When middle-class families in Japan, South Korea or China sit down for a special meal, either at home or in a restaurant, beef often is what’s for dinner. Each of those beef dinners represents a major change from as recent as 10 years ago, when pork, poultry or seafood were overwhelmingly the proteins of choice in most Asian countries.
The fact is international beef demand has grown rapidly in recent years, and likely will continue to grow significantly as the global economy improves and people become more affluent. And as fate would have it, that demand growth is occurring during a time when global beef production is shrinking. Increasingly high prices will limit growth in export volumes, but the value of our beef exports continues to trend upward. For January through August, beef exports were up 3 percent in volume and 13 percent in value — $4.55 billion — compared to the same period last year, says Phil Seng, president and CEO of the U.S. Meat Export Federation (USMEF). Exports currently add $327 to the value of each finished animal in the United States, up 29 percent from a year ago and shattering the previous record of $299 set in June. For January through August, per-head export value was $279.48 — up 15 percent from the same period last year. Exports equated to 14 percent of total beef production and 11 percent for muscle cuts only — up from 13 percent and 10 percent, respectively, last year, according to USMEF. These increases, Seng says, demonstrate the strength of international demand for U.S. beef, even as prices climb to record levels.
Japan remains our biggest beef customer, and Seng notes exports to Japan have grown since that country changed its maximum cattle-age requirement from 21 months to 30 months. U.S. beef now has a 38 percent market share in volume and 43 percent in value in Japan, compared with 26 percent and 31 percent, respectively, in 2012.
Cultural changes and competition
China serves as a dramatic example of the change in demand trends. According to the Global Trade Atlas (GTA), China’s beef imports for the first nine months of 2014 were up 13 percent from the same period last year. In 2013, China’s beef imports grew by an astonishing 346 percent. U.S. producers don’t benefit directly from that trade, as China still prohibits imports of U.S. beef because of BSE, but the indirect benefits are clear. As China claims a growing share of available beef from our competitors, customers such as Japan, Korea, Hong Kong and Taiwan turn to the United States for more of their supplies. Seng adds that while China’s economic growth appears to be slowing, it is shifting from an explosive pace to more moderate growth. China is working toward self sufficiency in poultry and pork production but lacks the infrastructure to increase beef production significantly.
High beef prices likely will prevent a repeat of the 2013 demand growth in China, but the trend should continue upward. Similar trends are evident in other regions of Asia, the Middle East and Africa.
While Australia offers significant competition for beef exports around the Pacific Rim, its ability to meet demand will be stretched in coming years. Australia has seen a significant increase in cattle slaughter, particularly cow slaughter, over the past two years in response to severe drought, according to a recent Rabobank report. Export demand has helped support prices in Australia through the liquidation, but supplies of Australian beef are likely to tighten due to the diminished cow herd. The Australian cow herd stood at 29.2 million in 2013, but it is projected to drop to 26.1 million for 2015.
Brazil also has benefited from strong export demand, particularly from some countries closed to U.S. beef. Russia has stepped up imports of Brazilian beef, and Brazil may soon be able to resume shipping beef to China. Brazil’s beef export volumes were up 7 percent through the first three quarters of this year but slowed significantly in September (down 17 percent year over year) due to tight cattle supplies (GTA data). Cattle slaughter in Brazil was down about 2 percent in the first half of the year, according to Rabobank.
India, Seng says, has become one of the world’s top three beef exporters in recent years. The country has built modern plants, implemented a traceability program and emerged as a major competitor in international markets. Because of the large difference in quality and India’s relatively limited market access, the product India exports rarely competes head-to-head with U.S. beef, but it is definitely a major factor in the global beef market.
Global economy and exchange rates
According to reports from USDA and the World Trade Organization (WTO), global trade continues to expand but at a somewhat slower pace than expected earlier. WTO economists recently reduced their forecast for world trade growth in 2014 to 3.1 percent, down from the 4.7 percent forecast made in April, and cut their estimate for 2015 from 5.3 percent to 4 percent.
The U.S. dollar remains fairly strong relative to most foreign currencies but, according to USDA’s latest trade report, is likely to depreciate in real terms against the currencies of China, South Korea, Indonesia, other large Asian economies and Latin America in 2015, helping control the price of U.S. beef in international markets. Declining U.S. energy costs also should improve our competitiveness in export markets for the remainder of 2014 and into 2015.
Trade barriers and marketing challenges
While U.S. beef exports have expanded in recent years and access has improved in several key markets, some countries continue to impose trade barriers. China maintains a ban on U.S. beef, ostensibly because of risk of BSE, in spite of our rating as a “negligible risk” country for BSE. Our beef currently is locked out of Russia due to Russia’s ban on beta-agonists, and most recently in retaliation for sanctions we’ve imposed to protest Russia’s aggression in Ukraine. Seng notes that Saudi Arabia, a lucrative market for high-quality beef, remains closed to the United States since the most recent case of BSE in 2012. Australia also has taken no steps to restore imports of U.S. beef.
Several countries have, over the past few years, imposed restrictions on beef produced with the use of beta agonist feed additives, and the European Union has long banned imports of beef from cattle treated with growth-promoting hormones.
Based on concerns that adoption of future technologies that enhance beef production could create misunderstanding leading to trade disputes, the U.S. meat industry recently formed the Meat Industry International Stewardship Advisory Council. NCBA CEO Forrest Roberts serves as chairman of the council, which intends to foster better communication, coordination and collaboration at all levels of red-meat production, processing and marketing so that new technologies are introduced in a manner that minimizes disruptions in exports without stifling the development of next-generation technologies.
Overall, Seng says, export markets for U.S. beef have become increasingly competitive. Other exporting countries are working to build their herds, and countries such as Brazil, Uruguay and Australia that traditionally marketed lower-quality grass-finished beef are expanding production of grain-finished product to compete more directly with U.S. beef. Gaining and retaining market access around the globe requires continuous effort from our trade officials, USMEF and other industry organizations.
Marketing also requires ongoing attention, and USMEF staff work within importing countries to educate chefs, retailers, food writers and bloggers, and consumers about the attributes of U.S. beef, and to build and maintain consumer confidence in its safety. Funding support from the Beef Checkoff Program, the USDA Market Access Program, state beef councils and state feedgrain organizations has been critical in these efforts; Seng says these efforts have paid off, as our beef exports have grown from near zero following our first case of BSE in 2003 to a $6.5 billion-per-year enterprise today. So increasingly, around the world, beef really is what’s for dinner. And for quality, safety and value, our international customers are learning to look for U.S. beef.
Mandatory country-of-origin labeling (COOL) remains a point of contention among U.S. producers and our trading partners. The current law, implemented in 2009 and revised in 2013, requires labels identifying the source of beef including where the cattle were born, raised and processed. Canada and Mexico, which export feeder cattle and finished cattle to the United States, have protested the rule through the World Trade Organization (WTO). On Oct. 20, the WTO ruled against the U.S. COOL rule, saying the requirements treat Canadian and Mexican livestock less favorably than U.S. livestock. The impact of the ruling is unclear at this point and will depend on the U.S. response. The United States could appeal the ruling, drop the COOL law outright or modify the rule. If the government takes no action and continues to enforce the current law, Canada and Mexico are likely to impose broad trade sanctions, including retaliatory duties on imports of U.S. meat products. Mexico currently is our second-largest beef export market, and Canada is the third largest.
See this article, along with more on global beef genetics, cattle transportation and our 2014 “40 Under 40” class of honorees in the November digital edition of Drovers/CattleNetwork.