USMEF promotes beef, lamb around the world at food shows, trade eventWritten by Saige Albert
Gulfood 2016 drew over 90,000 people from around the world from Feb. 21-25 in Dubai to celebrate the unique foods offered by exporters from around the world. As one of the world’s largest food exhibitions, the event brings exporters together with key buyers from growing regions around the world.
John Brook, U.S. Meat Export Federation (USMEF) regional director for Europe, Russia and the Middle East, says, “Gulfood has really become a very, very important show. It is the regional show for all of the Middle East, drawing in people from all over Africa and Asia, as well, and there’s no doubt that Gulfood is a hub. It’s a meeting point for a very wide region.”
Brook adds that the event drew more U.S. companies than ever before in 2016, and he sees that the regions represented at the show are important for U.S. producers.
U.S. beef piqued the interest of many from around the world, but Brook also notes the buyers showed strong interest in U.S. lamb.
“USMEF has been working with chefs and other foodservice professionals in the region to bolster demand for U.S. lamb,” adds Ralph Loos of USMEF.
Another important market for U.S. beef, USMEF notes that Indonesia has begun to relax their import restrictions on U.S. beef.
USMEF explains that the country was once a top 10 volume market for beef exports, but inconsistent access in recent years has occurred in response to government efforts to bolster self-sufficiency in beef production.
Joel Haggard, USMEF senior vice president for the Asia Pacific, says, “Following publicity last year about a government-wide effort to streamline red tape and regulations, the Indonesian minister of agriculture published these new import regulations that made more cuts eligible for importation and allowed importers to apply to import as much beef as they want. More cuts are eligible from the U.S., including export staples such as short plates and short ribs.”
He also predicted higher U.S. volumes for 2016.
“The U.S. probably has the best opportunity in years to supply Indonesia because Australia’s live cattle export supply will be constrained by where that country is at in terms of its own cattle cycle and the consequent high beef import prices from Australia,” Haggard adds.
However, he emphasizes caution for the market as a result of challenges in the marketplace.
Haggard explains that the country requires purchasers to buy a certain quantity of domestic beef and prove it by showing receipts before they are able to apply for an import license.
“It’s quite restrictive, and it lengthens planning time for imports, obviously,” he adds. “These and other restrictions are really the reason why the U.S., joined by New Zealand, filed a trade complaint to the World Trade Organization (WTO) over Indonesia’s beef import regime.”
While the outcome of the case is important, Haggard also notes that USMEF is focusing on capturing the market share that they can in the meantime.
USMEF reported on Jan. 7 that exports of U.S. beef and pork were above last year, though only modestly. At the same time, export value slipped.
“Beef exports increased three percent from a year ago to 82,301 metric tons, but value was down 13 percent to $438.1 million,” they said. “Exports to most Asian markets, which were impacted early last year by the West Coast port labor impasse, increased in January, but these gains were largely offset by lower volumes shipped to Western Hemisphere markets and the Middle East.”
Exports in January only accounted for 12 percent of total beef production and nine percent for muscle cuts, which was steady from 2015. Export value per head of fed slaughter was $239.88, down 11 percent from a year ago.
Beef exports to Japan were the largest in six months at 16,762 metric tons, up 21 percent from a year ago, while export value edged two percent higher to $93.2 million. Exports to South Korea and Taiwan increased by 59 and 25 percent in volume and 17 and three percent in value, respectively.
Led by a strong month in the Philippines, Vietnam and Indonesia, exports to the region increased 71 percent in volume and nine percent in value, said USMEF.
Exports to Hong Kong were up 19 percent, although value declined by 16 percent.
“Although it is encouraging to see beef exports to the Asian markets performing above year-ago levels, these results are a reminder of how disruptive the West Coast situation was for our industry,” said USMEF President and CEO Philip Seng. “While we still face a tariff gap in Japan compared to Australian beef, Australia’s recent slowdown in production presents an opportunity to reclaim market share – an opportunity the U.S. industry is pursuing very aggressively. U.S. beef is also capitalizing on the tight domestic supplies in Korea, making strides in both the retail and foodservice sectors.”
AFBF releases report citing $5.3 billion in TPP benefits to American agricultureWritten by Saige Albert
On Feb. 23, the American Farm Bureau Federation (AFBF) joined Agriculture Secretary Tom Vilsack to announce the release of a new report quantifying the benefits of the Trans-Pacific Partnership (TPP).
“Over the course of the past few months, we have studied TPP, and we are encouraged by our findings,” said AFBF President Zippy Duvall. “We know it is important to our ag communities and to farmers and ranchers to open markets and have access to markets.”
AFBF’s research concluded that TPP will result in a $5.2 billion increase in ag exports annually for an increased $4.4 billion in the pockets of farmers and ranchers across the U.S.
“We think TPP will be positive for all commodities across the board,” Duvall commented.
Vilsack added that for every $1 billion increase supports 6,500 jobs, and the predicted $4.4 billion in increased incomes means support for an additional 30,000 good quality, high-paying jobs in the U.S.
Role of exports
“To put a fine point on the important role of exports in American agriculture, 30 percent of sales and 20 percent of farm income are directly related to exports,” Vilsack said during a media conference call. “It is important that we realize additional opportunities to expand the reach, quality, quantity, safety and affordability of ag products.”
Vilsack referenced a report by the Peterson Institute which showed that, by 2039, Americans would see an additional $357 billion in exports, a portion of which would be directed to agriculture.
“This would raise income for Americans by $131 billion,” Vilsack added. “The bulk of this would go to high-wage workers and farmers. Export-related jobs are indeed higher paying jobs.”
Further, the Peterson Institute Report noted that delayed implementation could cost the American economy $94 billion in lost opportunity.
“It is important to emphasize the passage of TPP and allow it to be implemented,” Vilsack said. “No country will receive more benefit than the U.S.”
“Until today, we didn’t have a documented review or study, but thanks to AFBF, we are prepared to share information about the importance of opening markets for ag products,” he added.
TPP will reduce 18,000 tariffs and taxes on goods and services provided by American companies, including farms and ranchers.
“We see benefits in TPP to livestock and dairy across the board,” Vilsack said. “We see the impact and effects on grain and feed, and fruits and vegetables have benefited from expanded trade and access.”
TPP breaks new ground in the realm of trade agreements by including provisions for sanitary and phytosanitary (SPS) rules, as well as biotechnology.
“This is the first trade agreement that addresses the importance of making sure that SPS rules are based on science and documented information,” Vilsack explained. “This is also an agreement that, for the first time, makes reference to biotechnology and the importance of having a uniform approach to biotechnology.”
The added language will be helpful in Asian markets, he noted, adding that a standardized regulatory process that doesn’t unfairly create barriers will be particularly essential in China.
Vilsack further said that access to biotechnology is important to provide for the growing world population.
“We are challenged in agriculture in the U.S. to continue to lead the world in innovation and continue to lead the effort to increase productivity in fields, on farms, on the range and in pastures to meet growing food demands,” he commented. “America must have the ability to get innovations to the market after appropriate study and review without unnecessary and unreasonable barriers as a result of politics.”
Science-based decisions will be essential to fair trade around the world, he noted.
Expanded world markets
TPP has the potential to harness growing world markets, said Vilsack.
“The Asian market is a growing market,” Vilsack mentioned. “It is home to 535 million middle-class consumers, and in 15 years, we expect that number to grow by 2.7 billion – 10 times the population of the U.S.”
Expanded market access means diversity of markets for U.S. agriculture, and Vilsack noted that diversity reduces the chance of overreliance on any one market.
He continued, “Ninety-five percent of trade activity in terms of growth and development occurs outside the U.S. It is essential for us to be engaged in active trade discussions and to play a part in this expanded trade.”
Action from Congress
While TPP is ready to be signed, the U.S. is awaiting action from Congress on the deal, which is costly to the American economy.
“We know that if we delay implementation by a single year, we look at a $94 billion hit, which will impact agriculture but also the other sectors,” Vilsack explained. “There will be continued requests to Congress to get this done. Any delay is costly.”
Spearman: Energy, commodity prices impact cattle market across U.S., globallyWritten by Saige Albert
San Diego, Calif. – As energy prices plummeted this year and the profitability of crop prices has been squeezed, CattleFax’s Chad Spearman noted that the same trend is expected over the next few years.
“The question we have to ask ourselves about is weather,” he said. “The key as we look at corn, soybeans and wheat is we have ample supplies coming into this year, and without a major crop production issue, that is going to remain the case and keep pressure on prices through 2016 and into the next year.”
A key marker when looking at prices going forward is the stocks-to-use ratio.
“Stocks-to-use measures total usage relative to the ending stocks at the end of the year is presented on a percentage basis,” Spearman said.
He continued, “Corn stocks-to-use levels are just on top of 25 percent, and they are expected to be flat compared to last year but still elevated compared to tight levels of 2008-12.”
Going back to 2012, stocks-to-use for U.S. corn dropped below six percent resulting in record high corn prices. As stocks-to-use levels are low, prices are high, he explained.
“Since we have moved past that period, at least over the last two years, we have had stocks-to-use levels maintaining above the 12 percent level,” Spearman said.
Spearman added that, through the upcoming year, stocks-to-use ratios will range from 11 to 13 percent.
“That will keep major resistance for stocks of corn around four dollars a bushel and maintain a risk factor of $3.35 to $3.45 going into the spring,” he continued. “When we consider prices in the longer term, trends remain lower. Supplies are ample, so we are going to see that weigh on prices.”
Around the world, the U.S., Argentina, Brazil and Ukraine are the only major corn producers, meaning competition around the world is somewhat limited. However, Spearman also noted that dried corn isn’t as significant a concern as other commodities. Dried corn exports make up a very small portion of the overall crop sales in the U.S.
“We export a lot of things that are derived from corn, but only about 15 percent of the corn crop is dried corn,” he explained. “Cheaper corn prices outside of the U.S. are going to be a limiting factor, though.”
For farmers, increased supply will be a challenge, but livestock producers and feeders will see some relief.
“Feed costs will come down substantially, but we have to separate these three markets when we look at a global economy,” Spearman added.
Protein and energy
“We are looking at cheaper protein and energy feed costs in 2016,” Spearman summarized. “That pressure will continue to weigh on hay prices.”
After 2012, U.S. hay production rebounded sharply, and hay stocks also rebounded over the last year.
“We are seeing those prices come down substantially, and we expect that will be supportive in the cow/calf sector in terms of costs,” he said. “Other hay prices and alfalfa hay prices are expected to decline six and 16 percent, respectively, for the current marketing year ending in April.”
Influence of ethanol
An additional complicating factor in corn markets is the use of corn to make ethanol.
“When we look at the corn market and the changes it has undergone since 2005, the ethanol industry has become established and is not going anywhere,” Spearman said. “We have 35 to 40 percent of the corn market that is tied to energy markets.”
As energy prices have declined, support of the industry through ethanol production should not be expected.
“Corn prices will stay at $3.35 to $3.45, up to $4.10 on the high end in the spring.”
With 89.5 million acres of corn expected to be planted in the 2016-17 marketing year, and forecasted yields of 167 bushels per acre, Spearman commented that the resulting supply of corn is steady or only slightly higher than last year's.
“We do expect usage to grow, especially as supported by livestock production,” he said. “Without a major production issue, we will be limited to a little above four dollars for corn prices.”
Spearman addressed attendees of the 2016 National Cattlemen’s Beef Association Cattle Industry Convention and Trade Show, held in San Diego, Calif. at the end of January.
Global marketplace determines outlook, positive signs seen for futureWritten by Saige Albert
San Diego, Calif. – “In the course of the last few years, our business has become more global,” said CattleFax Analyst Mike Murphy during the National Cattlemen’s Beef Association Cattle Industry Convention and Trade Show at the end of January.
In 2008, when recession hit the global economy, markets contracted.
“We started to see the globe come together to try to stimulate business in our own countries around the world,” he said. “When that occurred, we had a big influx of commodities and values were supported.”
However, cattle aren’t as flexible as other commodities in terms of ability to recover quickly. The reproductive cycle of cattle can be prohibitive as compared to hogs or even crop markets, he noted.
“When we look at these changes in terms of crude oil or hogs, we have seen a significant correction to their values,” Murphy said. “That is driven by supply. We were having increased production, which was affected by demand. Then we saw a slowdown in global demand.”
Global demand declines led producers to assess their situations in terms of long-term price trends.
“We lowered interest rates to try to stimulate the economy,” Murphy said. “We were able to achieve some success, but we are now in a situation where interest rates can’t get lower.”
Some European countries are even encouraging their citizens to not deposit their money in banks now.
“There isn’t much more we can do to stimulate the economy,” he said. “At some point interest rates are going to go back up, but in the short-term, we expect them to stay fairly low.”
The impact seen from lowering interest rates was positive, but it has begun to wear off.
“We are seeing countries trying to devalue their currency in hopes of stimulating export growth. Some are in more difficult shape than others,” Murphy commented.
Key countries around the world are seeing a slowing of growth, including Brazil, Russia and China.
“Brazil and Russia, in particular, have seen contraction from an economic standpoint,” Murphy explained. “Countries like China stand out as solid but with slowing growth.”
For example, in Russia, a 56 percent decline was seen in their currency over the last 18 months.
“Some of that is related to what is going on in the energy sector and the deflationary concept,” Murphy said.
Murphy also noted that, despite slowdowns and cheaper beef coming from Brazil, many countries are still seeking U.S. beef because it is a high-quality, grain-fed product.
“Brazil has a grass-fed product,” he said.
While economic stimulation is still a concern, Murphy also added that slowdown around the world is starting to impact the U.S. economy more significantly.
“This is a reflection of where we are from an economic standpoint,” he continued. “In the U.S., we know we are in really good shape compared to the rest of the world, and that is the expectation as we look forward. We see no concerns looking at 2016 to be any sort of recessionary year.”
However, beyond the borders of the U.S., the picture is less clear, and Murphy noted that it continues to be important to pay attention to the global marketplace.
“We know how important global demand is for proteins – and in particular beef,” he said. “We have to make sure we are always analyzing and assessing what is going on around the globe.”
“The challenge in the U.S. is we are a stable economy,” Murphy added. “There is no fear of seeing our decline, at least in the short-term, over the course of the next one to two years.”
With a stable economy and other countries devaluing their currency to stimulate growth, Murphy explained that the U.S. is at a competitive disadvantage.
“There are some positive things from a global standpoint,” Murphy commented.
First and foremost, he noted that it is also important to consider supplies.
“We have had a small increase as we look at beef production, but when we look at the last several years, we have a tight, tight supply,” Murphy said. “Australia will contract their beef industry from a production standpoint because they are going to begin expansion as they receive more moisture. To expand, they have to contract first.”
Canada will experience a similar situation, comparable to what was seen from 2013-15 in the U.S.
“We don’t have a huge increase in terms of overall global beef supply,” he said.
Looking forward, beef imports are expected to decline about eight percent as Australia contracts their supply.
At the same time, the value of the 90% lean beef market has gone from three dollars a pound to $2.20.
“From an export standpoint, over the last four to five years, we have exported about 2.5 million pounds, which is what we expect to export on a consistent basis,” Murphy said. “That is roughly nine to 10 percent of our production.”
The ability to continue exporting beef is a “big positive for the industry,” he added.
Any increase in global beef production will also come from the U.S., considering expansion of the beef cattle herd, which puts the beef industry in a position to prosper.
“That puts us in a position where we should be able to command better demand from a global standpoint so we can export more product,” Murphy said.
He added, “There are some trade winds we will have to face, but we feel like, overall, the global market will be more positive.”
Private sector initiative strives to realize benefits of U.S.-China trade partnershipsWritten by Natasha Wheeler
Fort Collins, Colo. – In July 2013, the U.S.-China Agriculture and Food Partnership (AFP) was established to coordinate between private and public sectors in the United States and China and to serve as a platform for dialogue and discussion about food and agricultural issues facing both countries.
Bill Westman, senior vice president of the North American Meat Institute (NAMI), remarks, “Our role in the policy is to facilitate opening markets to promote trade in meat and poultry products.”
Trade is the operative word, he adds, explaining that exports are only part of the equation.
“The AFP revolves around three themes – food safety, food security and sustainability. That is important because China is an excellent market for us for many products, but it’s still closed to the U.S. for beef. We are working with the governments to resolve the issues so we can officially send U.S. beef into China,” Westman explains.
The partnership is led by the private sector and includes the participation of many individual businesses and other organizations.
“We work with as many trade associations and meat culture groups as we can to come together and coordinate policy with government. We have a beef market access group with the U.S. Meat Export Federation (USMEF) and the National Cattlemen’s Beef Association, and we talk every week,” he says.
Similar efforts are also being made for pork, and NAMI has a food and agricultural export alliance to bring in dairies, soybeans and grains, as well. There is also some cooperation with poultry, although that industry faces additional challenges and tackles many issues through other organizations.
“We feel we can make a lot more progress on the beef issue if we work cooperatively with private sector there,” Westman notes. “China is an excellent market, but we feel we can work with them on many issues related to food safety and how to improve their operations. It’s like any developing market. Strong markets become good customers.”
Strong meat markets in China also create opportunities for related businesses, such as equipment manufacturers, processing and packaging plants, food safety businesses and more.
“We want to be able to compete fairly in the market because we think we can do very well there. We also get a lot of support from China because they understand that, as their system improves, they will also buy from us to supply a growing market. It’s a win-win situation,” Westman states.
To show that the benefits can be big for both countries, NAMI and AFP have been working with interested stakeholders to discuss concerns and issues in the market.
“We have to develop a relationship, and we have to show up. We’ve been doing that for the last five or six years by, for example, going to their shows, and it’s been only in the last year to year and a half that China has recognized that we’re there to work with them and we want what they want,” Westman continues.
One example of current efforts include conversations with China Agriculture University. The university is looking to train students in Beijing and then send them to the United States to learn more about how information is shared and how products are improved.
“It’s a really interesting project, and what’s more interesting is that they came to us about it – they asked for help,” he comments.
NAMI is also creating a Meat Buyer’s Guide for the Chinese market, with the language translated into both traditional and simplified Chinese characters.
“We are not planning to change the pictures or cut nomenclature or coding, but the China Meat Association has asked us to do this so they can better utilize the book when ordering and learning about what types of cuts are available,” he remarks.
Demand is high for offal overseas, which benefits American meat suppliers who don’t have a strong market for those items. If the Chinese could order those products from the United States, it could provide an advantage to both countries.
“They are already buying these items from other countries, so why couldn’t we get some of the business?” Westman asks. “We feel that we have the best system, the best products and the best genetics in the world.”
“The government officials in China say they are going to import beef to meet their domestic requirements, and we think, over the long term, it will be a very good market. We want to be able to compete,” he explains.
Westman also believes that there are misconceptions about food safety in China. After living there, shopping at the supermarkets, preparing meals at home eating in restaurants and speaking with ag and food industry representatives, he expresses similarities between the cultures.
“They want safe food. They want a stable food supply. They want a good future for their children,” he says.
Westman hopes that the AFP collaboration will bring common interests to light, so trade can operate successfully in the global marketplace, benefiting everyone.
“We are two of the most important countries in the world in producing agricultural products. We should be working together. That’s what this is all about,” he states.
Bill Westman spoke at the International Livestock Forum in Fort Collins, Colo. in early January.