U.S. Beef Export's Future is Bright

CattleFax see long-term growth in exports, but record prices could slow some trading partners beef purchases.

The CattleFax folks are long-term fans of beef trade, and their presentation at the 2013 Cattle Industry Convention was fairly optimistic about the trade outlook for 2013—optimism fueled mostly by Japan’s long-awaited agreement to accept beef from older cattle and continued growth in demand from developing economies.

The downside? Well, Russia isn’t exactly a bright spot, and the record cattle prices expected for the year are on the wrong side of the supply and demand equation. In fact, domestic demand for low-value beef cuts has U.S. consumers bidding longtime customers—like Mexico—out of the market.

But the good should outweigh the bad, they suggested. They look for an overall increase of 3% in exports.  Much of that will be offset, of course, by increased imports—especially from Australia--as an expected decrease in U.S. cow and fed cattle slaughter reduces the supply of grinding beef even as continuing weakness in the domestic economy pushes consumers to lower-priced protein options.

This all has to be kept in a certain perspective. Randy Blach noted that both the packing and retail sectors did poorly in 2012, indicating that domestic retail prices are approaching their upward limits in this weak economy. In fact, CattleFax is predicting a 2% decrease in domestic demand this year—easily the most negative aspect of their outlook. The increased exports are a major reason they can still predict record prices for the year.

Despite a what they see as a bearish outlook for the worldwide economy, even sluggish growth in the developing nations has a positive impact on worldwide deman, simply because as people escape poverty, better food is their first priority—and beef is high on the list in most societies.

The global economy has grown by $4.1 trillion in the last 5 years, even as drought and feed costs have reduced the worldwide supply of beef. That and continued population growth translate into a rosy future for exports—in 2013’s case more than enough to offset the expected reduction in U.S. demand.

If Russia were to come around—you’ll recall they suddenly decided they don’t want U.S. beef—things would get even rosier. The CattleFax guys said they aren’t optimistic about a short-term fix, but Phil Seng at the U.S. Meat Export Federation professes to be more optimistic. He says that Russia "needs" U.S. beef and thinks the beef ban is a minor part of the problem in U.S.-Russian relations.

Either way, CattleFax expects that growth in demand from Japan, Mexico and Canada will offset the loss in the Russian market, even if it continues. The Japanese situation pleases them no end—they say Japan access alone will add $1 per cwt. to offal values this year. They note that Japan has been a long term customer for most beef tongues produced in the U.S., and note that tongues are twice as valuable in Japan as in the U.S.