Dittmer: U.S. exports uneven but showing strength

Free Market Reflections with Steve Dittmer

How is the export situation for U.S. beef into China and Asia? In general, Japan, our number one market and South Korea, our number two, are countries that have been pretty successful at containing the novel coronavirus. Japan has dealt with some flare-ups this summer and South Korea likewise but their numbers are very small compared to many countries. Most of Asia is further along in their COVID-19 battles.

China is dealing with pork shortages due to African swine fever. Their purchases of U.S. pork have been booming, both to fill shortages and to try to catch up to their commitments under the U.S.-China Phase One trade deal.

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U.S. export numbers stayed pretty close to last year through May but tailed off in June, as the major disruption in slaughter in April and May rippled into June supply. One can’t export what isn’t there, although variety meats could still be supplied, as that is the usual destination for most of them.

U.S. Meat Export Federation (USMEF) CEO Dan Halstrom and staff gave reports during the NCBA midyear meeting to checkoff and trade committees. January through May, U.S. beef and beef variety meats were down three per cent by volume and five per cent by value. Volume exports to Japan were up five per cent, flat to South Korea, up 15 per cent to Canada and Mexico, and two per cent to Taiwan. Exports to China were down five per cent.

Exports by value were up two per cent to Japan, three per cent to Mexico and 16 per cent to Canada. They were down three per cent to South Korea, four per cent to China.

USMEF’s later reports updated for January through June showed beef exports fell nine per cent below last year’s pace in volume (591,609 mt) and 10 per cent lower in value ($3.63 billion). Exports were below year-ago levels to most markets but trended higher to Canada, China and South Africa.

Pork fared better. Despite the June decline, first-half pork exports were still 24 per cent ahead of last year’s record pace in volume (1.55 million mt) and 29 per cent higher in value ($4.05 billion).

There is no doubt the Japan-U.S. agreement being implemented in 2020 is a huge deal for us. Japan’s $2 billion market was our largest in 2019, even with a 13 per cent tariff disadvantage to competitors. This year, with the same tariff and even with the COVID-19 problems, both volume especially and value are up.

The U.S. market share in Japan has grown to 46 per cent vs. 45.5 for Australia.

There are 58,000 Japanese convenience stores, mostly from three top chains. Convenience stores in Japan carry top-quality products and U.S. grain-fed beef fits right in. They feature home meal replacement and meal kits but also chilled steaks like porterhouse, tomahawk rib steaks and tenderloins.

USMEF works with the largest retailers but COVID-19 restrictions have boosted business for regional chains. Branded beef and branded-breed beef is symbolic of high quality for Japanese consumers. Retailers have figured out promoting thick cuts moves more volume with less cutting labour.

No one can really predict the political atmosphere in China and Hong Kong. Halstrom termed it “fluid” and leaning to restrictions. But supply and demand favour U.S. beef, given the Phase One deal just kicking in in March and mostly grass-fed competition. Sam’s Club in China sold 1,700 mt in May, the highest since 2003. The outlook is very good for all types of U.S. beef, barring more political restrictions.

But China has been tightening further in Hong Kong, the world’s blaming China for mismanaging the novel coronavirus outbreak and China has been purging domestic security departments. It really boils down to whether China decides to prevent political things from interfering with supplying meat to their people — or not.

South Korea’s market hit $1.7 billion in 2019, with demand for quality beef increasing. The country is more advanced in e-commerce, with projections of 40 per cent market share by 2024 vs. four per cent for America.

Costco Korea has shifted over the last few years to carrying only U.S. beef in 2019. Lines to get into Costco Korea have sometimes extended to three hours.

COVID-19 has forced suppliers to really boost e-commerce, home meal replacement boxes and takeout in countries where people normally eat out more than cook or food shop daily.

The theme from USMEF was the increasing demand for high-quality grain-fed beef and variety meats. The U.S. and Canada are the only major producers of high-quality, grain-fed beef. That has to be good news for the Canadian beef industry.

CattleFax CEO Randy Blach pointed out at midyear that since 2017, the U.S. beef supply has exceeded packing capacity, with the packers processing more than their rated capacity. Your feeders have been importing more U.S. feeder cattle. That bodes well for keeping feedlots full and Canadian packers busy if the prices to feeders can improve.

About the author

Contributor

Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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