The tumultuous year for agriculture was fueled by tariff uncertainty and trade negotiations, and as farmers checked the books and studied the trends, several economists out of Iowa had one clear message: beef and corn have survived the trade war.
Economist Chad Hart, an associate professor of economists at Iowa State University and Andrew Gottschalk, the senior vice president for R.J. O’Brien and Associates, a futures firm out of Chicago, spoke at a Feedlot Forum in Sioux Center, Iowa, Jan. 10.
Taking different outlooks on the current trade situation, both came to the same conclusion – that beef did fairly well despite the rocky export climate.
“Quality sells itself, and we should never forget that,” Gottshalk said. “Once people eat good beef they’ll go back to good beef.”
Based on numbers gathered by Hart and his colleagues at ISU, exports in the cattle industry actually grew in 2018, unlike many other agricultural commodities. Beef rose about 2 percent and was largely unaffected by the trade war due to supplying more beef to other areas of Southeast Asia and Korea. About 16 percent more product was moved overall to other areas outside of China.
Beef was selling higher last year as well, as U.S. beef was highly sought after in other areas, including the European Union.
“The big picture is that the future is bright for beef,” Gottschalk said. “Beef is at the top of the protein chain and that’s where we need to be.”
The biggest emerging market, aside from India and China, in 2018 was South Korea. Hart said that many delegations from the U.S. have worked closely with the South Koreans to figure out what they need and what they’d like from higher protein meats as South Korea moves further and further above the global poverty line.
“We figure out how to work within those countries boundaries,” Hart said.
The overall trade picture
Figuring out just how much tariffs impacted the ag economy has been tough outside soybeans, Gottschalk said, as he believes commodities such as beef, pork and corn would be in the same spot as if there were no tariffs at all.
This is due to what he referred to as a “normalization” event occurring with China. As China’s economy stabilizes, which he predicted it would as its economic growth this year was not nearly as high as predicted, Gottschalk said we can expect China’s lack of interest in U.S. products to have less and less of an effect moving forward.
Fortunately for the U.S., Gottschalk said, India is now the fastest growing economy and a partner the U.S. can work with moving forward. Hart agreed that India would be the next highest export market for the U.S. and added that India actually consumed 2 percent more beef last year than the year before, indicating that those who live in India who are non-Hindus are consuming more red meat.
“They don’t want chicken. They are fed up with that,” Gottschalk said. “You can sauce chicken all you want, it’s still chicken.”
While beef and corn survived most of the trade war disputes, soybeans and pork did not, Hart said. Soybeans took a 60 percent hit compared to last year and pork prices are down worldwide, despite moving 6.5 percent more product compared to 2017.
“We do things big enough and strong enough that we have to sell outside our borders,” Hart said. “That’s why I want to remind you why exports are such a big deal.”
In an unexpected twist, Hart said a handshake deal President Trump made with the European Union earlier in 2018 actually helped corn the most. The EU bought more corn from the U.S. than any recent year. This led to an overall 17 percent increase in corn product movement.
“The tariffs are rearranging the trade flows,” Hart said. “We just have to figure out where the product goes following these new trade rules.”
Hart’s main takeaway from the recent trade dispute was that the U.S. has to put more open trade agreements in place, as the countries with active trade agreements with the U.S. tend to perform more consistently for us than countries that don’t like Japan or China.
Gottschalk agreed with Hart’s assessment, but added that an unforeseen aspect for the survival of beef could simply be how wet the 2018 year was in the Midwest. In 2017, more than 50 percent of the cow-calf herds across the U.S. were in drought conditions. In 2018, it was just 10 percent. Because of this, he said less people will have to rely on outside feeds which will allow them to stay afloat longer.
“The conditions right now are very favorable to the calf and feeder cattle markets,” Gottschalk said.
The domestic market pull
While Hart and Gottschalk handled the export markets, Jessica Dunker explored U.S. food trends to study how livestock can improve domestically along with the restaurant industry.
Dunker, the president and CEO of the Iowa Restaurant Association, said that their national surveys sent to over 1,500 chefs indicate that more and more restaurants across the U.S. are looking to expand their offerings of beef.
In the “What’s Hot” survey released by the National Restaurant Association, new cuts of meat were the number one most requested thing by chefs. In addition, Americans now consume an average of 222.2 pounds of meat per person per year, which increased from 2017.
The main reason for this increase is actually a surprising trend, Dunker said. As exotic foods become more standard – foods such as Chinese, Asian fusion and Indian cuisine – more and more restaurants have begun filling their menus with “comfort foods.”
“Our grandma’s recipes are making their way back into the menus at restaurants,” Dunker said.
Pork butt use alone, which is used to make the highest rising food item in the U.S. – barbecue – rose 66 percent in 2018.
In the same survey, the highest recorded trends in the U.S. suggest that hyper-local, chef-driven food was the most requested and that more and more chefs would rather source their food locally than look for frozen food deliveries, regardless of price.
“People want relationships with folks like you in the restaurant industry,” Dunker said. “That can be capitalized on.”
In addition to a rise of local foods, Dunker said chefs are looking to use every part of the animal, even though the U.S. has historically ignored non-favored cuts of meat.
“Anything you can create and sell to us, a great chef can create something beautiful in their restaurant. And they want it,” Dunker said.
With this information in hand, Dunker said that farmers and ranchers can capitalize on the trends and open their operations to the public that is looking for more local and healthy foods.
The last piece of the puzzle that both Hart and Dunker talked about revolved around fake meats, or plant-based meats – which neither speaker said will be an issue moving forward.
“It’s really a first world problem,” Hart said.
Dunker said she hasn’t talked to a chef yet in Iowa that would even consider putting that on their menu. Putting aside the artificial nature of the product, Dunker said, the cost alone would cause most restaurants to ignore the niche trend.
“No self-respecting chef is going to use that crap in their food,” Dunker said. “I wouldn’t be worried at all.”