U.S. beef exporters fear declining sales to Japanese market

NEW ORLEANS, La. — The U.S. beef sector exported about US$8.25 billion worth of beef last year and the industry has high hopes for continued growth.

Trade agreements remove duties and non-tariff barriers so favourable deals are needed, said Kent Bacus, trade policy director for the U.S. National Cattlemen’s Beef Association.

“Customers want our beef and we want to be able to get our product there with the least amount of interference as possible. The reality is we are not the only people targeting these rich markets,” he said at the cattlemen’s convention held earlier this year in New Orleans, Louisiana.

Many nations want access to Japanese and Chinese beef markets. Currently, about 25 percent of U.S. beef exports go to Japan but Americans could face a growing disadvantage because they lack a trade deal with Japan. The U.S. will likely face increasing competition from countries like Canada that have signed on to the CPTPP trade agreement, which includes a lower tariff rate on beef entering Japan at 27.5 percent with continued declines expected over time.

“Even though we are having a record year with Japan we still face a 38.5 percent tariff,” Bacus said.

“If we don’t secure a trade deal with Japan then our annual export losses by 2023 could reach $550 million and will exceed $1.2 billion by 2028. On a per-head basis, those losses are $20 per head in 2023 and $43.75 per head by 2028,” he said.

South Korea has become a success story with a renegotiated deal and tariffs will eventually disappear.

U.S. President Donald Trump wants to repeal or replace existing trade agreements. He believes in using tariffs to gain leverage.

Tariffs on consumer goods from China and other trading partners resulted in China, Europe, Canada and Mexico slapping tariffs on U.S. agriculture to target Trump’s rural base to put pressure on the president to back off but he has not relented.

The United States-Mexico-Canada Agreement to replace the North American Free Trade Agreement was signed but must be ratified in a divided Congress. Bacus said it is unlikely that Congress will quickly ratify the agreement with Democrat Nancy Pelosi as house speaker.

“It is going to be very tough to expect we can move this very easily through the House and the Senate,” he said.

The NCBA supports USMCA because the beef industry was largely untouched with no changes to duty-free access and no renewal of country-of-origin labelling laws.

The U.S. continues to eye the potential of China, but with restrictions on hormone and beta agonist use and trade disputes outside the beef sector, little action is underway.

The U.S. Meat Export Federation estimated that if the restrictions are removed, China could become a $4 billion beef market in five years.

While trade agreements are being signed, there are additional plays underway that affect markets, said analyst Brett Stuart of Global Agritrends.

The global beef supply has expanded without a depression in prices because people are eating more.

“Usually when you increase production, you decrease price. Beef has gotten a free roll for about 10 years in global markets with an increase in production and increased price,” he said.

The value of beef exports has also escalated.

“Outside of the U.S. and Canada there is very little grain-fed beef in the world. Therefore grain-fed beef has become a luxury item in global markets,” he said.

Two unexpected events are changing trends.

China stepped into the market eight years ago and has become a big player in beef transactions.

“They came out of nowhere and eight years later they buy $9 billion a year and by the end of 2019 they will be $10 billion,” he said.

The creeping problem of African swine fever could have devastating effects on the entire meat spectrum.

“It is a black swan in the world protein market. It is a massive game changer for us,” said Stuart.

A highly transmissible viral disease with no cure, it has been found in Europe and Russia and is rampant throughout eastern China where most hogs are raised. He suspects the government is underreporting disease impacts.

Pork consumption in China is 88 pounds per capita and if many pigs are lost, there could be a shortage.

If the disease came to North America, the effects could be devastating for American and Canada exporters.

If pork exports from either country suddenly faced bans in foreign markets, the domestic market could not consume the excess meat, which would affect beef and poultry sales as well.

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