Our Views Columns

Our Views Columns

Date: 11/3/2011

Title: A Change in Japan’s Cattle Age Limit Holds Tremendous Potential for U.S. Producers

By U.S. Meat Export Federation Staff

A recent news report from Japan generated a great deal of talk about increased beef exports, suggesting that Japan was ready to increase the cattle age limit on U.S. beef imports above the current 20 months. While the U.S. Meat Export Federation (USMEF) cautions producers that this change in policy is unlikely to happen in the next few months, it holds the potential to become a very big opportunity for our nation’s beef industry.

USMEF Economist Erin Borror estimates that an increase in the cattle age limit – if it is combined with risk-based criteria for handling products that would still be ineligible for export to Japan (such as products from older cattle) – could boost U.S. beef exports to Japan as high as $1.7 billion by 2015, based on the following assumptions:

  • This year, beef muscle cut exports to Japan will total around 309 million pounds valued at roughly $740 million.
  • Pre-BSE exports to Japan (from 1999 through 2003) averaged 710 million pounds in volume and $1.22 billion in value.
  • So if a new trade protocol brings muscle cut exports to 95 percent of the pre-BSE volume at today’s per-unit export value, this would result in an additional $850 million in muscle cut exports.
  • The leading offal items currently exported to Japan are tongue, outside skirt, hanging tender and large intestine. Pre-BSE, tripe was another large export item for Japan. A new protocol could result in an additional $150 million in beef variety meat exports to Japan.

This is the basis for the $1.7 billion estimate for combined muscle cut plus variety meat exports for 2015, which is nearly $1.0 billion higher than this year’s pace.

Given recent declines in the U.S. cattle herd and excellent export growth to markets across the globe, the question will naturally be asked, “Can we really meet that figure without siphoning off exports that currently go to other markets?”

Export dynamics have changed significantly since 2003. But the U.S. continues to regain market share in Japan and this trend is expected to continue, especially with an increase in the age limit. Cuts typically exported to Japan also account for a significant share of our exports to other North Asian markets such as South Korea, Taiwan, and Hong Kong. If our available supply of these cuts does not increase, it is possible that exports to Japan could increase and replace exports currently going to other markets without significantly increasing our overall volume to Asia.

Of the North Asian markets, only Taiwan pays a higher average price per pound for U.S. beef than Japan. So even if the volume of our exports to Asia were flat, a shift toward Japan would increase export value. In preparation for tight supplies, USMEF continues to work rigorously to expand the range of cuts exported to these North Asian markets. But note that in 2003, 7.7 percent our fed beef production was exported to Asia. This year, it will be under 6 percent. So while the supply of U.S. cuts exported to Asia may be tight, it is certainly not “tapped out.” 

It is also important to note that neighboring markets might be prepared to bid a limited supply of U.S. beef away from Japan, thus increasing the value of total exports to the region. This is due in part to the difference in import duties. At 38.5 percent, Japan’s duties on imported beef are much higher than those imposed by Hong Kong and Taiwan, and (because of the Korea-U.S. FTA) will eventually be higher than those imposed by South Korea.

So the question of whether expanded access to Japan would cause a shift away from other markets is complex and difficult to quantify. But regardless of one’s viewpoint on this issue, the overall impact on U.S. exports will be extremely positive.

Do supply concerns sell our industry short?

Concerns about having adequate supply to meet growing demand in Japan are understandable. But another important point to consider is that exports are currently the most obvious source of optimism in the U.S. beef industry. If increased access to one of the most lucrative beef markets in the world doesn’t help turn around the contraction in the U.S. cattle herd, what will?

“I am really not overly concerned about Japan siphoning away exports from other markets,” said USMEF President and CEO Philip Seng. “We need to let the market work, and that means getting our product to the customers who value it most. Increasing our access to Japan will serve as a catalyst for the world’s most efficient and innovative beef producers to move more product overseas, and I have every reason to believe we will meet that challenge.”

The timeline for expanded access to Japan, however, is harder to predict.

“There already is a shortage of U.S. beef in the market, and Japan’s distributors, retailers and foodservice interests are really pushing for a change,” Seng said. “So my thinking is that Japan could be ready to move beyond 20 months in the first half of next year, and this would open up some great possibilities for U.S. export growth in 2012.” 



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-Bob McCan, Texas