WASHINGTON – Exports of US pork and beef are forecast to decline in 2022, the US Department of Agriculture (USDA) said in its Livestock and Poultry Outlook report. Shayle Shagam, livestock analyst for the World Agricultural Outlook Board at USDA, presented the data and Erin Borror, an economist at the US Meat Export Federation (USMEF), provided context of supply chain disruptions during USDA’s Agricultural Outlook Forum held Feb. 24-25.
USMEF’s Borror said that sustaining the momentum of record exports generated in 2021 will be challenging because “we have record red meat exports…incredibly strong demand, and at the same time, some incredible challenges on the logistical side,” that have only intensified in 2022.
“2021 was really an incredible year, especially given all of the challenges,” Borror said. “We saw red meat exports of $18.7 billion, and that was a $3.3 billion or 22% increase over 2020, and that included the pork export record on a value basis of $8.1 billion, and for beef at $10.6 billion, and for beef, that was a more than $2 billion increase over the $8.3 billion record set back in 2018. So, incredible demand and, again, incredible given all the challenges that were overcome.”
Beef exports ease
In its Livestock and Poultry Outlook 2022 report, USDA forecast total beef exports to decline to 3.27 billion lbs in 2022.
“US exports are likely to be pressured by tightening domestic beef supplies and the resultant higher prices may make US beef less price competitive,” USDA said in its report. “Furthermore, increased beef production in export-oriented countries such as Australia and Brazil will likely increase competition in several markets.”
In 2021, gains in beef exports to China were the primary driver of US export growth increasing more than 350% from 2020 and propelling that market from 4% of US exports in 2020 to almost 16% of total US beef exports in 2021, USDA said.
“China’s demand for US beef reflects a combination of a shift in dietary habits and changes in policies which previously limited US beef imports,” according to the Livestock and Poultry Outlook report.
However, 2022 will be different because US exports are likely to be pressured by tightening domestic beef supplies, USDA said, and higher prices may make US beef less price competitive. Furthermore, increased beef production in export-oriented countries such as Australia and Brazil will likely increase competition in several markets.
Variety meats are possibly one of the most obvious examples of why exports are so critical to the industry, Borror said. Exports of beef variety meats surpassed a billion dollars in 2021 and averaged roughly 25.5 lbs for every head harvested last year and with a value of $41.82 per head.
Borror said, “Another important thing to note here is that for both the beef and the pork variety meats, the logistical challenges, in some cases, meant that the shipping cost of items of lower value — so, for example, kidneys — those increased shipping costs often meant that packing and exporting these products was not feasible.”
Labor shortages were also a factor in the market.
“Our export volumes have not returned to their historic highs on a per-head basis for variety meats, and part of this is just the labor shortages in these plants,” Borror added. “So, we know that exporters are leaving money on the table every day, because they don’t have the people to produce and pack some of these variety meat items, and then you compound that with the high shipping costs and uncertainty, and some of these items are still being rendered.”
Pork not picking up
After a dramatic increase in 2020, pork exports in 2021 declined about 3% to 7.03 billion lbs and USDA expects that trend to continue into 2022 — exports of US pork are forecast to decline about 3% to 6.81 billion lbs, USDA said.
The United States benefited from strong import demand by China due to shortfalls in that country’s domestic pork production driven by African swine fever outbreaks. The benefit was also reflected in reduced competition in other key markets as competitors shifted sales to meet China’s import demand.
“China’s recovery from the African swine fever has really affected its import patterns,” Shagam said. “Pork imports were very high in 2020 and then came down again in 2021 and are declining further, expected to decline further in 2022. On the other hand, changes in dietary habits, increased incomes have supported increases in imports of beef. So, we’re seeing, basically, lower pork imports in 2022 and stronger beef imports in 2022.
“As that need for imported pork diminishes, it has not only affected the US, which is a major supplier of pork to China, but it’s affected all the players, and as those countries have fallen away from China, they're looking for alternative sources for their levels of production as well, and there are a number of markets that we will be competing with increased fervor in to maintain our market share from these sources of imported pork.
Again, exports of US pork variety meats and hams are critical to the sector. Borror said roughly 41 lbs per head was exported last year at an average of $53.28 per head. Including variety meats, pork exports were about 32% of hog value or 28% on a cutout value basis. Exports lean heavily on end-cuts — such as the leg or ham — which are high in demand in Mexico.
“We know Mexico’s importance was heightened again last year, partially to offset that slow-down to China,” Borror noted, “and Mexico has the labor advantage. So, without the labor in these plants, we do not have the labor to debone hams, and so, that has elevated prices for boneless specifications and increased our reliance on being able to export these bone-in hams, largely in combos, chilled into Mexico and also into Colombia, Australia, Canada, and Dominican Republic as other top destinations.
One value-added example is Japan and part of the reason the US-Japan free trade agreement was so important. Ground seasoned pork, which is produced from picnics has a tariff of 20% that is phasing to zero. When the United States was not a part of the Trans-Pacific Partnership the sector faced losing hundreds of millions of dollars’ worth of business.
“Our American consumers really love the middle cuts, bacon, ribs, porkchops, and exports are less significant on these middle items, so we’re able to provide American consumers affordable middle cuts that are preferred and capture the value on these end-cuts,” Borror said.
In markets for pork variety meats like China, variety meats often sell at a premium to muscle cuts. Stomach and some head products for example, sell for more than $2 a lb in China.
“So, there is huge demand for these variety meats,” she added.
Logistics, cost nightmares
Australia is a market that has been hard-hit by astronomical shipping fees. Citing data from the Office of the Chief Economist, shipping rates from the West Coast of the United States into Australia had jumped exponentially.
“We typically ship a boneless ham into Australia for their processing industry, and between our higher costs because of labor shortages and then these astronomical shipping rates, that is a market where our exports were down quite notably and an example of some of the shipping challenges actually impacting a specific market,” Borror said.
Borror noted that Asian exporters are paying premium shipping rates, sometimes 10 times what the rate is for shipping products from the states back to Asia. She said this shipping rate disparity incentivized returning empty containers to Asia. The cost to US exporters has been a lack of containers and chassis due to congested terminals. This has resulted in shipment delays which is a threat to United State’s exports of chilled meats.
“In my mind is the chilled business at risk here,” Borror said. “So, chilled pork is a big part of US the export portfolio and our competitive advantage. We had $3.37 billion in waterborne chilled beef exports last year for an increase of about a billion dollars over 2020, and the important thing to note is the premium on a per-pound basis over frozen.
“So, we want to be in this chilled business,” she said. “When we sell Choice and Prime product into retail, it needs to be chilled. This is how these markets have been developed. We want them to be day in and day out customers, and we want to capture these big premiums of, for example, $2.54 a pound in Taiwan. When there’s uncertainty added in and it’s no longer a just-in-time business, it becomes really problematic.”