January 26, 2016
US beef sector desperate for new market opportunities
The US beefindustry is facing challenges crucial to its sustainability or survival.
A new report on global beef production released by agricultural lender Rabobank says the industry''s future success would largely depend on how it responds to the new trade dynamics, policy and consumer-driven preferences.
The report said that while other countries are producing beef under favorable export agreements,
US beef producers are handicapped by a strengthening dollar and domestic-market demands that producers haven''t experienced before.
"In the US, we are hearing from producers that they are wrestling with strategic questions centered around whether creating a safe and nutritious product will be enough to sustain a profitable market for quality US beef," says report co-author and Rabobank protein analyst Don Close.
To keep US products competitive, Rabobank suggests that the industry enhance export opportunities, produce beef that meets emerging consumer preferences, and implement programs that would strengthen the US position in the market including a voluntary, industry-driven cattle and beef traceability program. Traceability allows the consumer to track products through all the stages of the agri-food chain—from production to retail. It ensures effective product recall and quick response in the event of an animal disease outbreak, as well consumer confidence in the product.
"Looking closely at trade, it''s our point of view that if TPP (Trans-Pacific Partnership) is not passed, it puts US exports at a significant disadvantage in a global marketplace since there is an anticipated increase in exports from South American countries that have trade agreements separate from TPP", notes Close.
The US National Cattlemen''s Beef Association (NCBA) agrees with Close. It has testified to the importance of the TPP at the Jan. 14 hearing hosted by the US International Trade Commission, saying the trade agreement''s biggest advantage for cattle producers is the increased access to the Japanese market. It said the US exported beef worth $1.6 billion to Japan in 2014 at a 38.5% tariff. It added that once TPP is implemented, tariff rate would phase down to 9% over 15 years, with a significant cut in the first year.
"This agreement grants the greatest market access for US beef ever negotiated into Japan," said Kevin Kester, NCBA Policy Division chair. "Since Australia implemented their own bilateral trade agreement with Japan last year, the US has lost five percent of the market share, about $100 million in sales, in Japan. We cannot afford to wait on TPP or we will continue to lose market share".
''Severely disadvantaged''
Echoing Rabobank''s analyst Close, the NCBA warns that if the US does not act to expand new market opportunities in growing economies, cattle producers would be "severely disadvantaged in the global market place", noting that of the more than 260 preferential trade agreements in force worldwide, only 14 include the US.
In January-November 2015, US beef exports were down 11% from the year before in both volume (973,028 metric tonnes) and value ($5.8 billion), according to the US Meat Export Federation (USMEF). Exports to Japan continued to decline, although increases were noted in key Asian markets including South Korea (up 7% in volume), Taiwan (up 4%) and the Philippines (up 5%).
Export volume to Japan fell 15% to 190,751 metric tonnes in January-November. Although Japan is still the leading value market for US beef, export value declined 19% to $1.19 billion.
The US lost market share to Australia in 2015, with US share dropping from 38% to 35%, USMEF noted, explaining that this was due in part to Australia''s 10 percentage point tariff advantage following implementation of the Japan-Australia Economic Partnership Agreement in January 2015.
The US is facing competition from China which, over the past few years, according to Rabobank analyst Matt Costello, "has become a major player in the global beef trade".
"While per capita consumption for beef is low compared to more traditional beef markets, projections suggest Greater China will become the world''s largest beef importer in the coming few years", said Costello.
Against this backdrop, the US beef industry faces an increasingly competitive global beef market, the Rabobank report said. "While the US is expected to remain the global standard for quality and supply stability, the domestic industry has the opportunity to determine future investment through a robust discussion about competitive strategy", it added. --Rick Alberto