Beef Industry Remains Net Value Exporter, Still See International Markets Key to Growth in the Industry

United States beef producers remain net exporters of beef, beef products and cattle on a value basis and this surplus should continue in 1999, according to Chuck Lambert, Chief Economist for the NCBA. Expanding access to international markets is vital to sustain and grow the trade surplus. From Russia and China to Mexico and Canada, opportunities abound for the U.S. beef industry to increase international beef trade.

"Cattlemen know that our growth market is beyond U.S. borders. We need enforceable global trading rules in place and in use that grant market access, settle disputes on the basis of science and reduce tariffs," Lambert says. Only four percent of the world's population lives in the United States. Population demographics show that the cattle industry needs to aggressively seize opportunities to market products in countries with young, fast-growing populations possessing increasingly disposable incomes.

U.S. beef producers exported $4.79 billion in beef, beef by-products and cattle in 1997 compared to imports of $2.90 billion for a trade surplus of nearly $1.89. While maintaining a surplus, U.S. beef producers narrowed their trade margin in 1998 and the surplus declined to $1 billion during the first nine months compared to nearly $1.35 billion during the same time in 1997.

Exports of U.S. beef and beef variety meats during the first nine months of 1998 increased 7.45 percent in volume compared to the same time in 1997, but declined 4.55 percent in value. Beef imports increased 9.8 percent in volume and 12.3 percent in value. Devaluation of foreign currencies and record supplies of competing meats, as well as continuing economic turmoil in some foreign countries and increased beef production in major beef producing countries contributed to the difference in 1997 and 1998 numbers, Lambert says.

In 1999, more stability is expected in all sectors of the beef industry. According to Lambert, Asian markets are expected to stabilize and regain some strength. He says it will take two to five years for the Asian economies to fully recover, but the recovery process should mean increased beef exports. In the first nine months of 1998, the export value of U.S. beef and beef variety meats to Japan, Korea, Taiwan and Hong Kong/China declined to $1.36 billion, down 11.5 percent from the same time period in 1997. However, exports to these Asian markets still accounted for 65 percent of total beef and variety meat export value.

Beef and beef variety meat exports are expected to reach a record high in 1999 of 2.35 billion pounds with an expected value of more than $3 billion, up eight percent from 1998. In addition to expected improvements in the Asian market in 1999, other factors may contribute to increased trade. A May 13, 1999, deadline for resolving the European Union ban on U.S. beef may play a role, as well as a U.S. food aid package for Russia that includes 120,000 metric tons of beef which is expected to begin establishing demand there as the Russian economy recovers. These factors, coupled with continued U.S. loan assistance that is expected for South Korea, should increase beef exports next year. Increased exports should offset an expected 150 million pound increase in imports, to 2.8 billion pounds.

Lambert also sees an opportunity for the U.S. beef industry's new prepared beef products to begin making inroads in the international marketplace. "International consumers often face the same time constraints that U.S. consumers do, and many of these consumers have increased their disposable income. So the ease and convenience of heat and serve beef products will likely be as popular in some international markets as in the United States," he says. He adds that there also may be opportunities to market prepared beef products in the international hotel and restaurant trade.

Current primary U.S. export markets for beef producers include Japan, Mexico, Canada and South Korea, which account for nearly 78 percent of export tonnage and more than 88 percent of export value. China and Russia have the potential to become the two leading markets for U.S. beef producers in the next century, Lambert says. For that to happen, it is essential that both countries become members of the World Trade Organization (WTO).

U.S. beef trade with Mexico has been a key global trade success in 1998, Lambert adds. U.S. cattlemen have developed a strong and vital two-way trading relationship with Mexican cattlemen and share a common goal to improve beef marketing and increase demand for beef.

Mexico in 1997 outpaced the Canadian market as the number two U.S. beef importer since the drought in Mexico reduced the Mexican cattle herd.

As Mexican cattlemen rebuild their herds in 1999, the rate of growth in U.S. beef exports to Mexico is expected to slow somewhat, Lambert says.

Lambert also sees a continuing trend for more shipments of U.S. feeder cattle to Canada. International trade initiatives like the Northwest Pilot Project with Canada, recently expanded to 26 U.S. states, will fuel the trend, he says. With only two U.S. states participating in the project, the United States has exported nearly 20,000 feeder cattle to Canada since October 1998.

Lambert adds, "The United States must enter all beef trade negotiations with access being a top priority. For international trade to expand and work for U.S. beef producers, it must be fair for U.S. producers."

Lambert points out that the EU has undermined the current WTO system by using stall and delay tactics to keep out U.S. beef. "The integrity and validity of the WTO as a dispute settlement body requires that WTO members promptly comply with recommendations and rulings," he says. "The current system is being tested, with the ruling by the WTO that the EU ban on U.S. beef is an unfair, illegal trade barrier."

With the upcoming round of multilateral WTO negotiations in 1999, changes may need to be made to the system to strengthen international trade cooperation.

"The bottom line is that U.S. beef producers need to build increased global market access in order to sustain a healthy beef industry. There is tremendous economic potential in the global marketplace, but we can't let politics keep us from taking advantage of that. We need to make international trade work for us."