“Export-focused” Competitors Pose Challenges to U.S. Beef Trade

USMEF-Mexico Director of Technical Services Nelson Huerta (2nd from r.) with (from l.) Genaro Guerra of Mexico’s Confederation of Livestock Producers and Juan Barrio and Yamil Garcia of the Mexican Association of Beef Cattle Fatteners at the ILC meeting

While the U.S. beef industry already has set a new record for export value for 2013 with one month of sales yet to be recorded, the United States should expect increasing challenges from its global competitors as it tries to maintain export growth, according to Philip Seng, U.S. Meat Export Federation (USMEF) president and CEO.

“Our competition is export focused,” said Seng in his address at the International Livestock Congress (ILC) meeting Jan. 14 in Denver. “Australia exports more than 60 percent of the beef it produces. For New Zealand, it’s 80 percent. They produce product to meet the requirements of their export markets. They are customer focused. For them, sales to their domestic markets are residual.”

Leading beef exporting nations including Australia, Canada, Mexico, New Zealand and the European Union focus their export initiatives on Asia, Seng said.

“Nearly 65 percent of the world’s middle class will reside in Asia in the year 2030,” he said, citing projections from the Organization for Economic Cooperation and Development (OECD), versus about 6 percent in the United States. “The world is rapidly changing. China is the fastest-growing country for food-related e-commerce in the world.”

Although the U.S. cannot export beef to the People’s Republic of China at this time, USMEF is actively involved in developing channels for Internet sales there, currently focusing on U.S. pork. While online food sales only account for 1 percent of all food sales in China and 4 percent of all online sales, that still amounts to a robust $8 billion in annual sales. And with China’s online retail sector growing at a compound annual rate of 120 percent, projections for the future of e-tailing there are very bright.

U.S. beef export growth potential

Philip Seng

U.S. beef exports set a new annual record of $5.61 billion in 2013 with one month’s total yet to be tabulated, and Seng noted that the record was achieved with several significant market access restrictions in place.

“The People’s Republic of China has been a $1.2 billion market for imported beef in the first 11 months of 2013 with none of that coming from the U.S.,” Seng said. “And Russia – which has been closed to U.S. red meat exports since last February – was a $307 million market for U.S. beef in 2012.”

With BSE-related bans on U.S. beef sales to Australia, Saudi Arabia, Ecuador, South Africa and Uruguay, and limitations on exports to Japan, Mexico, South Korea and other nations, obstacles to beef exports are numerous.

One avenue to increasing exports in spite of those challenges is through free trade agreements. Seng cited the success the U.S. red meat industry has enjoyed through the 20-year-old North American Free Trade Agreement (NAFTA), which has seen U.S. beef exports to Mexico and Canada grow from $660 million in value to $2 billion since 1994.

Seng noted that the United States currently is engaged in two key trade discussions: the Transatlantic Trade and Investment Partnership (TTIP) with the European Union and the Trans-Pacific Partnership (TPP) with a dozen countries including Japan, Australia, Mexico and Canada.

Seng cited communications issued jointly by the governments of Japan and the United States that indicate that the two countries acknowledge one another’s domestically sensitive industries.

“Both governments have stated that the outcomes of these talks will be tangible and meaningful,” Seng said.

At the same time, he cautioned against rushing to judgment on the potential end-result of the trade talks.

“These are negotiations,” Seng said. “We all have seen the results of the ‘all or nothing’ approach that was taken in BSE negotiations,” adding that estimates for post-BSE losses to the U.S. beef industry run as high as $30 billion.

Seng also noted that if the United States does not adroitly address trade overtures from key trading partners like Japan, other nations are standing by to negotiate their own deals.

Australia, for example, is currently engaged in FTA negotiations with Japan, China, South Korea, India and Indonesia. The EU is another region actively seeking to expand trade.

“The EU and Japan are working on an economic partnership agreement,” he said. “The EU is closely monitoring our progress on TPP. We’re also seeing the emergence of EU beef in the post-BSE era, with Irish, French, Dutch, Polish, German and other countries’ beef being aggressively introduced and marketed in the Asian marketplace.”

Couple that with a proposal by the EU Commission to triple spending in support of agricultural exports in the coming years, and Seng expects that the EU will be another formidable trade competitor to the United States in Asia and around the world.

USMEF involvement at the ILC

The ILC is active in identifying and educating future leaders of the world’s livestock industry, and USMEF has been proactive in its efforts to support international education and collaboration. Nelson Huerta, USMEF-Mexico’s director of technical services, moderated several sessions during the ILC program and accompanied three young representatives of Mexico’s Confederation of Livestock Producers and Association of Beef Cattle Fatteners to the Denver program. Leann Saunders, USMEF chair-elect and president of IMI Global, also participated in a panel at the ILC meeting.