U.S. beef trade has been doing spectacularly for the first half of 2018. However, indications are that trade will slow on the world stage going forward.

The World Trade Organization (WTO) released its quarterly outlook on Aug. 9. The World Trade Outlook Indicator (WTOI) read 100.3, down from the previous 101.8 and close to the baseline 100. An index of 100 means flat trade, with neither expansion nor contraction of the exchange of goods across the globe. This means trade is expected to slow in the coming third quarter of 2018.

Trade growth slowing on world stage

The July World Trade Outlook Indicator. The index’ scale places 100 as steady. Values over 100 suggest growth while lower values suggest retraction.

The WTOI looks at several different trade indexes, including export orders, international air freight, container port throughput, automobile production and sale, electronic components, and agricultural raw materials. Both container port throughput and electronic components were leading trade indicators at 102.2 each. On the other side, export orders and automobile production and sale saw weakness at 97.2 and 98.1 respectively.

Trade in agricultural raw materials, including food, was roughly steady.

“The latest results remain broadly in line with the WTO’s most recent trade forecast issued on 12 April 2018, which predicted a slowing of merchandise trade volume growth from 4.7 percent in 2017 to 4.4 percent in 2018,” noted the outlook.

“Rising trade tensions continue to pose risks to the trade forecast and will be monitored closely going forward.”

In a recent speech before the WTO’s Trade Policy Review Body, WTO Director General Roberto Azevêdo previewed another recent trade-focused report, saying that 75 new trade-restrictive measures were put in place between mid-October 2017 and mid-May 2018.

“This shift could have damaging ramifications for economic recovery. It should be of real concern to the international community,” he stressed.

“After years of sluggish growth following the 2008 economic crisis, the global economy has finally begun to generate sustained economic momentum. World trade growth increased dramatically in 2017, and it seems to be on a positive trajectory. However, this could be jeopardized by the marked increase in new trade restrictive measures among WTO members.”

During his late-July speech, Azevêdo pointed out that the reporting period did not include many of the trade-restrictive measures put in place since the middle of May and may be worse than the trade report indicates.

“This continued escalation poses a serious threat to growth and recovery in all countries. We are beginning to see this reflected in some forward-looking indicators.”

Though Azevêdo made no direct mention of the ongoing and increasing U.S. and Chinese tariff issues, these are certainly among the recent trade-restrictive measures to which he was referring. July alone saw an extreme uptick in the tariff threats between the U.S. and China when President Donald Trump called for up to $200 billion in tariffs against Chinese goods.

U.S. meat exports

The U.S. Meat Export Federation (USMEF) called beef exports for the first half of the year “tremendous.”

“First-half exports set a record pace in both volume and value as international customers bought a larger share of U.S. beef production at higher prices, indicating strong demand,” the group wrote in their monthly export report using USDA data through June (most recent complete information).

“Export volume was up 9 percent from a year ago to 662,875 mt [metric tons] while export value was just over $4 billion, up 21 percent. In previous years, export value never topped the $4 billion mark before August.”

“It’s remarkable to think that as recently as 2010, beef exports for the entire year totaled $4 billion, and now that milestone has been reached in just six months,” noted Dan Halstrom, USMEF president and CEO.

“This should be a source of great pride for the beef industry, which has remained committed to expanding exports even when facing numerous obstacles. And with global demand hitting on all cylinders, there is plenty of room for further growth.”

For the first half of the year, beef exports—muscle cuts and variety meat together—accounted for 13.5 percent of total production. This was up from 12.8 percent for the same time last year. The value added to the beef carcass from export demand was estimated at about $317 per head for the first half of the year. This was up 18 percent from the same time last year.

The retaliatory tariffs from China and the other countries, plus the increasingly uncertain trade environment around the world, have shown themselves in pork trade. After setting a new record in April, May and June saw pork export volume decline. USMEF attributed this decline to declines in demand from the China and Hong Kong area, plus increased domestic pork production in China.

Halstrom called the export environment for pork, and especially pork variety meats, “very challenging” as a result of the retaliatory tariffs and Chinese production.

“On the positive side, exports are achieving solid growth in most other markets and reached new heights in destinations such as Korea and Latin America,” he added, optimistically.

Halstrom also pointed to ongoing talks with Mexico, a previously big destination for U.S. pork, with a hopeful tone. Following the U.S. tariffs on steel and aluminum, Mexico applied retaliatory tariffs on U.S. pork.

“USMEF feels strongly that exports to Mexico could set another new volume record in 2018, though export value will likely be lower due to the retaliatory duties. We remain hopeful that duty-free access to Mexico will be restored soon, as competitors are now targeting a market that U.S. pork has dominated for many years, and the duties are contributing to lower prices for U.S. producers and adding costs for customers in Mexico.” — WLJ

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