Doud sees big opportunities in beef export market
Rapid City, S.D. – U.S. producers may see some big opportunities over the next couple years exporting beef, according to Greg Doud, president of the Commodity Markets Council.
Doud spoke to cattle ranchers about beef trade during the Range Beef Cow Symposium in Rapid City, S.D.
“The grain cycle has peaked, but I think there may be a few years left in the beef cycle,” Doud told producers. “There are some big opportunities there.”
Currently, export markets account for almost $300 a head. Doud said about 17 percent of the value of a finished steer now comes from the international marketplace.
“Another way to look at it is that 17 percent of the money used as payment for the product we are producing comes in the form of Pesos, Yen, Won, Yuan, Euros, Rubles, Canadian or Taiwan dollars,” Doud stated. “The heifers producers retain will produce calves that will be finished out and go to 70 to 80 countries around the world.”
Doud told producers not to become too caught up in the fact that per capita domestic beef consumption is declining, because the beef marketplace is now a world supermarket.
“One of the biggest economic changes of the past decade is the increased buying power of consumers in all corners of the world for U.S. beef,” he said. “There has been incredible growth in some of these countries.”
Doud said it looks like the U.S. may this year finally meet or exceed the $1.4 billion of beef products exported to Japan in 2003.
“This year’s strong resurgence in exports clearly demonstrates that the relationship between Japanese consumers and U.S. beef is still very strong,” he explained.
However, the relationship isn’t without its challenges.
Currently, Japanese consumers have to pay 38.5 percent more to put beef on their table, thanks to a Japanese tariff applied to all U.S. beef imported into the country. This tariff is one of the highest that U.S. beef faces in the world, Doud said.
Japan is currently looking to do away with its nuclear power plants and move toward natural gas, which could be supplied by the U.S.
“I’m optimistic that we can get something done through the Trans-Pacific Partnership (TPP) trade negotiations. Maybe we can trade natural gas for beef,” he said.
In 2014, the U.S. will be in its third year of a trade agreement with South Korea, which will mean the tariff on beef imports will be at 32 percent, or eight percent less than any other country exporting beef to the country.
Doud said because of this eight percent reduction, the Meat and Livestock Australia office in South Korea plans to close in 2014.
Australia has worked for several years to form their own trade agreement with South Korea but has been unable to do so.
“The expectation is that U.S. beef will soak up somewhere in the neighborhood of 70 percent of South Korea’s beef imports. In the future, U.S. beef exports to South Korea will swing up and down due to domestic beef production changes and prices in competing meats, but the leverage of continued tariff reductions via the U.S.-Korea Free Trade Agreement gives us the drop on the competition,” he said.
Another major player in the future of U.S. beef exports will be China, Doud continued.
A decade ago, China couldn’t afford U.S. beef, but now they can, Doud said.
“One and a half billion pounds more beef is going to China and Hong Kong this year versus last year,” Doud said. “To put this into perspective, Wal-Mart’s beef sales domestically are a little over 2 billion pounds, and total U.S. beef imports are about 2.2 billion pounds.”
During the last two years, beef prices in China have increased 83 percent, he continued. The retail price of beef in China is now $4.80 a pound, compared to $4.95 a pound in the U.S.
China has taken over from the U.S. as the world’s largest beef importer. To date, 80 percent of those imports have come from Australia, Brazil, Argentina and Uruguay. China bought 100,000 metric tons of beef per month this summer, compared to 40,000 metric tons per month a year ago, Doud said.
He added, “In comparison, total U.S. beef exports to all countries are currently running about 70,000 metric tons per month.”
“Ten years ago, per-capita incomes in China relegated Chinese consumers to importing products like tendons, backstrap and ligaments, omasum, rectum, aorta and whatever else they could import at a price point of about two dollars per pound,” Doud said. “U.S short ribs and chuck rolls, the staple in South Korea and Japan, were mostly out of reach for middle-class Chinese consumers who were dining out.”
“The fact that this appears to no longer be the case has to be one of the biggest things to happen to ranchers all over the world,” he stated.