Americans will enjoy ample supplies of red meat and poultry this year. Total 2019 production is expected to reach a record 105.570 billion pounds, up 3.0 per cent on 2018, according to the U.S. Department of Agriculture’s Economic Research Service (ERS). This would exceed the expected 2.4 per cent increase in 2018 from 2017.
ERS forecasts that 2019 broiler production will be up 1.7 per cent on 2018 at an estimated 43.370 billion pounds. Beef production will total 27.810 billion pounds, up 3.3 per cent on 2018, and pork production will set a new record of 27.715 billion pounds, up 5.3 per cent on 2018. Turkey production will total 5.905 billion pounds, up 0.5 per cent.
Like last year, strong demand will be the key to the financial health of the red meat and poultry industry this year. Potential negatives will be stock market volatility in the U.S. and overseas, and trade issues. The latter includes tariffs and uncertainty that Congress will ratify the new U.S.-Mexico-Canada Agreement (USMCA), which would replace the 24-year-old North American Free Trade Agreement. The three countries signed the agreement in late November. But Congress is unlikely to take up ratification until a newly elected House of Representatives is seated early this year. Moreover, House Democrats might try to alter terms of the agreement and delay or even block its ratification. If that happens, would NAFTA remain or end?
A report last November painted a sobering picture of the cost to the U.S. of the Canadian and Mexican tariffs and the cost of not ratifying the USMCA. While the tariffs remain in place, they would negate USMCA export gains, said an analysis commissioned by the Farm Foundation. Market access improvements included in the USMCA are expected to increase U.S. agricultural exports by US$450 million, mostly in the poultry and dairy sectors. But this gain will be offset by retaliatory measures taken by Canada and Mexico, it said.
Under the USMCA, meat product exports are projected to increase by 1.6 per cent and the agreement is expected to produce modest benefits for U.S. farm income and labour demand, said the analysis. Retaliatory tariffs imposed by Canada and Mexico, however, could cause U.S. agricultural exports to these two key trading partners to decline by US$1.8 billion and US$1.9 billion, respectively. U.S. agricultural exports to Canada and Mexico would decline more than US$9 billion and export revenue would fall US$12 billion if the U.S. withdraws from NAFTA without ratifying USMCA, said the analysis.
Tariffs will also play a big role in Japan, the U.S.’s top beef export market. On a value basis, the U.S. is the top supplier to Japan, with 46.8 per cent of imports in last year’s first three quarters. This was up slightly from the prior year. But on a volume basis, U.S. beef accounted for just under 42 per cent of total imports, down from 43 per cent in 2017 and trailed Australia’s 48.6 per cent. Competition will heat up this year as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) took effect December 30. U.S. beef will continue to face Japan’s 38.5 per cent tariff, while the tariff on CPTPP countries’ beef will be much lower.
Japan’s tariff on Canadian beef is now 27.5 per cent on fresh beef and 26.9 per cent on frozen beef. On April 1, Canada will enjoy a second decline to 26.6 per cent on both categories and an eventual decline to nine per cent. With CPTPP, Canadian beef will also be exempt from the Japanese safeguard tariff of 50 per cent on frozen beef. The same lower tariffs will apply to New Zealand’s and the other CPTTP countries’ beef entering Japan. The U.S. industry expects to see increased competition in Japan from all these countries.