JBS executive speculates about the year ahead

by MEAT&POULTRY Staff
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DENVER – U.S. beef exports in 2008 exceeded many expectations, and so could 2009 considering the potential for market improvements. But this year could also result in major setbacks, warned Dan Halstrom, U.S. Meat Export Federation past chairman and current senior vice president for international sales at JBS. Mr. Halstrom delivered his remarks at the 2009 Cattle Industry Convention and Trade Show in Phoenix.

Even though global economic volatility made the final months of last year very challenging, 2008 was strong for U.S. beef exports, Mr. Halstrom said. U.S. beef exports through the first 11 months of 2008 increased 29% in volume and 40% in value over the same period in 2007, Mr. Halstrom said. When all 2008 results are final, beef exports will total well over 2 billion lbs. and more than $3.5 billion in value. Both the per-head export premium for cattle and the percent of total U.S. beef production exported are approaching the pre-B.S.E. peaks achieved in 2003.

South Korea, Japan, Canada and Mexico were identified as the foreign markets holding the highest priority for JBS in the future, primarily because the stability and reliability these markets offer during times of very tight credit. Japan has the largest potential for growth if the pool of cattle eligible for export to that nation could be expanded from 20 months of age to 30 months.

"People are estimating that a 30-month age limit in Japan could be worth $80 to $90 per head in incremental value for cattle producers," Mr. Halstrom said. "But I think it could even exceed $100 if we can get variety meats included. Japan really wants U.S. beef, but we don’t have enough cattle that qualify. It’s a situation that Australia has really been taking advantage of."

Hiking the age limit to 30 months could restore as much as 95% of the U.S. export business, industry experts believe. But Mr. Halstrom cautioned Japanese retailers will likely continue to require age verification, even if the age limit is expanded to include the majority of fed cattle.

Mr. Halstrom is concerned over potential trade interruptions with Canada and Mexico because of the United States’ implementation of Country-of-Origin Labeling. "It is estimated that the loss of the N.A.F.T.A. markets would cost cattle producers $50 to $60 per head," Mr. Halstrom said, "but I think it would be quite a bit more than that because of all the end cuts and variety meats we would have to absorb into the domestic market."

This year, the U.S. beef industry must overcome the challenges of global liquidity; risk related to specific markets; a strong U.S. dollar; and shifts in demand toward lower-cost cuts and proteins to maximize export growth, he said:

"At JBS, we expect to grow our U.S. beef exports in excess of the industry forecast of 6%, but this will require a change in the way we do business," Mr. Halstrom said. "We need to manage our risk carefully, and focus on stable markets and affordable cuts."

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