Meat + Poultry - June 2010 - 19

RED MEAT REPORT

(Continued from Page 18)
will be even stronger the second half
of the year. Total income is likely to
be well over $500 million.
JBS USA reported EBITDA (earnings before interest, taxation, depreciation and amortization) of $170.5
million for its beef business (which
includes the U.S. and Australia) in
the first quarter of 2010. This was 86
percent higher than a year earlier and
followed EBITDA of $126 million in
the 2009 fourth quarter.
Fourth-largest beef processor National Beef Packing reported net income of $49.4 million for its fiscal
2010 second quarter ended Feb 27.
This was a record for its winter quarter and was 63 percent higher than
the prior year's $30.3 million. This
pushed National's earnings for the
fi rst half of fiscal 2010 to $90.6 million, vs. $27.7 million in the fi rst half
of 2009. So National appears on track
to make record profits for the second
straight year. It had record net income
of $143.2 million in 2009.

Global beef and beef
by-product demand
will continue to
improve.
In reporting its second-quarter
results, National summed up the key
markets factors just behind the market and now ahead of it. Beef prices
have responded positively since the
beginning of 2010 due to weatherrelated carcass-weight declines, fewer
cattle on feed, improved beef exports
and smaller beef imports, it said. The

smaller-than-expected domestic beef
supply has also found modest support
from an economy slowly working its
way out of a recession. Meanwhile,
competing meat supplies do not appear burdensome, which should keep
the overall protein supply in check and
continue to support stronger yearon-year cattle and beef prices, it said.
Global beef and beef by-product
demand will continue to improve on
gradual economic gains and smaller
global protein and by-product production, said National. But it also noted
that for the remainder of 2010 and beyond, the cattle industry will continue
to struggle with the long-term implications of a herd reduction.

Rally was supply-induced
The spring rally saw the Choice cutout
values increase $33.50 per cwt from
February 5 to May 11. The rally was
almost entirely supply-induced and was
the result of tighter-than-forecast total
available beef supplies. Disappearance
(domestic production plus imports minus exports) declined 3.8 percent in the
first quarter vs. a year ago. March saw
the smallest beef disappearance since
2001. Fed-beef disappearance for the
quarter was down 1.2 percent and lean
beef disappearance was down 8 percent. April disappearance was down
5 percent to 6 percent on a year ago.
The declines reflected an unusual
confluence regarding the beef supply. Domestic production into midMay was nearly 1 percent lower than
the year-earlier period although total
cattle slaughter was up 1.4 percent.
That's because carcass weights, especially on fed cattle, were down dramatically from last year's levels because of
adverse winter conditions.
Meanwhile, total beef exports were
up 11 percent in volume in the fi rst
quarter vs. a year because of the improvement in the global economy and
stronger demand from key markets
Canada, Japan and South Korea. The
high Australian dollar vs. the U.S. dollar made U.S. beef more competitive
in Asia than six months ago.

"Tyson's beef business
is on track to report
record operating income
for fiscal 2010... Total
income is likely to be
well over $500 million."
Conversely, beef imports were
down sharply the fi rst fourth months
of the year and are not likely to increase soon. The biggest year-on-year
decline in imports was from Australia, down 39 percent from a year ago.
Rains in Australia continued to delay
seasonal cow sales. A second factor, as
noted previously, was the high Australian dollar. The value of the U.S. dollar through much of the first quarter
was 29 percent lower than the same
period last year. This offset much of
the benefit that Australia might have
had from high U.S. prices for lean
manufacturing beef.
Total available beef supplies will
continue to be smaller than last year
for the rest of 2010 and into 2011.
USDA forecasts that beef exports will
be up 10 percent on last year while
imports, initially forecast to be down
only marginally, might be down 5 percent. The key component is that domestic beef production is expected to
be down as much as 2.2 percent from
2009 (to 25.4 billion lbs.). USDA currently forecasts production to be down
0.8 percent to 25.745 billion lbs., but
this forecast appears to be too high,
say analysts. At the lower production
forecast, beef disappearance might be
as low as 59 lbs. per capita in 2010,
compared to 61.2 lbs. in 2009. USDA
currently has the figure at 59.3 lbs.

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