The World Will Continue to Eat – But Economics Changes the Menu
USMEF-Europe director assesses impact of global recession on protein exports
When prices for proteins rose to all-time highs six months ago, driven in great part by increased demand from Russia, politicians expressed fears of global food shortages. Time and a global economic crisis have certainly reframed the issues.
Speaking before the Joint International Markets Committee at the Cattle Industry Convention and Trade Show in Phoenix, USMEF Director for Europe, Russia and the Middle East John Brook noted that while the questions regarding both the supply of and price of protein have been resolved for the time being, it is global consumers’ “perception of wealth” that is putting a damper on U.S. exports.
“I don't believe that the world consumes food on credit – certainly not in developing countries,” said Brook, “but there is little doubt that the credit-driven economy of the United States contributed to increased incomes in countries like China, in turn stimulating consumption. This has most certainly slowed down.”
Brook noted that protein consumption in the developing world increased through 2008, particularly in countries like China, Russia and Brazil, but demand has diminished as economic conditions deteriorate and consumers lose confidence in their economic situation.
“The choice of protein that people consume is in part determined by their sense of wealth,” Brook said. “Even if consumers’ income remains the same, as their sense of wealth and security falls, they switch consumption from higher-priced goods to more affordable goods. This would seem to be the case certainly in Western economies at present.”
The relative strength of the U.S. dollar against other international currencies has an impact on the competitiveness of American exports, particularly when considering the massive devaluation of beef exporting countries' currencies seen in Brazil and Australia.
“Volatile exchange rates are always a fact of life in the international marketplace,” Brook said, “but these mind-boggling 40-percent-plus swings in exchange rates are very hard to overcome.
“But in the medium to long term, I do not see the U.S. dollar remaining strong. The massive level of U.S. government debt should push the dollar down, increasing export competitiveness.
The Russian ruble has tumbled versus the U.S. dollar, and this has significantly impacted Russia’s demand for U.S. beef. Plunging oil and energy prices have also changed the economic landscape in Russia. But Brook emphasized that Russia still needs to import meat, and he noted protein supplies in Russia have already tightened considerably.
“Non-payment problems, plant delistings and other trade issues have created a shortfall of supply in Russia, causing food prices to rise,” Brook said. “If oil and gas prices come back, Russia’s economic situation can recover, and so could our export opportunities.”
When asked about U.S. beef exports to the European Union, Brook offered a mixed outlook. He said the U.S. has already fulfilled 4,500 metric tons of its 11,500 metric ton quota for the year (the quota year runs July 1 to June 30). This is more than ever before at this point in the year, but economic conditions have caused the pace of these exports to slow in recent weeks.
“It looked for a time as if the U.S. might eclipse its quota by June 30, but now it appears that we will not,” Brook said. “U.S. beef is a high-end, high-quality product in Europe, and demand has been increasing. But I suspect it will plateau until the economic situation improves.”
Despite the current economic situation, Brook urged cattlemen to remain steadfast in their commitment to international marketing. He said most of the United States’ major beef-exporting competitors are struggling to increase or even maintain supplies, so he does not see a long-term imbalance in world supply and demand for protein.
“The fundamentals have not changed,” he said. “The world still needs protein and the United States is uniquely positioned to produce that protein at a high level of quality and efficiency.
“People want to eat more beef,” Brook added. “As the uncertainties and wild fluctuations of the world economy gradually settle, it will allow consumer confidence to rebuild and demand for beef meat will return.”
“Whatever else happens, the world will carry on eating,” Brook concluded.
USMEF-Europe director assesses impact of global recession on protein exports
When prices for proteins rose to all-time highs six months ago, driven in great part by increased demand from Russia, politicians expressed fears of global food shortages. Time and a global economic crisis have certainly reframed the issues.
Speaking before the Joint International Markets Committee at the Cattle Industry Convention and Trade Show in Phoenix, USMEF Director for Europe, Russia and the Middle East John Brook noted that while the questions regarding both the supply of and price of protein have been resolved for the time being, it is global consumers’ “perception of wealth” that is putting a damper on U.S. exports.
“I don't believe that the world consumes food on credit – certainly not in developing countries,” said Brook, “but there is little doubt that the credit-driven economy of the United States contributed to increased incomes in countries like China, in turn stimulating consumption. This has most certainly slowed down.”
Brook noted that protein consumption in the developing world increased through 2008, particularly in countries like China, Russia and Brazil, but demand has diminished as economic conditions deteriorate and consumers lose confidence in their economic situation.
“The choice of protein that people consume is in part determined by their sense of wealth,” Brook said. “Even if consumers’ income remains the same, as their sense of wealth and security falls, they switch consumption from higher-priced goods to more affordable goods. This would seem to be the case certainly in Western economies at present.”
The relative strength of the U.S. dollar against other international currencies has an impact on the competitiveness of American exports, particularly when considering the massive devaluation of beef exporting countries' currencies seen in Brazil and Australia.
“Volatile exchange rates are always a fact of life in the international marketplace,” Brook said, “but these mind-boggling 40-percent-plus swings in exchange rates are very hard to overcome.
“But in the medium to long term, I do not see the U.S. dollar remaining strong. The massive level of U.S. government debt should push the dollar down, increasing export competitiveness.
The Russian ruble has tumbled versus the U.S. dollar, and this has significantly impacted Russia’s demand for U.S. beef. Plunging oil and energy prices have also changed the economic landscape in Russia. But Brook emphasized that Russia still needs to import meat, and he noted protein supplies in Russia have already tightened considerably.
“Non-payment problems, plant delistings and other trade issues have created a shortfall of supply in Russia, causing food prices to rise,” Brook said. “If oil and gas prices come back, Russia’s economic situation can recover, and so could our export opportunities.”
When asked about U.S. beef exports to the European Union, Brook offered a mixed outlook. He said the U.S. has already fulfilled 4,500 metric tons of its 11,500 metric ton quota for the year (the quota year runs July 1 to June 30). This is more than ever before at this point in the year, but economic conditions have caused the pace of these exports to slow in recent weeks.
“It looked for a time as if the U.S. might eclipse its quota by June 30, but now it appears that we will not,” Brook said. “U.S. beef is a high-end, high-quality product in Europe, and demand has been increasing. But I suspect it will plateau until the economic situation improves.”
Despite the current economic situation, Brook urged cattlemen to remain steadfast in their commitment to international marketing. He said most of the United States’ major beef-exporting competitors are struggling to increase or even maintain supplies, so he does not see a long-term imbalance in world supply and demand for protein.
“The fundamentals have not changed,” he said. “The world still needs protein and the United States is uniquely positioned to produce that protein at a high level of quality and efficiency.
“People want to eat more beef,” Brook added. “As the uncertainties and wild fluctuations of the world economy gradually settle, it will allow consumer confidence to rebuild and demand for beef meat will return.”
“Whatever else happens, the world will carry on eating,” Brook concluded.