Saudi Arabia could once again prove to be a promising market for U.S. beef in the foreseeable future, one U.S. Meat Export Federation (USMEF) executive said Thursday.
After a 2012 case of Bovine Spongiform Encephalopathy (BSE) was recorded in California, Saudi Arabia closed its borders to U.S. beef. But John Brook, USMEF’s regional director for Europe, Russia and the Middle East, said he’s optimistic the important Middle Eastern country will resume importing U.S. beef in the coming months. He said the industry should learn more details soon as government officials look to sort through the technical and political matters at play.
Despite a drop in oil prices, the Middle East remains a promising market for U.S. beef with the presence of more American-style restaurants and modern retail outlets, Brook told reporters during a media conference call from the USMEF Strategic Planning Conference in Tucson, Ariz.
“Those establishments are looking for reliable suppliers of quality (beef) product,” Brook said of the emerging food service and retail businesses. “And with the steady growth in the Gulf Area, that is why regaining access to Saudi Arabia is so important. Saudi Arabia is the biggest country in the region.”
Australia, which ships about $100 million in beef products annually to Saudi Arabia, has a corner on that important market at present, Brook said.
Australia also has a decided advantage over U.S. beef in Japan, Joel Haggard, USMEF senior vice president for Asia Pacific, said at the media conference.
“Japan is our largest market for red meat, (but) exports to Japan have been down for these first nine months (of 2015),” Haggard said. “The duty differential that exists between U.S. beef and Australian beef has been a major handicap.”
A 10 percent duty differential places the U.S. at “a serious competitive disadvantage,” Haggard said.
Still, USMEF officials remain optimistic the recently negotiated Trans-Pacific Partnership (TPP) agreement would help level the playing field in the long term – if Congress acts quickly to ratify the trade pact in the U.S.
“Almost 42 percent of all U.S. ag exports go to the (12) TPP countries,” Philip Seng, USMEF president and chief executive officer, said. “By 2030, 60 percent of the world’s middle class will reside in Asia, which has the fastest growing middle class in the world. In Vietnam, the economy has basically doubled since 2007 … so this is the kind of growth envisioned in this TPP block.”
About 70 percent of all U.S. red meat exports go to TPP countries today, Seng said.
Seng did not sugarcoat his message to reporters, describing 2015 as a tough year for red meat exports.
“We’re dealing in a marketplace internationally that has been shrinking the last couple of years,” Seng said. “This is a trend that hopefully will reverse itself in 2016. But it’s been a tough year. (Total) export numbers for the year are down 12 percent on volume and 8 percent on value on the beef side.”
U.S. beef exports are down 10 percent to Mexico this year, Chad Russell, regional director for Mexico, Central America and the Dominican Republic, offered as one example. High beef prices have prompted Mexican consumers to gravitate to pork and poultry in recent years, he said.
“Another characteristic of this year is that the dollar has been strong against all the major trading currencies, and especially the markets that appeal to us,” Seng said. “So, as their currencies become weaker our currency becomes stronger and it’s just an added tariff, if you will, to our product.”
But Seng said international markets remain of paramount importance to U.S. beef.
“Highlights from last year, on beef side, we were up about 9 percent in Korea, roughly 5 percent in Taiwan … Vietnam was up 50 percent and Singapore was up 72 percent. So in spite some of the gloom, there is some very good news we’ve experienced,” Seng said. “Saudi Arabia is a market we are very intent on getting into in the next few months.”
Though not yet part of the TPP agreement, China remains the big prize, Seng said.
Though China paints a very uneven economic picture at present, food service receipts are increasing at an annual rate of 7 to 8 percent, Asia-Pacific expert Haggard said.
“That’s robust growth and that’s driving record beef imports to China,” Haggard said. “Brazil has reestablished access there, and Australia is taking advantage of its economic free trade agreement and started to ship live cattle there.”
Haggard cited Argentina, Uruguay and Paraguay as other examples of countries making inroads in the Chinese market.
The dynamics of logistics in the region also have evolved, making it easier for Europeans to ship product to China, Seng said.
“Our attention should be focused on China long term. … Europeans and everybody are looking at China as the most potential market for growth,” Seng said. “I think the U.S. has a responsibility from a trade relationship … to work out how we can accommodate a working relationship with China, especially on trade.”