Sort & Cull

The USDA Foreign Agricultural Service (FAS) recently issued its bi-annual report, Livestock and Poultry: World Markets and Trade. This particular chamber of the government's think tank believes that 2016 world beef and veal production will eventually total close to 59 million metric tons, approximately up 1% over 2015.

In a nutshell, these analysts seem to be assuming that herd expansion in the U.S., India, and Brazil is projected to offset lower production in Australia, Argentina, and Russia.

More specifically, the FAS has the U.S. beef factory penciled in for 11.33 MMT, 4.7% more than the national output of 2015. At the same time, Brazil, the second largest beef producing country behind yours truly, is forecast to reach 9.62 MMT, 2.1% more than last year.

Through 2016, world beef and veal exports are forecast to increase nearly 1.0% over the previous year to 9.63 MMT. Beef exports from India, the leading beef exporting country, are expected to increase 8% over 2015 to 1.95 MMT. Brazil's beef exports are forecast to total 1.85 MMT, 8.5% more than 2015. U.S. beef exports are forecast at 1.11 MMT, up 8.4% over last year.

Significantly swimming against this current, Australia's beef exports are expected to fall 17.7% from 2015 to 1.53 MMT.

On the receiving end, the U.S. is typically predicted to be the largest beef importing country this year, accepting 1.32 MMT of foreign product, 14% less beef than 2015.

Yet I thought the most dramatic stat in the entire eye-glazing report concerned the mounting beef appetite of China. China's beef imports during 2016 are expected to surge to 24.4% over 2015 to 825,000 MT, pumped both by the steady growth in consumption and new market access for Brazil and Argentina.

Once or twice a year for the last decade or so, the USMEF has posted a Chinese teaser for beef producers, a suggestive yet veiled promise that normalized trading relations will the Great Wall is just around the corner. Chances are 2016 versions of this tiresome bait and switch are already waiting in the wings.

I'd like to think that the real deal with China is inevitable. But something tells me with a Supreme Court nominee on hold, the extremes of Donald Trump and Bernie Sanders skewing political expectations, and the Obamas already collecting boxes to move, it ain't gonna happen in an election year.

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John A. Harrington

FEEL OF THE MARKET

http://feelofthemarket.com/…

(CZ)