Americans consume 86 percent of all the beef the U.S. industry produces. The good news is that domestic demand this year has been stronger than expected, thanks to solid economic growth, low unemployment and rising wages for those who earn the least. This means consumers are spending more on beef, especially on the higher-quality cuts. That’s great news for an industry that is producing well over 80 percent Prime and Choice beef each week.
Equally good news is that global demand for U.S. beef has never been stronger. Beef exports January through August were slightly below last year’s record pace, declining 2 percent in volume (881,526 metric tons (mt)) and down 1 percent in value ($5.44 billion).
Beef export value per head of fed slaughter averaged $309.85. Through the first eight months of the year, exports accounted for 14.2 percent of total beef production and 11.6 percent for muscle cuts, down from 14.6 percent and 12.1 percent, respectively, in 2018. Meanwhile, September export sales were down 11 percent from August but were 6 percent larger than last September, say analysts.
These numbers represent strong demand for both cuts and variety meats. The variety meat trade is especially important because it adds value to items that have little value at home. Mexico is the largest market for these exports. But Japan has been a bright spot in 2019 for tongues and skirts. Its imports in the eight months increased 31 percent in volume year on year and 18 percent in value. U.S. tongues and skirts face higher duty rates than competitors’ products but have a 12.8 percent tariff compared to 38.5 percent for U.S. muscle cuts.
However, a Sept. 26 agreement between the U.S. and Japan means the 38.5 percent tariff will be lowered to 26.5 percent when the agreement kicks in and then to 25.8 percent next April. Japan remains the U.S.’s top export volume and value market despite the tariff. January-August exports were just 3 percent below last year’s pace in volume (217,698 mt) and were 4 percent lower in value ($1.36 billion).
It’s no wonder that Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF), says the beef industry is extremely excited at the prospect of lower tariffs in Japan, as 38.5 percent is the highest rate assessed in any major market. As USMEF has seen in South Korea, where the tariff rate was once 40 percent, lower tariffs make U.S. beef even more affordable for a wider range of customers. While the agreement still needs parliamentary approval in Japan, importers are already enthused and are preparing for long-awaited tariff relief, he says.
South Korea has been the export growth pacesetter for the past two years. U.S.exports cooled in August after setting new value records in June and July. But for January through August, exports to Korea were still 8 percent ahead of last year’s record pace in volume (174,290 mt) and 10 percent higher in value at $1.26 billion. Korea is a blueprint for what U.S. beef can achieve when consumers don’t shoulder a heavy tariff burden, says Halstrom. Korea’s tariff is half its pre-KORUS level and Koreans enjoy U.S. beef more than ever before in a wider variety of venues, he says.
Taiwan is another booming Asian market. Through August, exports were 10 percent above last year’s record pace in volume (42,785 mt) and were 7 percent higher in value ($384 million). The U.S. dominates Taiwan’s chilled beef imports and has a 72 percent market share. Led by surging demand in Indonesia and solid growth in the Philippines and Vietnam, beef exports to the ASEAN region were 27 percent above last year’s pace in volume (37,206 mt) and 12 percent higher in value ($181 million).
China of course dominates the global beef trade and replaced the U.S. two or three years ago as the world’s largest beef importer. Total world beef imports increased 17.7 percent from 2015 to a projected 2019 total, while Chinese imports increased 153 percent and imports to the U.S. fell 12.3 percent. In 2015, China accounted for 8.7 percent of total beef imports but in 2019 will account for 19 percent of the total. With Hong Kong, it will account for 24.8 percent. China is forecast to import 2.9 million mt of beef in 2020.
This huge growth has dramatically altered global beef flows. The majority of China’s beef imports come from South America. Brazil ships 22 percent of its exports to China for 31 percent of total Chinese imports. Uruguay sends 70 percent of its exports to China and accounts for 21 percent of the total. Argentina accounts for 17 percent of Chinese imports. That’s 69 percent from just three countries.
Unfortunately, U.S. beef exports to China, still tiny, will not increase until high tariffs and China’s non-implant restrictions are removed. There is no indication that China will do this, especially as it has just licensed even more beef plants in Brazil, Ireland and the UK to export to China. — Steve Kay
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)