Beware of Disrupters In Four Out of Five Top Beef Destinations

Uncertainty in trade agreements have four of the five top beef markets in jeopardy. ( Photo: Drovers )

Four out of five top destinations for U.S. beef are in jeopardy of trade disruption, according to a report from CoBank’s Knowledge Exchange Division.

“We know supplies are growing, so that puts more pressure on the demand side of the equation,” says Trevor Amen, animal protein economist with Co Bank. “Moving forward, exports are even more critical.”

As the U.S. beef cow herd continued to expand in 2017, beef output is tracking to reach a peak in 2018. Solid demand has kept prices at mostly profitable levels in 2017 and into 2018.

But 80% of beef exports are sold to five countries that could be affected by ongoing trade negotiations. Deals includes the Trans Pacific Partnership, the North American Free Trade Agreement and the United States-Korea Free Trade Agreement, and are either being renegotiated or the U.S. has dropped out of the agreement altogether.

Japan, South Korea, Mexico, Canada and Hong Kong top the list of countries importing beef from the U.S., representing 83% of all U.S. beef exports.

Mexico represents the No. 1 U.S. beef export market in terms of volume. Japan is the top market in terms of value.

Of these partners, Hong Kong is the only one that will be unaffected by current negotiations.

While China remains a long-term opportunity, current trade requirements are cost-inhibitive for most exporters.

“China represents the greatest opportunity” Amen says. Traceability requirements and the ban on feed additives and growth promotants.

“So there are increased economic costs to produce cattle that qualify without a guaranteed premium on the other end today. We expect that market to be slow develop—and the supply of cattle to be slow to develop—as that becomes a more mature market.”

Southern Hemisphere competitors, New Zealand, Australia, Brazil and Argentina are hoping to take advantage of the reshuffle. “Japan is definitely a prize market,” Amen says, referring to Japan’s recent trade agreement with Australia. ”Now that Australia is coming out of their drought and entering the expansion phase of their cattle cycle, looking forward, they will have more available supplies to export. Which will definitely be a competitive market moving forward for the U.S.