If U.S. beef exports are going to keep up with production, the immediate future rests on consumers in just five countries. The longer-range outlook, however, ties more closely to the East's economic powerhouse, China.
Trevor Amen, animal protein economist with CoBank, says today's export market is concentrated around Canada, Hong Kong, Japan, Mexico and South Korea. This is where 80% of current export volume goes. Last year, U.S. beef exports accounted for 11% of production, the highest level in history.
That number was helped along by sales to emerging markets like Chile, Columbia, Peru and South Africa. Trade disruptions with any of these countries, Amen notes, will have ripple effects in terms of oversupply, price pressure and margin compression.
"The continuation of a business environment where we have free trade and open markets, and the global flow of livestock and meat, is critical to the beef industry," he stresses.
When it comes to continued trade talks, Amen says predicting negotiation progress and outcomes is virtually impossible in the current environment. That uncertainty may play a role in the confidence of the beef market this year.
Trade agreements especially critical to the industry's future include NAFTA (North American Free Trade Agreement) and KORUS (United States-Korea Free Trade Agreement). In addition, Amen notes the absence of participation in TPP (Trans-Pacific Partnership) will highlight the importance of successfully negotiating competitive bilateral agreements.
The big market prize continues to be large-scale, open access to China. It's the fastest-growing importer in the world, with the fastest-growing middle class. U.S. producers will have to take steps to maximize availability of product that can meet this buyer's parameters.
That is going to call for a leap of faith. Currently, Amen says, it costs an additional $200 to $250 per head to produce cattle that fit China's trade parameters. This is tied to the need for animal traceability, as well as a supply of cattle free of growth promotants, such as beta-agonists.
With traceability, Amen says work is under way to figure out the best approach. He explains the industry needs a technology platform to aggregate the data it already has and then be able to efficiently track it. Ultimately, he believes, a system will exist that can meet the needs of all of America's trading partners.
"As this market matures, I believe we will reach a point where the economic signal reaches producers that there is an incentive to produce those cattle that will be eligible for China's import program. While we are in transition, though, it's difficult to significantly increase supplies because of a lack of a guaranteed premium on the other end."
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