EXPORT MARKETS
NCBA Staff Contact:
Gregg Doud, Chief Economist
202-347-0228
gdoud@beef.org
Summary:
With eleven months down and one to go, U.S. beef, variety meat, and product exports were $2.401 billion. This is a 30 percent increase from the same period in 2006, but it is still well behind the $3.856 billion for all of 2003. A quick analysis of the twelve markets to which we’re exporting at least $10 million in beef clearly indicates some very encouraging trends in terms of U.S. beef’s competitiveness in the world market. However, the data also points out that the same old problem, now four years running, still plagues this industry – a lack of market access to South Korea, China and Japan. Fortunately, this topic has just about been put to rest with our remaining customers globally as 2007 exports should be $600 million higher than pre-2003 levels of trade once the December trade data is reported.
Mexico and Canada
Without full access to Japan and Korea, Mexico will remain the top destination for U.S. beef and beef variety meats in 2007, and it is likely that a new record will be reached exceeding last year’s record of $1.2 billion in sales. Through November, exports to Mexico were down two percent in volume but up three percent in value. Another key feature is that the per pound value of U.S. beef exports to Mexico continues to grow from about $1.40/lb in 2003 to more than $1.70/lb today.
January to November exports to Canada are up 35 percent in volume and 38 percent in value. Driven by the decline in the value of the U.S. dollar, the record pace of U.S. beef exports to Canada should end up very near $600 million in 2007, easily making our neighbors to the north our second largest customer. This would exceed any previous years’ exports to Canada by roughly $150 million.
This isn’t bad for a country of just over 33 million people, which is just eleven percent of the U.S. population or less than one-third of the 109 million citizens in Mexico. Keep in mind that most of Canada’s population lives in the East making these consumers logistically much closer to U.S. beef supplies than those grown and processed in Canada, particularly at today’s exchange rates and fuel prices. In fact, Toronto’s five million affluent consumers are 1,000 miles closer to Grand Island, Nebraska’s beef processing plant than Alberta’s packing plants. Alberta raises 85 percent of Canada’s fed cattle, and except for Calgary (population 1.1 million) and Vancouver (2.1 million), the closest markets for this beef are the U.S. cities of Seattle (3.5 million), Portland, Ore. (2.0 million) and San Francisco (4.2 million).
Outside the “Big 4” Countries
Through November, U.S. beef markets outside the “Big 4” (NAFTA plus Japan and Korea) are up 14 percent in 2007. Vietnam is up 375 percent; the EU is up 58 percent; Central America is up 51 percent; and the Caribbean is up 16 percent. The United States also exported 81,869 metric tons to the Middle East, which is a ten percent increase on the year. This is almost entirely variety meat trade. Additionally, the United States now sends more variety meats (79,307 mt of mostly livers) to Egypt than we ever sent to Russia (60,132 mt in 2003). Angola is the third largest market for U.S. variety meats at 7,105 mt, and Mexico is still the top destination for beef variety meats at 155,457 mt for the eleven months in 2007, which is 10 percent more tonnage than during the same period in 2006. Through November, the U.S. has exported 621 million pounds of heart, liver, tripe and tongue (for example), up 9.7 percent from 566 million pounds between January and November 2006. That is a LOT of lickers and tickers!
Exports Are Up (Except for Japan and Korea)
So to recap the good news, where the U.S. has market access, its exports, in most cases, are not only back to “normal” 2003 levels of trade, but they’re now WELL ABOVE those levels and rising. In fact, if Japan and South Korea are excluded, January-November 2007 beef exports are a remarkable $406 million ahead of comparable trade for ALL of 2003. So, if November’s $208 million in exports to the rest of the world are similar to December, it suggests total 2007 exports to all countries except Japan and Korea will actually be more than $600 million ahead of where they were in 2003. For just a second, this remarkable statistic might help us forget that at the end of 2007 we’re still losing out on the more than $1.1 billion in sales to Japan and about $700 million to Korea compared to 2003.
Continuing Roadblocks in Asia
It is, therefore, no wonder that U.S. beef producers remain flat out angry that South Korea and China still won’t buy our beef and that access to Japan is still running at only about one-fifth of the pace in 2003 due to Japan’s 20-month and under BSE-related age restriction. Of course 2007 will forever be known for Japan’s historic political revolving door at both the Prime Minister and the Agricultural Ministry’s posts, where five different ministers were at the helm in barely more than a seven month period. Although they’ve by no means been perfect during this protracted saga, it is impossible to be critical of anyone inside the U.S. government during this past year of historic Japanese political paralysis, which brought new meaning to the phrase, “just when you thought it couldn’t get any worse…”
Fortunately, sales to the rest of the world will likely set new records again in 2008. However, this will be overshadowed by the $6-8/cwt still missing in fed cattle prices due to the lack of access to what were once our first and third largest markets. The fact that U.S. beef may not be available for travelers to this summer’s Olympic Games in China only adds insult to injury as far as U.S. cattlemen are concerned.
We already have more than 15,000 metric tons on the books in the first week of this year to Mexico because of a change in Mexico’s tax law in 2007 that no longer encourages carrying big inventories from one year to the next. In the coming year, industry analysts see continued (4-5 percent) growth in business to Mexico and another huge year for exports into Canada. Growth in exports to the EU is certainly a hot topic at the moment, and the big wild card is Russia where exporters are seeing interest in U.S. beef (rounds) begin to open up rather than the traditional beef variety meat (liver) exports.