11,758 mt valued at $21.4 million – up 77 percent and 21 percent, respectively, from a year ago. While most of this increase was due to strong variety meat demand in Mexico, muscle cut exports posted solid gains in the Caribbean, the United Arab Emirates, Taiwan and the Philippines.



With 90-Day Negotiation Period Waning, Soybean Growers Want Resolution

Talks are good, purchases are good, but lifting the tariff that China imposed last July on soybean imports from the United States is the only way for U.S. soybean farmers to regain commercial access to the significant Chinese market.

“It is heartening that the Administration is keeping soybeans in the conversation during the ongoing 90-day negotiation period with China, and again this week in the President’s State of the Union remarks,” said Davie Stephens, a grower from Clinton, Ky., and ASA president.

“Chinese Vice Premier Liu’s commitment to buy an additional five million tons of U.S. soybeans is encouraging, but it is not the answer. We need an agreement at the end of this 90-day period that specifically rescinds the tariff that China has imposed on U.S. soybean imports,” Stephens continued.

Members of the Administration, including U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer, met with Chinese officials in D.C. last week. While the two countries have not shared any formal areas of agreement, Liu’s “good-faith” purchase commitment is a positive sign both countries are working towards the real progress that is needed for soy producers.

As of February 1, China’s purchases of the 2018 U.S. soybean crop totaled about 6.5 million tons, or just 20 percent of past annual levels of more than 30 million tons. These purchases do not come close to offsetting the damage done to the soybean industry since the tariffs were imposed—nor do they negate the likely long-term damage to a trading relationship that was decades in the making.

“We still do not know what the longstanding consequences will be to the industry,” said Stephens. “Until this tariff is lifted and we can go in and try to repair our relationship with this important China market, we will not know the lasting repercussions.”

ASA is joining other agriculture organizations this week in asking Members of Congress to help strengthen their message to the Administration that rescinding the tariffs imposed by the U.S. and China is vital to the health of the U.S. farm economy and American farm families.



NCBA Unveils Cost/Benefit Principles for Climate-Change Policy Proposals

The National Cattlemen’s Beef Association’s Center for Public Policy today released new Cost/Benefit Principles that will help guide its decision-making process on various policy proposals regarding climate change.

“It seems like every week or so, another group releases another proposal or call to ‘Do Something’ about climate change – such as the so-called 'Green New Deal' that was released today,” said Colin Woodall, NCBA Senior Vice President, Government Affairs. “Unfortunately, many of these proposals are often lacking in specifics, which makes it very hard for us to develop substantive responses. Hopefully, our new Cost/Benefit Principles will help the producers we represent – as well as millions of other concerned American citizens – make better-informed decisions on important issues like climate change.

“In addition, reporters who cover these new proposals are welcome to use our Cost/Benefit Principles as a general roadmap as they dig for important policy details that will affect the lives of millions of Americans.”

Woodall pointed out that U.S. beef producers have already made a great deal of progress on environmental issues like climate change, such as producing the same amount of beef with 33 percent fewer cattle, compared to 1977. Woodall also pointed out that beef producers in the U.S. now have one of the lowest carbon footprints compared to many of their worldwide counterparts – now producing only 2 percent of all carbon emissions in the United States.

“Despite all the progress we’ve made on the environmental front in recent decades, some policymakers still seem to think targeting U.S. beef producers and consumers will make a huge impact on global emissions,” Woodall said. “That’s why we drafted our Principles – to give the folks who are proposing new public policies the opportunity to outline the specific costs and estimated benefits of their proposals.”

NCBA’s new six-point Cost/Benefit Principles for Climate Change Policy Proposals read as follows:
1)    Explain specifically what policy changes you are proposing.
2)    Estimate as specifically as possible how much each of these policy changes would cost taxpayers, consumers of specific energy sources (automobile drivers, residential electricity users, airline travelers, etc.,) food consumers, and specific targeted industries / business owners, etc. Again, please be as specific as possible, and please detail costs on a monthly and annual basis for each affected group mentioned above.
3)    Estimate how much CO2 and other greenhouse gas emissions would be reduced by a date certain (of your choosing) if your proposed policies outlined in Question 1 above were to be fully implemented.
4)    Estimate how much global temperatures would be changed by the same date certain you use in Question 3 if your policy recommendations in Question 1 were to be fully implemented.
5)    If any of your policy proposals are intended to reduce the consumption of beef, please detail specifically how much additional land must be converted to crop production in order to fill the protein-intake gap, i.e,, the difference between average protein intake via current beef consumption and what would have to be produced and consumed to keep protein-intake levels consistent under an all- or mostly vegetarian of vegan diet. Also, please identify specifically where this land is located, and how much additional GHGs would be released into the atmosphere by converting current pasture land into crop production.
6)    Please show all your math for your estimated costs, emissions, average global temperature, and land conversion data outlined in Questions 2, 3, 4, and 5.

 “These are very straightforward questions that any concerned citizen or reporter should be asking anyone who proposes new climate-change policy,” Woodall concluded. “What specifically are you proposing, how much will it cost, how much will it affect global temperatures down the road, and how did you arrive at those numbers? Seems like anyone who is proposing billions or trillions of dollars’ worth of policy changes should be happy to answer those questions. Yet for some reason, few currently are.”



Take Part in a National Survey on Agriculture-Related Stress

Women in agriculture are encouraged to take part in a national survey on agriculture-related stress. The survey is part of project called “Cultivating Resiliency for Women in Agriculture,” which is sponsored by American Agri-Women, District 11 Agri-Women, University of Minnesota Extension-Women in Ag Network and the Upper Midwest Agricultural Safety and Health Center (UMASH).

The survey takes about 10 minutes and the findings will be used to help develop future programming. Go here to take the survey: z.umn.edu/cultivatingsurvey.

The “Cultivating Resiliency” Project also includes a free interactive series of online sessions to help women in agriculture cope with stress. Several webinars are already available for viewing at www.americanagriwomen.org/webinars. Upcoming sessions, which start at noon Central time, include:
    March 8 - Increasing Your Joy and Happiness While Living a Farm Life
    April 12 - Putting it All Together

American Agri-Women promotes the welfare of our national security through a safe and reliable food, fiber and energy supply. Since 1974, AAW members have worked together to educate consumers; advocate for agriculture; and offer networking and professional development opportunities. Go to the AAW web site for more information and to join, www.americanagriwomen.org.



 Syngenta: NK soybean growers can expect maximum value even as industry struggles with seed quality

 Despite industrywide concerns over soybean seed quality going into 2019, Syngenta anticipates growers of NK® soybeans will experience minimal to no effect.

The challenging growing season of 2018 left its mark on 2019 grain quality across the U.S. According to the University of Wisconsin Extension, diseases such as stem canker, pod and stem blight, and Phomopsis seed decay lowered soybean seed quality in many regions, while excessive fall rain resulted in a high percentage of pod infection and a delayed harvest that compounded issues.

“Because this is an industrywide challenge, farmers are understandably worried as they prepare for 2019,” said Scott Erickson, NK soybean product manager. “Although few seed companies were immune to nature’s curveballs last year, we’ve taken a number of steps to ensure NK soybean growers can remain confident they’ll still see the consistently strong yields they’ve come to expect.”

One of these is a rigorous seed quality program that grows, cleans and conditions all NK soybean seed to the highest quality standards. From the seed breeder to the final seed delivery, testing also plays a crucial role, with Syngenta operating three internal quality assurance labs and utilizing two third-party testing sites – all to ensure farmers will benefit from the seed’s full yield potential.

An additional benefit for growers of NK soybeans is clear tagging of germination rates, which can be impacted by grain quality. To provide clarity for farmers and help them be confident in their management plans, all NK varieties are tagged by minimum germination rates.

Less than 2 percent of NK seed volume saw germination rates lowered by 2018’s weather challenges. Even then, the yield impact is expected to be virtually non-existent, Erickson said, with no need to plant additional seed to compensate for losses.

“More than 400 research experiments published in scientific journals show that, on average, yield in the Midwest is maximized at a plant density of 104,000 plants per acre – far below what most farmers plant,” he said. “When you add to that our strong commitment to delivering high-quality seed, NK soybean growers should feel confident they’re set up for a strong 2019.”



Reduce Your Dairy’s Risk for Violative Residues
Matt Boyle, DVM, U.S. Dairy Technical Services, Zoetis

Responsible use of antibiotics plays a significant role in helping protect animal and human health. Proper training on use and administration of antibiotic products play a key role in ensuring all antibiotics are used responsibly and administered appropriately to avoid violative residues. Dairies have made significant improvements toward decreasing the number of residue violations in milk, specifically a 70% reduction in bulk tank milk residues in the U.S. food supply over the past 10 years.1,2 Despite this, dairy producers are also beef producers and still have work to do. Dairy cows accounted for 67% of residue violations from inspector-generated samples across all species of animals from October 2015 to September 2016.3 Dairy producers, under the guidance of their veterinarians, should continue to focus on steps that mitigate the risk of residues to protect food integrity.

There are four things you should focus on to minimize your risk of residue violations in meat from cull dairy cows.

-    Involve your veterinarian in all treatment decisions. Without veterinary involvement, your dairy’s risk for residue violations increases significantly. According to the U.S. Food and Drug Administration, 70percent70% of cases involving violative drug residues had no veterinary involvement in treatment or protocol development.4 Your veterinarian is the expert in choosing the correct products that prevent and treat disease, as well as how to prevent residues by complying with label directions for use. This means he or she should be engaging with you not only in setting treatment protocols but also in determining what animals are treated in the first place. Regular visits and communication with your veterinarian — an established partnership called a veterinarian-client-patient relationship (VCPR) — allows your veterinarian to maintain a relationship with you and your key employees and have a good understanding of your animals and preventive care to provide thorough guidance and recommendations.

-    Set and follow protocols. Even if your dairy has set protocols, a study found an estimated 43% of employees administering treatments on well-managed dairies were not following protocols when observed.5 Compliance matters for treatment success and protecting the food supply. Talk with your veterinarian to make sure there aren’t any outdated or missing protocols and that they are easy to understand and follow. Regularly train employees who administer medications on accuracy of diagnosis and review proper protocol application. Also, effective protocols should include steps for how to give the medicine, including following label instructions, the proper route of administration and administering products for appropriate duration of therapy.

-    Keep accurate treatment records. Inaccurate or incomplete records can be big contributors to human errors at the farm level that can lead to residues, including misidentified animals, animals not receiving the appropriate amount of treatment at the proper time or even animals being moved from the hospital pen or sent to market before the withdrawal period has passed. After treating a cow, record all the information about the cow and treatment administered in your record-keeping system. This will help the veterinarian and herd manager know how well treatments are working and provide important information to help avoid mistakes and, therefore, avoid residues.

-    Respect the beef market. The beef market is an opportunity to place another quality food product into consumers’ hands, and it should be treated with the same respect we give the milk market. You can’t make healthy beef from unhealthy cows. Animals should be healthy, not simply past the residue withholding period, before being considered viable candidates for the beef market. The first step is to appropriately identify the disease process at hand and evaluate which animals should and shouldn’t be treated. Then, work with your veterinarian and herd manager to establish guidelines for identifying animals that leave the farm intended for human consumption.

Today, thanks to the hard work of dairy veterinarians and producers, there are fewer residues in dairy cull cows than ever before.3 The amount of milk dumped from positive tankers also continues to decline.1,2 However, a single violation can erode consumer confidence in milk and meat. That’s why it’s critical to work with your veterinarian to establish and train employees on protocols, ensure proper record keeping, and only send high-quality healthy cull cows to market that are suitable for human food. Remember: you are in the beef business, too.



ADM Reports Fourth Quarter Earnings of $0.55 per Share, $0.88 per Share on an Adjusted Basis

Archer Daniels Midland Company (NYSE: ADM) today reported financial results for the quarter ended December 31, 2018.

“Our team executed well, delivering strong year-over-year profit growth in the fourth quarter,” said Chairman and CEO Juan Luciano. “Looking back on the full year, the team did a great job focusing on the items we could control, as we continued innovating to serve customer needs and advancing our strategic priorities. Our effective management through complicated and rapidly changing trade, geopolitical and market conditions helped deliver an impressively strong 2018 that included solid profit growth, improved returns on invested capital and higher cash flows.

“We will continue working to deliver shareholder value in 2019 by vigorously executing our strategy, including aggressively working to improve execution in select businesses, accelerating our Readiness efforts to deliver increasing value, and harvesting the contributions from our acquisitions and organic growth investments. By continuing to pull the levers under our control, we are positioning ourselves to grow profits and returns in 2019 and beyond.”

Results of Operations

Origination results were down versus the fourth quarter of 2017.
-    Merchandising and Handling results were lower than the prior-year period, which included significant insurance settlements and other income. North American results benefited from wheat basis gains due to strong carries, as well as solid execution that drove improvements in export margins and comparable year-over-year export volumes, despite the extremely small volume of U.S. soybean exports to China. North American exports of corn, and soybeans to markets outside of China, were higher. Global Trade benefited from good execution in origination and destination marketing, as well as an intra-company insurance settlement, offset by timing losses in ocean freight hedges, which are expected to reverse.
-    Transportation results benefited from improved freight rates, offset by increased operating costs.

Oilseeds results were more than double the prior-year period.
-    Crushing and Origination results were up significantly year over year, as the business continued to leverage its global asset footprint to capitalize on solid demand for soybean meal and strong crush margins.
-    Refining, Packaging, Biodiesel and Other was up on strong biodiesel volumes and margins as well as higher year-over-year results from food oils, partially offset by challenging market conditions in nut processing.
-    Asia was higher on strong Wilmar results.

Carbohydrate Solutions results were lower than the year-ago quarter.
-    In Starches and Sweeteners, North American volumes remained solid. Results were driven by lower margins and sales in EMEA; higher costs in North American liquid sweeteners, in part due to lower production rates at the Decatur complex; and lower co-product income.
-    Bioproducts results were lower than the fourth quarter of 2017, when trading results were very strong. Ethanol margins and volumes were down in a continued weak industry pricing and margin environment.

Nutrition results were down versus the prior-year period.
-    WFSI results were higher year over year, with sales up 14 percent versus the prior-year quarter on a constant currency basis. Recent acquisitions in WILD and Health & Wellness, along with strong demand for lecithin, also contributed to higher results.
-    Animal Nutrition results were significantly lower, driven primarily by continued production issues that compressed margins in amino acids, including lysine.

Other results were negative, but improved versus the prior-year period, which included significant insurance settlements.
-    Current-quarter results were driven by an intra-company insurance settlement relating to sorghum shipments in early 2018, as well as other underwriting losses.
-    ADM Investor Services results were up year over year.