By Heather Smith Thomas, Contributing Editor
There are many challenges and opportunities in global beef markets, and many factors affect those markets. Kent Bacus, executive director of government affairs for the National Cattlemen’s Beef Association (NCBA), says U.S. cattlemen consistently produce a high-quality product with some of the highest value in the world, but, currently, our total cattle numbers are down.
“The prediction is for continued decline though next year – partly because of weather [in drought areas where producers are culling harder, cutting numbers] and the cost of production with inflation, which discourages expansion,” Baucus says. “It’s also hard for people to hold onto all their cows when they can get record prices selling them.
“There are always cattle cycles; however, every time we have contraction [culling] of the herd, we have quality improvement – which includes genetics and more efficiency built into U.S. cattle production,” Bacus says. “We’re still in that contraction phase, and there are differing views regarding how long this will continue. History has taught us that these cycles happen about every 10 years. The growth potential we’ll have on the upside of this cattle cycle is strong. The good thing is that we have access to other markets that want our higher quality, grain-finished beef.”
No other country in the world can compete with the United States on quality and quantity of grain-finished beef. “I think we’ll have opportunity in Asia, all across North America, parts of Europe and potentially the Middle East,” Bacus says. “We’ll have more potential for exports but this may still be a year or two away. Most of the beef produced in the U.S. – about 85 percent – is consumed in the U.S., and the rest is exported.”
The import side is a little different. The United States is one of the biggest importers, volume-wise, second only to China. “Only about 12 percent of the beef consumed in the U.S. is from an imported source,” he says. “About 75 percent of the beef imported is lean trimmings to combine with our fattier trimmings to meet ground beef demand.”
Ground beef competes directly with chicken. Imported lean trimmings plays a significant role in making sure we don’t lose market share at that price point.
“The U.S. also imports beef cuts, especially from Canada and Mexico,” Bacus says. “A lot of the beef cuts from Mexico are marketed to consumers in California, Arizona, New Mexico, Texas, Florida, Chicago, etc., where Latin cuisine is popular. Canadian imports backfill shortages in places across the northern U.S. and areas like California with larger populations. That meat is similar to ours but closer to Choice than Prime, so it’s not competing in our high-end markets. This mid-range quality mainly goes into some of the big box stores.
“Our main sources of lean trimmings are Australia and New Zealand. About 60 to 70 percent of the production in Australia is grass finished, but they have a growing grain-finished market. They see an opportunity to export that beef to Asia. We are competing with them for grain-finished markets in the Pacific Rim countries.
“Australia is at the top of their cattle cycle. In recent years, Australians expanded their herd to capitalize on global beef shortages. With the uncertainty in China, the U.S. has become a better market; Australian export sales to the U.S. overall [not just lean trimmings but also grain-finished beef] have been up significantly this year, due to consumer demand,” he says.
“We have a trade agreement with the Australians; they have access here and can ship quite a bit without facing tariffs and fees. At the same time, we’re still trying to get our access approved to the Australian market. It’s not a level playing field. The Australians have gummed up the works in the regulatory approval process, and this is something we’ve been working diligently to correct,” Bacus says. “We’ve been working closely with the U.S. trade representative and with USDA to right this wrong. Australia doesn’t have a legitimate reason to keep our product out. Once we gain access to the Australian market, even though it’s a fairly saturated market, we know our beef will compete. Their consumers want the high-quality, grain-finished product we produce.”
Historically, trade barriers have been common in many of our key export markets. Each country has ways to try to protect its own producers, including non-scientific standards and arbitrary rules.
“That’s why we must make sure that trade is always objective and as fair as possible – and why trade policies are so important and why NCBA is actively working on these issues,” Bacus says. These markets are always in flux.
The cattle cycle is subject to broader economic pressures such as inflation, cost- of-living increases, etc., that keep some people from buying higher valued beef, or they may not buy it as often.
“There’s a lot of uncertainty, and a lot of opportunity,” Baucus contends. “Unfortunately, politics plays a significant role in economic forces. If we see a more protectionist bent in U.S. trade policies and trade wars, or greater uncertainties, this could put us at a disadvantage in some of our key markets. At the same time, if the U.S. does not actively enforce trade agreements, it could have a negative impact on us.
“The ideal situation would be for our government to re-engage and negotiate trade agreements and enforce them, and prioritize trade with our allies. When we look at China and some of the other places around the world that the U.S. has prioritized, they are not as stable as our allies. We should prioritize developing market access with more dependable trade partners.”
