Japan Ready for More U.S. Beef
Japan Ready for More U.S. Beef
By Joel Haggard, Senior Vice President, USMEF-Asia/Pacific
The U.S. beef industry is facing a unique dilemma in Japan. This key export market appears to be emerging from its economic slump, public perceptions of the safety of U.S. beef are higher than they’ve been in years, and the new government led by the Democratic Party of Japan (DPJ) is funneling more money to consumers to encourage spending.
At the same time, the U.S. beef industry is shackled – limited to exporting beef from cattle 20 months of age or younger – while Australia’s beef industry is spending heavily to solidify the gains it has made in the absence of U.S. beef. Although Canada currently faces the same age limit as the U.S., it is actively engaged with Japan in an effort to expand access for Canadian beef.
Market acceptability and interest in U.S. beef have improved markedly over the past year in Japan, and conditions are ripe to expand sales. Consumer anxiety toward U.S. beef has abated, the yen is now close to near-term highs against the dollar, reducing the price of U.S. products, and a soft economy is helping propel demand for high-value beef products across a range of foodservice and retail end users. On the supply side, although U.S. beef exports are recording double digit growth from the pace of last year, the lack of age-verified cattle and seasonality of eligible cattle supplies continue to constrain exports to a fraction of sales potential.
The progress the U.S. beef industry has made toward winning back the trust of Japanese consumers is dramatic. USMEF’s bimonthly poll now indicates that the number of consumers who believe U.S. beef is safe equals those still harboring doubts (30 percent each). Another 39 percent of respondents remain neutral on U.S. beef, suggesting that nearly 70 percent of Japanese consumers have no serious concerns about the safety of U.S. beef. This is a dramatic improvement over scores from 2006 when nearly 57 percent of consumers said they did not trust the safety of U.S. beef while only 15 percent gave it a vote of confidence.
“Concern over U.S. beef safety is declining steadily as U.S. beef is offered in more and more trusted outlets, both in foodservice and at retail,” said Takemichi Yamashoji, U.S. Meat Export Federation (USMEF) Tokyo’s senior marketing director.
While the growing interest in U.S. beef is welcome, it presents challenges on the supply side as U.S. beef producers and processors struggle to produce and process a larger, consistent supply of age-verified cattle. The pace of U.S. beef and variety meat exports through July of this year is up 18 percent over last year, but buyers are concerned about beef availability this fall, when the supply of eligible 20-month-and-younger cattle seasonally drops.
“I would like to sell U.S. loin cuts and short plate in addition to the chuck items I am currently featuring, but I am worried about supply,” said Mahito Takeuchi, chief meat buyer for retail chain Daiei’s 355 stores.
The problem is more acute in foodservice, where large chains must have assured supplies of a large volume of a narrow range of cuts month in and month out. The ability of the U.S. to supply large volumes of specific cuts has been constrained by the age limit, especially given the seasonality of available eligible cattle. Therefore, large foodservice operators are waiting to fully resume U.S. beef sales once a more consistent supply of specific cuts becomes available. USMEF expects an incremental but rapid increase in exports to Japan given an increase in market access, as more large foodservice operators would resume featuring U.S. beef. With an increase in the age limit, certain cuts like short plate could be sourced from a large percentage of steer and heifer slaughter. U.S. beef could also reenter the sizeable Bento carryout lunch box market, once a major outlet for U.S. short plate.
Moreover, the absence of higher graded beef – such as that from top choice and prime programs – affects U.S. beef’s competitiveness in hotels and fine dining/steakhouse establishments.
Japan remains largely under-supplied in beef. Total beef sales in Japan dropped from 1.1 million tons (2.4 billion pounds) in 2000 (Japan fiscal year) to 825,000 tons (1.8 billion pounds) last year, according to Japanese government statistics. The decline in imported beef sales between 2000 and 2008 of 259,000 tons (571 million pounds) accounts for almost all the drop in consumption.
More importantly, Japanese domestic production as well as beef from Australia and New Zealand have been unable to fill the void left by the USA’s departure from the Japanese market in late 2003. Japan’s total beef imports this year will likely remain at around 63 percent of the level of 2000, the record year for beef imports. The pace of U.S. beef exports this year is still only one-sixth that of 2003, suggesting a huge near-term opportunity for U.S. beef.
“This is not a question of having to displace existing suppliers,” said Yamashoji. “Rather, it’s a question of filling a void and a market need right now.”
One measure of the demand for U.S. beef is Japan’s willingness to pay premium prices for it under existing access conditions. In U.S. dollars, the average value of imported beef from the U.S. in the January-July ’09 period was $5.47/kg compared to $3.82/kg for Australian beef. Thus, despite being 43 percent more expensive than Australian beef (U.S. beef was 23 percent more expensive than Australian in 2003), U.S. product is still the fastest growing imported beef product.
As is generally the case, export markets are willing to pay premiums over domestic values for certain cuts and the ability to export these cuts from a greater percent of steer and heifer slaughter would benefit the entire beef industry. The potential added export value of an increase in access to Japan has been estimated at $1 billion per year.
Some market watchers believe the weak state of Japan’s economy could benefit U.S. beef demand. The largest pre-BSE customers for U.S. beef were major foodservice chains that primarily offered value meals. As premium dining struggles, demand for ready-to-eat meals in outlets such as convenience stores is increasing. Such end users require a consistent supply of uniform quality cuts.
In addition, an estimated 18,000 family style Yakiniku (barbecue) restaurants are large potential markets for a range of U.S. beef products, including many underutilized cuts and offals. These outlets have thrived on lower prices and high product quality . While demand exists now, larger outlets are reluctant to add U.S. beef because of the seasonal swings in availability. According to an executive with Yakiniku Sakai, one of Japan’s largest chains with more than 150 stores, “We need a steady supply of U.S. beef in order to develop and maintain a menu across all our outlets.”
USMEF pays close attention to Japan’s political landscape for any hints of a change in official attitude to U.S. beef. Although incoming center-left political leaders from the Democratic Party of Japan (DPJ) have espoused tighter controls related to BSE, including calls to resume 100 percent BSE testing and mandatory traceability for all beef suppliers foreign and domestic, the steady drop in consumer concern over U.S. beef safety, and beef safety in general, has lowered the visibility of the issue on the political agenda.
Seng noted that the DPJ’s new finance minister has cancelled a number of public works projects, including a major dam project in Gumma, that were viewed by the new government as wasteful. Those funds are being redirected toward consumers to help foster increased consumer spending. It has been proposed that each family would receive 26,000 yen (about $290) per month per child as an economic stimulus, with much of that expected to go toward food purchases.
Seng also said that the finance minister is on record as stating that he will not defend the yen, with the exchange rate potentially dipping to below 80 yen to the dollar, making imported products even more affordable for Japanese consumers.
“Sadly, this is happening while U.S. beef is limited to a fraction of its production,” said Seng. “The Japanese government provided its citizens with a substantial stimulus program last fall to help promote spending and economic growth, and we were on the sidelines for that. Given the signs of strong interest in and renewed desire for U.S. beef, we need to renew efforts to expand access for our products so that we can meet the year-around demand for high-quality, grain-fed U.S. beef.”
# # #
The U.S. Meat Export Federation (www.USMEF.org) is the trade association responsible for developing international markets for the U.S. red meat industry and is funded by USDA, exporting companies, and the beef, pork, corn and soybean checkoff programs.
For more information, contact Jim Herlihy at jherlihy@usmef.org.
USMEF complies with all equal opportunity, non-discrimination and affirmative action measures applicable to it by contract, government rule or regulation or as otherwise provided by law.
Japan Ready for More U.S. Beef
By Joel Haggard, Senior Vice President, USMEF-Asia/Pacific
The U.S. beef industry is facing a unique dilemma in Japan. This key export market appears to be emerging from its economic slump, public perceptions of the safety of U.S. beef are higher than they’ve been in years, and the new government led by the Democratic Party of Japan (DPJ) is funneling more money to consumers to encourage spending.
At the same time, the U.S. beef industry is shackled – limited to exporting beef from cattle 20 months of age or younger – while Australia’s beef industry is spending heavily to solidify the gains it has made in the absence of U.S. beef. Although Canada currently faces the same age limit as the U.S., it is actively engaged with Japan in an effort to expand access for Canadian beef.
Market acceptability and interest in U.S. beef have improved markedly over the past year in Japan, and conditions are ripe to expand sales. Consumer anxiety toward U.S. beef has abated, the yen is now close to near-term highs against the dollar, reducing the price of U.S. products, and a soft economy is helping propel demand for high-value beef products across a range of foodservice and retail end users. On the supply side, although U.S. beef exports are recording double digit growth from the pace of last year, the lack of age-verified cattle and seasonality of eligible cattle supplies continue to constrain exports to a fraction of sales potential.
The progress the U.S. beef industry has made toward winning back the trust of Japanese consumers is dramatic. USMEF’s bimonthly poll now indicates that the number of consumers who believe U.S. beef is safe equals those still harboring doubts (30 percent each). Another 39 percent of respondents remain neutral on U.S. beef, suggesting that nearly 70 percent of Japanese consumers have no serious concerns about the safety of U.S. beef. This is a dramatic improvement over scores from 2006 when nearly 57 percent of consumers said they did not trust the safety of U.S. beef while only 15 percent gave it a vote of confidence.
“Concern over U.S. beef safety is declining steadily as U.S. beef is offered in more and more trusted outlets, both in foodservice and at retail,” said Takemichi Yamashoji, U.S. Meat Export Federation (USMEF) Tokyo’s senior marketing director.
While the growing interest in U.S. beef is welcome, it presents challenges on the supply side as U.S. beef producers and processors struggle to produce and process a larger, consistent supply of age-verified cattle. The pace of U.S. beef and variety meat exports through July of this year is up 18 percent over last year, but buyers are concerned about beef availability this fall, when the supply of eligible 20-month-and-younger cattle seasonally drops.
“I would like to sell U.S. loin cuts and short plate in addition to the chuck items I am currently featuring, but I am worried about supply,” said Mahito Takeuchi, chief meat buyer for retail chain Daiei’s 355 stores.
The problem is more acute in foodservice, where large chains must have assured supplies of a large volume of a narrow range of cuts month in and month out. The ability of the U.S. to supply large volumes of specific cuts has been constrained by the age limit, especially given the seasonality of available eligible cattle. Therefore, large foodservice operators are waiting to fully resume U.S. beef sales once a more consistent supply of specific cuts becomes available. USMEF expects an incremental but rapid increase in exports to Japan given an increase in market access, as more large foodservice operators would resume featuring U.S. beef. With an increase in the age limit, certain cuts like short plate could be sourced from a large percentage of steer and heifer slaughter. U.S. beef could also reenter the sizeable Bento carryout lunch box market, once a major outlet for U.S. short plate.
Moreover, the absence of higher graded beef – such as that from top choice and prime programs – affects U.S. beef’s competitiveness in hotels and fine dining/steakhouse establishments.
Japan remains largely under-supplied in beef. Total beef sales in Japan dropped from 1.1 million tons (2.4 billion pounds) in 2000 (Japan fiscal year) to 825,000 tons (1.8 billion pounds) last year, according to Japanese government statistics. The decline in imported beef sales between 2000 and 2008 of 259,000 tons (571 million pounds) accounts for almost all the drop in consumption.
More importantly, Japanese domestic production as well as beef from Australia and New Zealand have been unable to fill the void left by the USA’s departure from the Japanese market in late 2003. Japan’s total beef imports this year will likely remain at around 63 percent of the level of 2000, the record year for beef imports. The pace of U.S. beef exports this year is still only one-sixth that of 2003, suggesting a huge near-term opportunity for U.S. beef.
“This is not a question of having to displace existing suppliers,” said Yamashoji. “Rather, it’s a question of filling a void and a market need right now.”
One measure of the demand for U.S. beef is Japan’s willingness to pay premium prices for it under existing access conditions. In U.S. dollars, the average value of imported beef from the U.S. in the January-July ’09 period was $5.47/kg compared to $3.82/kg for Australian beef. Thus, despite being 43 percent more expensive than Australian beef (U.S. beef was 23 percent more expensive than Australian in 2003), U.S. product is still the fastest growing imported beef product.
As is generally the case, export markets are willing to pay premiums over domestic values for certain cuts and the ability to export these cuts from a greater percent of steer and heifer slaughter would benefit the entire beef industry. The potential added export value of an increase in access to Japan has been estimated at $1 billion per year.
Some market watchers believe the weak state of Japan’s economy could benefit U.S. beef demand. The largest pre-BSE customers for U.S. beef were major foodservice chains that primarily offered value meals. As premium dining struggles, demand for ready-to-eat meals in outlets such as convenience stores is increasing. Such end users require a consistent supply of uniform quality cuts.
In addition, an estimated 18,000 family style Yakiniku (barbecue) restaurants are large potential markets for a range of U.S. beef products, including many underutilized cuts and offals. These outlets have thrived on lower prices and high product quality . While demand exists now, larger outlets are reluctant to add U.S. beef because of the seasonal swings in availability. According to an executive with Yakiniku Sakai, one of Japan’s largest chains with more than 150 stores, “We need a steady supply of U.S. beef in order to develop and maintain a menu across all our outlets.”
USMEF pays close attention to Japan’s political landscape for any hints of a change in official attitude to U.S. beef. Although incoming center-left political leaders from the Democratic Party of Japan (DPJ) have espoused tighter controls related to BSE, including calls to resume 100 percent BSE testing and mandatory traceability for all beef suppliers foreign and domestic, the steady drop in consumer concern over U.S. beef safety, and beef safety in general, has lowered the visibility of the issue on the political agenda.
Seng noted that the DPJ’s new finance minister has cancelled a number of public works projects, including a major dam project in Gumma, that were viewed by the new government as wasteful. Those funds are being redirected toward consumers to help foster increased consumer spending. It has been proposed that each family would receive 26,000 yen (about $290) per month per child as an economic stimulus, with much of that expected to go toward food purchases.
Seng also said that the finance minister is on record as stating that he will not defend the yen, with the exchange rate potentially dipping to below 80 yen to the dollar, making imported products even more affordable for Japanese consumers.
“Sadly, this is happening while U.S. beef is limited to a fraction of its production,” said Seng. “The Japanese government provided its citizens with a substantial stimulus program last fall to help promote spending and economic growth, and we were on the sidelines for that. Given the signs of strong interest in and renewed desire for U.S. beef, we need to renew efforts to expand access for our products so that we can meet the year-around demand for high-quality, grain-fed U.S. beef.”
# # #
The U.S. Meat Export Federation (www.USMEF.org) is the trade association responsible for developing international markets for the U.S. red meat industry and is funded by USDA, exporting companies, and the beef, pork, corn and soybean checkoff programs.
For more information, contact Jim Herlihy at jherlihy@usmef.org.
USMEF complies with all equal opportunity, non-discrimination and affirmative action measures applicable to it by contract, government rule or regulation or as otherwise provided by law.