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Beef Imports And Exports, Lots Of Dynamics

published: July 28th 2010
by: Stu Ellis
source: Farm Gate

Cowboys have a love-hate relationship with the market. They love it when the market buys their cattle and ships them overseas to hungry consumers, but they hate it when cattle come into this country and dilute the demand for USA beef. That international trade thing is a two-way street that the livestock industry knows a lot about, and crop farmers know very little about. Not many foreign shiploads full of corn or soybeans dock at New Orleans for offloading. But Canadian and Mexican cattle are inbound, along with Australian beef, and a wide variety of processed pork products from the EU. Trade is an issue, but does it have net positive revenue in the end?

Livestock and meat trade can be divided into two eras, before and after the mad Canadian cow in the US feedlot in December 2003. Before that incident, the US was exporting about 2.5 billion pounds of beef and veal annually, with about 1 billion pounds being shipped directly to the Japanese market. Just 15 years earlier, Japan was buying almost no US beef, and I remember traveling with then-Secretary of Agriculture John Block to Japan for ceremonies to mark the successful negotiations on opening up the beef market. Some of the finest US steak ever tasted was being prepared, somewhat raw, at the finest hotels in Tokyo and Japanese consumers were being treated to special pricing on other cuts of US beef to spur their interest, since they had not tasted it previously.

By 2003 Japan was the largest single market for beef, and Utah State University livestock economist Dillon Feuz writes that such a volume was twice the tonnage going to the next largest market. He says South Korea was the fastest growing market during the 2000 to 2003 period, from 350 million to 600 million pounds a year before the mad cow BSE incident. Exports to Mexico were 500 to 600 million and exports to Canada were in the 200 million pound range. Those four markets comprised 85% of US beef exports in 2000 to 2003.

When the BSE problem was announced nearly all export markets closed for US beef, but Mexico reopened in 2004 and bought 333 million pounds about 80% of the total beef exported by the US. Canada was back to buying pre-BSE beef tonnage by 2006. But only a few grocery sacks of beef were going to Japan and South Korea. They wanted to establish their own scientific protocols, which turned out to be political in nature, and during that time the taste for beef in those countries was well supplied by Australia, but US pork significantly increased its market share. In the past year, Viet Nam has purchased more US beef than has South Korea, whose purchases are about 25% of pre-BSE levels.

But while beef is outbound, cattle and beef are also inbound, and in the three years prior to the BSE problem, the US imported 3.1 billion pounds per year. In the three years afterward Feuz says imports averaged 3.3 billion pounds, but that has declined to 2.5 billion in the past two years. Most comes in the form of Canadian feeder cattle for feedlots and Australian boxed beef for the grocery store. Those comprise about two-third of total imports.

But tonnage and value are different yardsticks, and economist Dillon Feuz says before the 2003 BSE incident, export value was $5.25 billion and import value was $3.75 billion, which was a $1.5 billion trade surplus thanks to US cowboys. The export value dropped expectedly after 2003, but by 2008 export value was back to $5.5 billion and $4.5 billion during the 2009 recession. Import values were $4.5 billion and $4 billon respectively. Consequently, the US is back to enjoying a trade surplus for beef, and Feuz says, “If we are exporting more total value of beef than we are importing, then beef, live cattle, and ultimately feeder cattle are probably all higher priced because of trade.”

Will that scenario remain? The USDA’s Economic Research Service, in its July Livestock Outlook reports that beef exports for 2010 will be 2.09 billion pounds, a 12% increase from 2009. That would be 83% of pre-2003 BSE levels, but dollar values were not provided. ERS says, “U.S. beef exports through May were 26% higher, year-over-year, with exports to Asian markets—namely Japan (+24%), South Korea (+74%), Taiwan (+54%), and Hong Kong (+126%) —contributing toward much of the forecast and year-over-year growth.” Interesting, the USDA economists say the stronger dollar is not going to be deterrent to beef exports, given the growth in the Asian markets, and constraints within competing suppliers, namely Australia and Argentina.


On the return route beef imports for the year will be 2.5 billion, which is a 5% decline from last year and the least amount of beef imported since 1997. Beef imports from Canada will be up because of higher numbers of cattle entering the US for immediate slaughter. And Mexican cattle being brought into the US were coming from areas where drought had deteriorated pastureland.

Summary:
Beef exports had been climbing prior to the mad cow BSE incident, and have taken 7 years to return to pre-BSE levels. Beef imports have been rather steady, but in terms of value have been surpassed by beef exports. Beef trade, at this point, has a net surplus in value, but not always in volume. However, that net value is expected to remain for the balance of 2010.