It always amazes me just how global the meat business has become. When you consider that we export about 25 percent of our pork and poultry and roughly 15 percent of our beef production around the world, it’s remarkable that the shipping industry’s infrastructure can get a perishable product to market before it goes bad. Much of the meat we ship is fresh, which makes it even more remarkable.
Rabobank came out with their assessment on global beef trade and they see nothing but growth ahead. I know we’ve all been concerned about getting the USMCA, as well as Japanese tariffs reduction, done. China has always been the big question mark for us beef producers. All I can say is it will happen when it happens. They just approved poultry imports and they have been forced to start buying pork again from us with their problems with African swine fever.
Last week Great Britain held elections to make Boris Johnson or Jeremy Corbyn prime minister. Johnson, the conservative candidate, is expected to win. Then they will complete their Brexit from the European Union. This transition could be good for U.S. beef exports as well. If Corbyn wins, they will embark on a socialist path of governance which will take them back to the EU.
China is responsible for global meat prices rising. With 1.4 billion people and a middle class larger than the entire U.S. population, there are a lot of mouths to feed. If they aren’t fed, they get a little punchy and then more things like Hong Kong could happen, and that’s the last thing the Chinese government wants.
China has been on a beef crusade. Beef imports to China are up 54 percent this past year. They have turned to Brazil for most of their needs. They have been approving new Brazilian beef plants for export left and right. As I said last week, beef prices in Brazil are at an all-time high. China has become the world’s largest beef importer since 2018, importing over 1 million metric tons.
One would think that they will eventually turn to the U.S. to fulfill their newfound taste for beef. But geopolitical issues and the trade war with China have slowed the market for ag products. We’ve been hearing a lot of noise about phase one of a trade deal where China is to buy $40-50 million in ag products. China, however, is afraid of being committed to buying that much.
Rabobank says, “If you’re an importer, it is prudent to have access to reliable or a diverse range of suppliers. We saw China increase its supplier base from nine countries to 23 countries in 2019. As an exporter, however, importers expanding their supplier base means more competition and reduced dependency on your products. With reduced dependency, opportunities exist for importers to exert greater pressure in trade relationships. And with rising geopolitical tensions, increased societal pressures, and ongoing concerns surrounding food safety, the use of non-tariff trade barriers is becoming more common.”
Rabobank also said, “Such ongoing and strong import demand, at a time in which traditional exporters have limited ability to increase supplies, may place pressures on domestic beef supplies in exporting countries. We belive the U.S. is close to its maximum production capacity, while Australia has a depleted cattle herd following drought liquidation. Both will be limited in their ability to increase production to meet the growing need for exports. While South American countries have the capacity to increase production, weaker economies or devalued currencies may result in more product being directed to export markets.”
If beef consumption continues to expand worldwide the U.S. beef industry is going to have to make some decisions. We know that we have a different product because of our grain-fed resources. We will certainly need more beef packing capacity to fulfill export markets. But is our ability to produce more cattle available? I’m sure if the market is right we can expand the nation’s cow herd. We will certainly continue to have droughts and tough winters—can’t control Mother Nature. Perhaps we will have new national policy that allows more cattle production on federal lands. The stars are starting to align on increasing our beef export trade, which will no doubt raise cattle prices.
Export markets are valuable to the cattle business because they add value to just about every part of the bovine. Global trade is here to stay so forget all that talk about isolationism. The world doesn’t work that way. — PETE CROW
