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Agricultural News


International Trade Will Play Major Role in Keeping Beef Industry Balanced During Expansion

Mon, 12 Sep 2016 10:06:10 CDT

International Trade Will Play Major Role in Keeping Beef Industry Balanced During Expansion Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel touches on how international trade will help in stabilizing the beef industry during this period of expansion.


"Markets work best and most efficiently not by stopping and starting abruptly but by gently tapping the brakes or the accelerator as conditions change. International trade of cattle and beef is a significant buffer that reduces drastic market swings in U.S. markets. In 2014 and 2015, record high U.S. prices, reduced supplies had the expected effect of stimulating beef imports and cattle imports while retarding beef exports. A strong U.S. dollar exaggerated those effects both ways. Increased beef imports augmented supplies of beef, especially supplies of lean processing beef (primarily for ground beef) and moderated what would have been an even more extreme impact on domestic demand in a period of record prices. Beef exports decreased as record high prices rationed demand in both the domestic and international markets.



"Increased beef production and lower prices in 2016 is reversing those impacts. Beef exports are recovering, albeit rather slowly and unevenly. July beef exports were up 8 percent to all destinations. Year to date beef exports are up 3.1 percent with year over year increases to Japan, Mexico and South Korea. Exports to Canada and Hong Kong are still down year over year though Hong Kong posted a year over year increase for the month of July. The dollar has moderated against several currencies, the Japanese Yen in particular, but still represents a headwind for beef exports.



"Beef imports were down 6.8 percent for the month of July with the year to date total down 12.1 percent. Imports from Australia have been down sharply every month this year and are down 31.2 percent for the first seven months this year. Beef imports from Australia increased the most the past two years as record high U.S. prices coincided with drought forced liquidation in Australia that increased short run beef production. Imports have also decreased from Brazil for the latest monthly data and for the year to date. Other beef import flows are in flux with Mexico down in July but still up for the year to date. By contrast New Zealand, Nicaragua, and Uruguay were all up in July but are still down for the year.



"Beyond short term market conditions, trade flows are impacted by longer term conditions in various countries and structural changes that alter the long term trajectory of beef and cattle trade flows. For example, China has emerged as the second largest beef importer in recent years as consumption exceeds beef production; making China a global beef market participant for the first time. The U.S. does not yet have direct access to the Chinese market but the impacts are already evident in global markets and are expected to continue to grow. Closer to home, Mexico's growth in beef production and processing and growing exports has a number of direct impacts on the U.S. market. In 2015, roughly 90 percent of Mexican beef imports moved to the U.S. making Mexico the fourth largest source of beef imports in the U.S. At the same time, increased demand for Mexican cattle in Mexico is reducing the flow of Mexican feeder cattle to the U.S. Cattle imports from Mexico were down 54.1 percent year over year in July and are down 20.9 percent for the year date. This is likely a permanent or at least, long-lived decrease in Mexican cattle exports.



"Decreased beef imports and growing beef exports will play a central role in stabilizing cattle and beef prices in the U.S. as production expands in the coming years. Along with domestic beef demand, international demand for U.S. beef will determine just how big the U.S. beef industry needs to be as it grows. More than just total tonnage, beef exports and imports are critical in balancing the supply and demand of specific beef products. This helps maximize the value of every beef carcass in the U.S. market."


   


 

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