Increased U.S. beef production and lower cattle prices are reversing the trend of recent years, where beef exports decreased as record high prices rationed demand in both domestic and international markets.

“Markets work best and most efficiently not by stopping and starting abruptly but by gently tapping the brakes or the accelerator as conditions change,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. “International trade of cattle and beef is a significant buffer that reduces drastic market swings in U.S. markets.”

In 2014 and 2015, record high U.S. prices and reduced supplies had the expected effect of stimulating beef imports and cattle imports while retarding beef exports. A strong U.S. dollar exaggerated those effects both ways.

“Increased imports augmented supplies of beef, especially supplies of lean processing beef – primarily for ground beef – and moderated what would have been an even more extreme impact on domestic demand in a period of record prices,” Peel said.

Thus far in 2016, beef exports are recovering, albeit rather slowly and unevenly. Year-to-date beef exports have increased 3.1 percent with year-over-year increases to Japan, Mexico and South Korea. Exports to Canada and Hong Kong are still down year over year, though Hong Kong posted a year-over-year increase for the month of July.

“The dollar has moderated against several currencies, the Japanese Yen in particular, but still represents a headwind for beef exports,” Peel said.

Beef imports declined 6.8 percent for the month of July with the year-to-date total down 12.1 percent. Imports from Australia have declined sharply every month this year and plummeted 31.2 percent for the first seven months of 2016. This is in sharp contrast to the past two years, when beef imports from Australia increased the most as record high U.S. prices coincided with drought-forced liquidation in the Land Down Under.

Imports also have decreased from Brazil for the latest monthly data and for the year to date. Other beef import flows show Mexico down in July but still up for the year to date. However, New Zealand, Nicaragua and Uruguay increased in July but are still down for the year.

“Beyond short-term market conditions, trade flows are impacted by longer term conditions in various countries and structural changes that alter the long-term trajectory of beef and cattle trade flows,” Peel said.

For example, China has emerged as the second largest beef importer in recent years as consumption exceeds beef production, making China a global beef market participant for the first time.

“The United States does not yet have direct access to the Chinese market but the impacts are already evident in global markets and are expected to continue to grow,” Peel said.

Closer to home, Mexico’s growth in beef production and processing and growing exports has a number of direct impacts on the U.S. market. In 2015, approximately 90 percent of Mexican beef imports moved to the United States, making Mexico the fourth largest source of beef imports.

“At the same time, increased demand for Mexican cattle in Mexico is reducing the flow of Mexican feeder cattle to the United States,” Peel said. “Cattle imports from Mexico were down 54.1 percent year-over-year in July and are down 20.9 percent for 2016 to date. This is likely a permanent or at least long-lived decrease in Mexican cattle exports.”

Analysts expect decreased beef imports and growing beef exports to play a central role in stabilizing cattle and beef prices in the United States as production expands in the coming years.

“Along with domestic beef demand, international demand for U.S. beef will determine just how big the U.S. beef industry needs to be as it grows,” Peel said. “More than just total tonnage, beef exports and imports are critical in balancing the supply and demand of specific beef products. This helps maximize the value of every beef carcass in the U.S. market.”

Cattle and calves account for approximately half of Oklahoma’s agricultural cash receipts, according to USDA National Agricultural Statistics Service data.