U.S. exports regaining 2003 levelsWritten by Christy Hemken
“We’ve made a lot of progress with beef markets, but we also have an unfinished agenda,” he told the crowd. “The wild card is the global financial situation. Everyone is concerned about this and we have people walking away from houses, horses and pets. We’re in a transition in a definite period of uncertainty, but I think we have a good team of appointees in the next administration. However, this will take time to turn around.”
He said unemployment benefits in the U.S. can be up to $18,000 per year, which will be seven to 10 percent of the economy in the near future. “People will be trading down, trading out and using lower cost alternatives. That will be a reality for around 10 percent of our population and will have an impact on middle meat prices and on overall the beef complex as people trade to lower cost protein sources.”
In 2008 the U.S. exported $100 to $110 billion total in ag commodities. “As prices and demand go down, export lines will go down too,” said Lambert. “The Grain Inspection Service projects a 24 percent decline in volume for export. If prices come down 30 percent and volume goes down 24 percent, our exports will be less than we had in 2007, in the worst case scenario.”
However, in the genetics industry the U.S. exported record amounts of shipped semen and embryos, totaling over $100 million for the first time in history, Lambert said.
“A lot of my time since 2003 has been spent regaining markets,” he said. “Some people say I should retire and write a story about the last five-and-a-half years and how we got to where we are and where I feel we can make some more progress.”
Breeding cattle will be close to $50 million in exports for the beef and dairy industries combined. “That’s the highest they’ve been since 1996 when we were at $41 million,” said Lambert, comparing the figure to the previous low of $18 million in 1999. “We’ve had a few higher years. In 1989 to 1994 we had a five-year period that ranged from $50 million to $92 million, but we’re close to recoving all-time highs.”
Lambert said the U.S. is still in discussions with the Andean countries, including Columbia, Peru and Chile. “Argentina was a large market for breeding cattle, as was Brazil prior to BSE. Those governments now say they’ll recognize our BSE status when we recognize their FMD status. It will be a while before we recover markets in those countries.”
In beef exports, Lambert said the U.S. is going to recover markets at 2003 levels. “Exports account for 10 percent of tonnage and 12 percent of value, so they’re a large and important part of the industry, but the domestic market is the largest driver of overall demand for beef and beef products.”
He expects this year’s markets to be close to where they were before the BSE incident, but he said $1.5 million will still be left on the table. “Mexico is now the largest single export market at over $1.3 million, and Canada will be somewhere over $700 million as we close out 2008,” he said.
Both markets are looking at concerns and discussions regarding NAFTA’s renegotiation, said Lambert, adding, “Those two markets account for 40 percent of total 2008 beef exports.”
“Our goal is to maintain trade relations and to move Mexico to OIE consistency, which is basically that all products of animals of all ages, except for the risky parts, can be exported. How we get there and what it costs us becomes the question,” he said.
Other successes are based on different product mixes in different countries, noted Lambert. “The Philippines take all products of all ages, and we’re selling only boneless beef under 30 months into Taiwan. Vietnam accepts all products from animals younger than 30 months, and that market has been very successful.”
However, he said he thinks a lot of Taiwan’s product is probably going into China.
Egypt’s liver, heart and kidney market accepts $80 to $90 million of product. “That’s a product of low value in the U.S. that would go into cat food, so it’s a high value added market that’s up from nothing in 2004,” he commented.
This year the U.S. will export $80 to $90 million of product to Russia after its market opened late in 2007. “There are some concerns we need to be aware of with Russia,” he said, indicating the ruble’s decline relative to the dollar. “Russia is dependent on oil and gas revenues and they’ve had a significant decline. They also have protectionist tendencies and last fall’s military confrontation with Georgia did not further policy relations and they may now be more inclined to implement whatever protectionist tendencies they had in the first place.”
Lambert called Korea the success story of 2008. “We negotiated the opening of that market in April, but in June we found we can over-negotiate and drive countries beyond where their consumers want them to be,” he said of people in the streets of Seoul protesting the opening of U.S. markets. “We still have a negotiated agreement on all products younger than 30 months of age and we started shipping in July.”
Of the $500 to $600 million market, Lambert said it’s back significantly but not quite to where we were in 2003.
China, with 350 million middle class consumers, is not open. “We said ‘no thanks’ because they wouldn’t do it our way, but their economy has grown 10 percent each year since we were shut out in 2003,” noted Lambert. “However, a lot of Vietnam’s market is going there, so we’re selling $100 million through the back door. If we could be in that market legitimately it could be on the scale of Korea or Japan, or even Canada and Mexico.”
Moving forward, Lambert thinks there’s a need for compromise to avoid other ‘Koreas,’ as well as the need for a consistent message.