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Want to hear an impressive
statistic about the future? By the year 2050 the world’s
population is expected to increase by 33%.
The good news for food producers is
that along with that, global food production will need to
increase by 40% by 2030 and by 70% by 2050. Specifically, beef
and dairy production will need to double by 2050, according to
analyst’s predictions.
Three industry leaders offer perspective on what this growth in
population and the need for food may mean for the American beef
industry:
With the increasing population, what predictions are being made
for beef consumption?
CattleFax’s Brett Stuart says prediction models project an
increase in beef consumption by 8.5 million metric tons by the
year 2018, “That’s just 9 years away,” Stuart says. But, Stuart
emphasizes that much of that growth will be internationally,
which means tapping the export market – and listening to the
international consumer – will be essential for American
producers. Stuart says
today, the U.S. only exports 7% of it’s beef production. Looking
to the opportunity of the future he says, “Beef exports will
grow by 2.8 million metric tons by 2018; this is the equivalent
of 22% of U.S. production today.”
But he adds, “The U.S. will need to
continue gaining international market access by resolving trade
issues such as traceability, hormone and BSE bans, and other
consumer concerns. “All of these things limit our ability to
trade,” says Stuart.
What’s the value of exports?
In 2009, U.S. beef exports added $1 billion to the American
economy, according to Jim Robb, director of the Livestock
Marketing Information Center. Robb too emphasizes that
“International trade is important to the beef industry.”
Particularly, he says, beef by-products such as tallow, greases,
variety meats, hides and skins are almost all exported and have
as much dollar value as the traditional red meat cuts that are
exported. “We are very dependent on export markets for variety
meats and inedibles like hides and tallow,” he says.
How do exports influence cattle prices?
Exports do have a direct correlation to live cattle prices
because they are tied to demand. Addressing the Texas Cattle
Feeders Association convention this fall, Cattle-Fax Executive
Vice President Randy Blach said, “I don’t want to sound like a
broken record. I’ve said this for the last several years, but I
still think this [exports] is an area where we’re really missing
the boat as an industry.”
He explained, “We still aren’t back to the same levels of beef
exports that we were pre-BSE. We were exporting 2.5 billion lbs.
in 2003. We’re going to be lucky to be at 1.8 or 1.9 billion
lbs. this year.”
According to Blach, if US beef
were operating under the same trade protocols with Japan as it
is with South Korea, “it would be worth another $60 to $70 per
head across our fed cattle market.” Getting into China also
needs to be a priority, he says.
Overall, the decline in beef demand
is the biggest challenge facing the industry, according to Blach.
“We’ve averaged $83 to $84 on fed cattle this year. If we had
the same demand we had a year ago, our market would be averaging
$94 to $95 per hundredweight.”
How can the U.S. increase beef exports?
All three of these industry leaders agree that market access
will be key to the U.S.’s future success.
Robb acknowledged there are several
hurdles that the beef industry must overcome to tap that
international trade potential. Specifically, he said, “We’ve had
three major market shocks this decade that were not expected.”
He names the Sept. 11 terrorist attacks, the BSE incident that
halted trade, and the international credit crisis last fall that
threw the global economy into recession.
Robb pointed out how all three of
these events created substantial drops in beef prices and export
markets. Specifically, he said, “We took $6/cwt. out of the
cattle market last fall because we had five weeks when exports
weren’t moving. The international credit crisis hit the beef
industry immediately.” “It
will take years to climb out,” Robb says of these three
incidents. But he adds, “The good news is we are starting to
make some progress gain with the export market.”
Looking ahead, Robb says U.S. beef
exports will have a slight decline in 2009 from the previous
year’s levels due to the recession. And he said, “For the next
couple years I don’t see a lot of growth on a tonnage basis. We
may see value increases, but the cowherd is shrinking in the
U.S.,” which he explains means the volume isn’t there to
increase exports.
Also contributing to the struggling export market right now are
issues such as volatile exchange rates and phytosanitary bans
over concerns like H1NI. “With H1N1 fears we haven’t exported as
much pork, so we need to consume it domestically and that has
hurt the beef market too,” Robb says.
He also cites the premiums for
cattle under 21 months of age for exports to Japan as an issue
that affects exports, and Europe’s hormone ban. Robb says these
issues will likely continue in the future, as will global
consumer demands for traceability, country-of-origin labeling
and even convenient beef products.
Thus, Robb says the U.S. beef
industry will need to take these factors into consideration as
it works to continue building beef exports which ultimately
bring value back to the American beef industry.
He concludes, “Building foreign
demand takes a lot of effort. Just because you do a good job of
producing beef, doesn’t mean people will buy it. Supply doesn’t
create demand. You’ve got to go out and work to create it, and
it’s a long slow process.”
Blach says that beef producers need to work harder to get “the
right people’s attention and get some of these markets opened
up.” And he adds, “It would have a tremendous impact on what
we’re able to merchandise cattle for.”
What’s one additional factor?
Promotion of U.S. beef internationally – and building consumer
support – will also continue to be paramount, according to
CattleFax’s Stuart. He reports that currently Australia is
outspending the U.S. 7 to 1 on beef promotion to foreign
countries.
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