Uncertainty continues to cloud the trade outlook for U.S. beef, but in the near-term, the situation remains fairly positive.
Derrell Peel, Extension livestock marketing economist with Oklahoma State University, says despite trade issues, strong beef demand has helped absorb huge beef production over the past couple of years.
“We are slowing down with herd expansion, but there is always a two-year lag with beef production,” he says. “Even if we stop growing in 2019, we have a pretty full pipeline of beef.”
Most of the uncertainty revolves around the potential of the Chinese market. Negotiators from the U.S. and China have met recently to help settle trade issues between the two countries, particularly retaliatory tariffs.
“China is the biggest importer of beef in the world,” Peel says. “As of yet, the U.S. has seen very little of that market, with just 0.4% of their beef imports coming from the U.S.”
He says Japan remains the largest customer for U.S. beef, but the implementation of the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) will likely cut into U.S. exports.
“We are really losing ground relative to tariffs,” Peel says.
Modest export growth is expected this year, says Lee Schulz, Iowa State University Extension livestock marketing economist. He says while beef exports have grown by 20% over the past two years, a much more modest 3% growth is in the forecast for 2019.
“It is worth noting that the modest forecasts the past two years have been sharply exceeded,” he says. “Weekly export data from USDA’s Foreign Agricultural Service appears to stymie any strong optimism at this time.
“The weekly data are preliminary and do not include all beef items sold, but do provide a quick glimpse as to how exports are trending and provide a quick alert to the market of any big export sales packages.”
Schulz says weekly sales of fresh, chilled or frozen muscle cuts through May 2 have total commitments that are down 1% from a year ago.
He says commitments (already exported plus unshipped sales) from Japan and Canada are down 18%, while Mexico is down 10%. Conversely, commitments to Hong Kong are up 55% and up 4% to South Korea.
Muscle cut and variety meat exports were down 6% by volume in February and down 3% in value.
“While Japan’s import tariffs on U.S. beef remain unchanged, CPTPP countries received tariff relief at the end of 2018 and saw another rate decrease on April 1,” Schulz says. “U.S. exports to Japan could further decline if the United States doesn’t quickly gain access on par with international competitors.”
Exports have continued to expand into South Korea, he says, thanks to a free trade agreement with the U.S. Tariffs have decreased from 40% to 18.7% since implementation of the agreement in 2012.
Schulz says there are other growth opportunities for U.S. beef exports.
“Impressive growth in many emerging and developing markets have certainly helped buoy U.S. beef exports as some of the major export destinations are steady or down so far in 2019,” he says.
For example, the Dominican Republic is up 87% by volume and 78% by value. Indonesia is up 41% by volume and 11% by value, while the Philippines is up 37% by volume and 6% by value. Taiwan is up just 3% in value, while value has decreased in Canada, Hong Kong and Vietnam.