January 1, 2010
by Steve Bjerklie
If the global economy banks upward this year, there’s a chance the U.S. meat industry could take some credit for the gains. With the value of the U.S. dollar entering the decade of the teens at a low for the 21st century, U.S. products are attractive buys for foreign buyers. That’s especially true for American meat and poultry – and more U.S. meat and poultry exports in the global pipeline tends to stimulate exports and imports worldwide, because the economies of nations such as Brazil, Australia and New Zealand are built, to a great extent, on meat exports. To stay competitive, these nations must counter with market strategies of their own. Moreover, few if any commodity products other than meat and poultry carry the capability of improving global nutrition and health as they are distributed around the world to the extent meat and poultry do.
But before anyone pops the champagne and leads a chorus of “Happy Days Are Here Again,” it’s important to realize two things. First, the comeback comes out of a deep hole. Secondly, the climb will be gradual, step by step.
Len Steiner analyzes meat production and shipping data for the Meat Importers Council of America; he also watches meat and poultry exports and global trends. He sees some shiny glimmers lighting the way in 2010. Pork, for example: He estimates that U.S. pork exporters will ship out 4.315 billion lbs. of pork in 2010, a nice 10 percent improvement over 2009 – but ‘09’s total, 3.920 billion lbs., was a 16 percent drop from 2008. Overall, however, pork exports will be an industry bright spot, he says.
“We think China will come back a bit – and overall the China factor is just huge for pork. It’s hard to estimate how big that gorilla really is,” he comments.
One thing benefiting both U.S. and Canadian pork exporters in terms of the Chinese market is that the cost of importing North American pork and shipping it from China’s coastal ports to that nation’s rapidly growing cities is still cheaper than hauling pork from the inland to distribution centers. How long those conditions will last, however, is anyone’s guess, as China is investing heavily in new infrastructure. At the same time, China’s enormous pork industry – “they raise 50 percent of all the hogs in the world over there,” notes Steiner – is hidebound by a traditional system that has changed little since the glory days of the emperors. Nearly every one of those millions upon millions of Chinese hogs is raised on a tiny rural farm that’s located far from any major thoroughfare.
Japan, however, remains the “premier” market for U.S. pork, to borrow the word Takemichi Yamashoji, senior marketing director for the U.S. Meat Export Federation in Japan uses. He notes that in 2009, the U.S. pork industry debuted a quintessentially American pork product in Japan, the back rib. “Because of the way the hog is processed in Japan, neither consumers nor the trade have experienced pork back ribs, and we saw this as a real opening for U.S. pork,” he says. During the year, more than 1,500 retail outlets in Japan began selling U.S. back ribs. While yearend totals are still being compiled, USMEF estimates that when the final figures are tallied, the U.S. pork industry will have shipped 660,000 pounds of pork back ribs to Japan. What is more, because the ribs are a relatively inexpensive cut, the product helps U.S. exporters comply with Japan’s complicated gateprice system, which requires importers to pay a duty on products priced under a specific per-pound scheme. Importers can avoid additional duties by bringing in valuepriced cuts like ribs.
Overall, “pork production this year will be down but exports will be up. Net-net, there will be 3.8 percent less pork consumed by the American public,” estimates Steiner, “but the reasons for less consumption at home will be ones that mean better economics for the industry.”
Rebuilding in beef
Things are somewhat rosy on the beef side, too. After falling nearly 7 percent from 2008, beef exports will gain 10.8 percent in 2010, the analyst believes, climbing to 1.950 billion lbs. “It’s the cheap U.S. dollar and the further widening of the Japanese market,” he comments. “Mexico” – according to the USMEF, Mexico is the largest market for U.S. beef exports by far – “will hold steady.” Since 2008 was a record-volume year for U.S. beef shipped to Mexico, at 396,065 metric tons, that’s good news indeed. And while a nearly 11 percent improvement this year still won’t return beef exports to their historic high, reached in 2000 and nearly again in 2003, just before the market collapsed in the wake of the discovery of a bovine spongiform encephalopathy-infected cow in Washington state, the industry may reach historic levels again within three to five years. That’s an impressive gain from the disaster of 2004, when U.S. beef exports fell from a high of 1.275 million metric tons to just 322,000 metric tons.
Steiner estimates that chicken exports in 2010 will be up about 1 percent while overall production will fall 0.3 percent. The numbers are similar for turkey: exports up an estimated 0.8 percent and production down 0.6 percent (after a 9.3 percent reduction in ’09). “Steady as she goes,” is how the analyst describes the U.S. poultry situation overall in terms of production and exports.
On the import side, he notes that “country-of-origin labeling is really discouraging imports of live hogs. It’s really changing where hogs are born.” Canada, he comments, “was the nursery for a lot of the hogs raised in Iowa,” but, thanks to COOL, no more. For beef, imports were up 6.8 percent in 2009 over ’08, “but most of that gain was in the first half,” before the impact of the foodservice industry’s continuing woes curtailed orders for Australian and New Zealand product.
“Beef imports are pretty light, and the main problem is the exchange rate,” agrees Laurie Bryant, executive director and secretary of the Meat Importers Council of America. “For exporters, other markets look better right now.” He expects beef and lamb imports from New Zealand to remain normal, but Australian exports will be a question going into the new year. “It’s pretty hard to read where it’s going
to go,” Bryant says. “For example, Argentina is running into some problems and will import some beef next year, and that market might be an attractive one for Australian exporters, more attractive than the U.S.” For lamb, Europe is still a much better market for the Australians than the U.S., he adds.
“We think prices are going to be up,” concludes Steiner. “If you’re a processor, that’s not good, and if you’re a consumer, that’s not good. But if you’re raising animals, it’s finally some good news.” •
Steve Bjerklie is M&P’s East Coast correspondent based in Franconia, N.H. He has worked as a journalist covering the meat and poultry processing industry for more than 25 years.