Why we must think globally
Most folks in agriculture prefer American-made products, though most of us wear, own or perhaps drive some imports.
We cringe when a Greek monetary crisis rocks our stock market, when we read about Middle East oil ministers setting global oil production, or closer to home how a bumper crop in South America will affect our grain markets.
U.S. beef is not as dependent on the outside world as other meats like pork or poultry, but exports still command beef industry attention. CattleFax estimates those sales add $240 to each fed steer sold, and multiplied by 24 or 25 million fed cattle each year, that's nearly $6 billion coming into the U.S. from outside our borders.
That does not include the tens of thousands of Angus cattle exported to Russia to rebuild their infrastructure in the past five years or the volumes of semen from U.S. bulls sold worldwide. Obviously, the global market is worth keeping an eye on.
What makes U.S. beef and related genetics so highly sought after?
The answer goes back to the 1950s, when Midwestern farmers started feeding corn to finish their cattle. They created a unique and tasty dining experience that developed to the point where the United States produces about 80% of all grain-fed beef.
Our partners to the north in Canada add another 8%. Australia has a feeding industry but its total size is no more than the largest single U.S. feedyard. Brazil and Argentina are starting to feed cattle, but in a little different manner and with different genetic potential for taste. Russia has a fledgling program that may have global impact 10 years down the road.
Well into the foreseeable future, the U.S. competitive advantage will continue to be the quality of product we put into the global marketplace.
Of course most of that, about 89% of all fed beef stays home, leaving perhaps 11% for the rest of the world.
You may well ask, if the percentage is that low, why is the global market important? For starters, it provides a wider market for by-products like hides, tongue and liver, not so much in demand here. Certain cuts we barely notice, like the chuck-eye roll, are a delicacy on the Pacific Rim. And world demand continues to grow for those high-quality rib and loin steaks we produce.
Maybe you knew most of that, but here are some things about the international beef market you likely DID NOT KNOW:
One of the main items, representing more than half of all beef consumed in this country is ground beef. Yet export opportunities are limited, partly because those grinds are not price competitive in the world market. Then, too, people in most other countries do not consume ground beef like we do.
Few people understand how our beef gets into foreign markets, but that typically involves the far-flung offices of U.S. packers scattered around the world. These create local linkages to meat importers in those countries, which establish and maintain distribution to retail and restaurant outlets.
A great supporter of this global trade is the U.S. Meat Export Federation, partly funded by the beef check-off and leading the van in promoting our beef in the open global markets.
Looking at the relatively small share again, you may wonder why we export only 12% of our beef when other protein products are double or triple that. First, pork or chicken provide cheaper meat and second, for many countries, beef is not a traditional meat. Fortunately for beef, tastes are changing quickly as the per-capita incomes rise in those countries.
Another limitation recently has been the strength of the U.S. dollar, a major deterrent to beef exports in 2015. And not to be overlooked are the trade barriers and tariffs placed on U.S.-produced beef as countries seek to protect their own industries.
Finally, government-to-government relationships often represent the main limit to trade of any kind, including beef.
To a premium U.S. brand like Certified Angus Beef, all of these factors are top of mind. The international market is a huge part of the CAB marketing focus with about 13% of current sales going to 37 different countries. As company sales grow closer to the billion-pound annual goal, the exported share could grow to 15% or even 18% of the total.
Geof Bednar, CAB International Director, says the top two markets, Canada and Mexico, respectively, should be no surprise. These are followed, again predictably, by Pacific Rim countries. He points to what many would not know: the fastest recent growth is in sales to South American countries, already big beef consumers but until now lacking access to the quality level that the CAB brand provides.
As an industry, we must pay attention to the folks in other countries.
