Speaking to producers at the Cattle Industry Convention in San Diego on Jan. 28, Murphy explained that as other countries are taking action to devalue their currency in an effort to stimulate their economy, the U.S. is becoming less competitive.
“We are clearly in a currency war around the globe, and everyone is trying to position themselves in a way that is going to help them best,” Murphy said. “In the U.S., unfortunately, because we are the most stable and strongest economy outside of China today, we are going to be the one that gets beat up a little bit from this.”
With that said, however, Murphy told producers that he expects the U.S. to maintain a positive trade in 2016. Beef imports are projected to be down 8 percent, while beef exports are projected to be up 3 percent, he said.
“We know there are some positive things going on out there from a global standpoint. As we start to look at our beef forecast imports, we expect Australia to contract their supply in terms of production because they are going to expand. So that’s going to be less product that is coming into the U.S.,” he said.
Murphy further explained that since the value of the beef market has gone down from $2.90 to $3 a pound to $2 to $2.20 a pound, there will be less of an incentive for Australia to ship product into the U.S.
The stronger U.S. dollar has created opportunity for the U.S. beef imports by strengthening purchasing power, he said. However, it has also caused a challenge by making the U.S. beef exports more expensive globally.
In terms of exports, Murphy said that about 2.5 billion pounds, or 10 percent of the U.S.’s total production, is exported on a consistent basis. Because the global beef production number is slightly higher for 2016, most of that growth is going to come from the U.S.
Several of the world’s largest beef exporters such as India, Brazil and the U.S. are expanding their beef production by growing their beef cow herds, he said. Of the expanding countries, the U.S. is the largest producer of grain-finished beef versus predominantly grass-finished Brazilian beef or Indian water buffalo.
“Here in the United States, we are in really good shape compared to the rest of the world,” Murphy said. “And that is the expectation as you look forward here over the course of 2016.”
PHOTO: CattleFax analyst Mike Murphy speaking at the Cattle Industry Convention in San Diego on Jan. 28. Staff photo.
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