Drought, fires, floods, skyrocketing input costs and record herd shortage; factors we have unfortunately become very familiar with over the past couple of years and all of which would send cattlemen and women running to the hills. In fact, many cattle families are wondering if right now isn’t the best time to hang it up while prices are good and land values are high. But before you make that decision, I encourage you to consider what you will be missing.
At the end of this year, we will be fortunate enough to see the implementation of three free trade agreements (FTA); the Korea-U.S. agreement; the Colombia-U.S. agreement; and the Panama-U.S. agreement, which will be implemented on Oct. 31. The agreement with Korea repeals a 40 percent tariff on U.S. beef and gives our country a competitive tariff advantage over competitors such as Australia. Likewise, the Colombia agreement repeals a massive 80 percent tariff on U.S. beef. The agreement between Panama and the United States eliminates a 30 percent tariff on U.S. beef. Eliminating high tariffs gives us a competitive advantage in all three markets and a strong foothold in Asia and South America where demand for beef is strong and growing.
Another Asian market with strong potential for growth is Japan. Currently the second largest export market for U.S. beef behind Canada, Japan accounts for nearly $720 million in U.S. beef sales through August 2012. This is a 23 percent increase over 2011 sales figures and is within striking distance of surpassing 2011 total beef sales at $874 million. The Japanese government is currently reviewing its bovine spongiform encephalopathy (BSE) protocols for domestically produced beef and imported beef. There is recent discussion of lifting the age restriction on U.S. beef imports from 20 months and under to 30 months and under, which could be a tremendous opportunity for U.S. beef producers. It is obvious that Japan continues to be a strong export market with much potential for U.S. beef exports.
While Korea and Japan are certainly strong export markets for American beef, we have seen tremendous growth in other Asian markets such as Hong Kong and Vietnam. In 2012 there has been a 28 percent increase in U.S. beef sales in Hong Kong, totaling nearly $200 million. Meanwhile, Vietnam has purchased $133 million, 19 percent more than in 2011. As part of the Trans-Pacific Partnership (TPP), there is a strong possibility that Vietnam will represent an even greater opportunity for U.S. beef exports.
TPP is a multilateral trade agreement between the United States, Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Mexico and Canada. Under this agreement, the beef industry could see the elimination of tariff and non-tariff trade barriers that have plagued the industry for many years. While the final terms of the agreement are still far from conclusion, TPP could give the United States a stronger foothold in the growing Asian and Pacific Rim markets. Also, TPP could set the stage for future trade agreements that allow a science based and market driven set of guidelines to spur economic growth.
Another market with vast potential for U.S. beef and live cattle exports is Russia. Currently the fifth largest export market for U.S. beef at nearly $214 million through August 2012, Russia has experienced a 31 percent increase in American beef sales since 2012. Russia recently became a member of the World Trade Organization (WTO). As part of the accession agreement with the United States, Russia established an import quota of 60,000 metric tons for frozen U.S. beef and an unlimited allotment of high quality beef at a 15 percent tariff. If all goes well, this could be another great opportunity for the beef industry. At the same time, Russian demand for U.S. live cattle is through the roof. According to the U.S. Department of Agriculture (USDA) over 43,000 head of U.S. live cattle were sold to Russia from January to August 2012. The demand for America’s superior genetics and technology has created a tremendous opportunity for U.S. cattle families who are willing to expand into this niche market.
Many are saying that these advancements sound good, but given the volatile political situation in Washington how can we be sure this isn’t just a house of cards that will collapse after the election? How do we know that whomever is in the White House may decide trade no longer matters? Fortunately, both candidates agree that trade is and will continue to be a fundamental part of our economic recovery. President Obama promised to double exports in five years and so far he has done a good job at making sure the FTAs with Korea, Colombia and Panama are implemented, and his team is hard at work on the TPP agreement and expanding trade with other countries. Meanwhile, expanded trade is part of Gov. Romney’s five point plan for economic recovery. Romney has promised to open new markets for U.S. goods and for the first time, many in Congress are finally starting to view trade in a positive light; realizing that exports create jobs and can help address our revenue shortfall.
Many cattlemen have been through tough times before and with their backs against the wall, they stuck it out and came out stronger on the other side. Without question, times are tough right now and it will take our industry some time to replenish the losses nature has dealt us. But keep in mind the one advantage we have; U.S. beef and livestock are superior products that foreign consumers want to purchase.
Source: Kent Bacus, NCBA Associate Director of Legislative Affairs