Throughout the pandemic, we saw demand increase for U.S. beef in both the U.S. and international markets. Food service typically accounts for a significant share of U.S. beef consumption internationally, so it was a surprise to see such incredible performance at retail. This also speaks to the versatility and high quality of U.S. beef. Consumers have recognized the nutritional benefits, the convenience and the deliciousness of U.S. beef. These demand factors are expected to help sustain the momentum for exports even as U.S. beef production decreases over the next few years.
Most countries in the world cannot produce beef like the U.S. We are blessed with the natural resource advantages and the ranching and cattle feeding heritage, as well as our incredible domestic beef market. Our vast production base means that we can supply international customers with loads of cuts they most desire week in and week out, often as a chilled, rather than frozen, product.
The Choice and Prime grades, offered only by the U.S., are also major selling points. Thus, the retail penetration for U.S. beef deepened over the past three years and will now pair with a food service comeback in key Asian markets like Japan and China, where COVID-19 restrictions are finally being lifted.
In 2021, U.S. beef exports were a record 1.44 million metric tons (mt), up 15% year over year, valued at a record $10.6 billion, up 38%. Exports continued on a record pace through October 2022, already topping $10 billion in value.
The Taiwan example
Joel Haggard, U.S. Meat Export Federation (USMEF) senior vice president for the Asia Pacific region, and Jihae Yang, USMEF Korea director, recently traveled to Taiwan, one example of a stellar market for U.S. beef. Taiwan is the sixth largest destination for U.S. beef after Japan, Korea, China/Hong Kong, Mexico and Canada, and exports to Taiwan were valued at more than $650 million in 2021. Taiwan has just 23.5 million people but buys over three times more U.S. beef than the entire European Union. U.S. beef accounts for 43% of Taiwan’s total beef imports and 77% of its chilled beef.
U.S. beef is everywhere in the market. Taiwan doesn’t have a domestic beef industry, so U.S. beef is by far the most consumed, accounting for more than 40% of total beef consumption. Taiwan is the 17th largest food service sales market globally, despite having only 0.3% of the world’s population. Not only is U.S. beef on the menu at restaurants, including Korean and Japanese barbeque, hot pot, steakhouses and high-end burger concepts, but it is also widely available at retail, including Costco.
There has also been explosive growth in home meal replacement, which has been a hot trend in Korea for years. Davis Wu is the director of USMEF’s Taiwan operations, and he and his team watched restaurant participation in promotions drop as restaurants were forced out of business throughout the pandemic. Yet U.S. beef exports continued to set records, driven by strong penetration at retail. Although inflation and economic challenges are expected to persist in 2023, Taiwanese importers are taking steps to secure supplies so they can still feature U.S. beef during a time of declining production. Items such as heel muscle, rib finger and boneless short ribs top the list of Taiwan’s favorite cuts, and USMEF Taiwan is also training on the utilization of U.S. round.
Another note highlighted on the trip: The Association of Southeast Asian Nations region has a rising competing bid for U.S. beef. U.S. exports to the Philippines are on a record pace, up 79% year over year, despite tariff and currency disadvantages. Exports to Vietnam are up 56%.
Competition from down under
Brazil, the U.S., Australia and India (mainly buffalo meat) are consistently the top four global beef exporters, but Australia is the primary competitor for U.S. beef, especially in Asian markets. Australia’s exports were supposed to rebound in 2022, but through November, they were down 4% from last year, when exports were the lowest in 36 years.
Herd rebuilding has been strongly underway since 2020. Additional cattle will be harvested in 2023, and exports will increase, but labor remains a major constraint. Cattle feeders and packers have been losing money, and Australia’s cattle prices have been dropping in late 2022, reflecting the challenging economic conditions and the expectation that additional numbers must work through the system next year. There will be added competition facing U.S. beef, but it is important to note that Australia’s grain-fed production and exports have been mostly steady to higher throughout the herd rebuilding process.
Grain-fed exports were down just 3% from January through October, totaling 238,000 mt and accounting for 34% of Australia’s total exports. Australia’s top three markets are the same as ours: Japan, China and Korea. The increase in U.S. beef exports has come with continued Australian grain-fed exports, meaning total demand has grown. Canada is the other major grain-fed exporter, and its production is expected to be lower in 2023. Overall beef production for the top exporters is expected to decline in 2023, down 1% following a 2% increase in 2022, based on October estimates from USDA’s Foreign Agricultural Service.
Exports near $12 billion
The strong U.S. dollar has been another headwind for U.S. exports. But even with that constraint, U.S. exports are likely to near $12 billion in 2022. Exports to Korea, Japan and China/Hong Kong already exceeded $2 billion each in just the first 10 months of the year. The Japanese yen and Korean won saw some of the steepest devaluations against the dollar. The added cost due to the weaker yen was 20% in early December and 12% for the won compared to year-ago levels, and these two markets account for 40% of U.S. exports.
But the dollar has likely peaked, and these currencies devalued against our competitors as well, so a strong currency hasn’t been unique to the U.S. As travel and tourism regain momentum in Japan in 2023, there is some optimism for stronger beef consumption. China only began lifting its COVID-19 restrictions in early December, and it will likely be rocky for some time as they work through a major wave of COVID-19 cases, but the market will hopefully gain momentum in 2023.
China’s demand for U.S. beef has been incredible despite these restrictions and the requirements imposed on cold chain food, with importers required to pay for COVID-19 testing, disinfecting and tracing of imported food products, including beef. Although restaurant demand has been pummeled, U.S. beef has gained presence at modern retail and on China’s e-commerce platforms.
Challenges persist in 2023
As we look ahead to 2023, many of the same challenges will remain, but the headwinds are likely to be steady to easing rather than accelerating. The main change that will limit further export growth is the coming decrease in U.S. beef production. International customers have been through these cycles before, but this time, they have already seen and paid sharply higher prices for U.S. beef. They have also dealt with shipping delays and logistical headaches and lived through their own uncertain circumstances. Throughout the pandemic, restaurant operators, retailers and e-commerce purveyors have stuck with and profited from U.S. beef, and it will remain on their menus and shelves.
From the U.S. standpoint, exports remain essential to the bottom line. Export values averaged $460 per fed head slaughtered in January to October this year, up from $407 last year. Even with record large beef production this year, the U.S. is exporting a larger share of beef and beef variety meat production (15.4% through October). Variety meat export values averaged more than $48 per fed head, or about 10% of the total per-head export value, as exports of these edible products, including tripe, tongues, livers, intestines, hearts, lips and kidneys exceeded $1 billion in the first 10 months of the year.
Beef is complex—the vast number of cuts and offal products produced means that we have the need and opportunity to capture the highest possible value from every item. Having access to and relationships with a wide range of customers makes this happen. When selling to international customers, we can capitalize on their different tastes, preferences, seasons, holidays, exchange rates, gross domestic product growth rates and so on. Especially in these volatile times, we must continue to invest in and build relationships in the global markets.
USMEF’s in-country staff continues to work tirelessly on behalf of our industry to adapt and market U.S. beef according to the latest situation. Our forecast is for a relatively mild pullback in U.S. beef exports in 2023 to just under 1.5 million mt, valued at close to $12 billion. However, there is further downside risk, especially if economic conditions deteriorate even more than expected. — Erin Borror, USMEF vice president of economic analysis
