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USMEF Feedgrain and Oilseed Caucus Report

Lou Lamoureux and John Hagenbuch

Lou Lamoureux and John Hagenbuch

By Lou Lamoreux and John Hagenbuch, Co-Chairs

The USMEF Feedgrain and Oilseed Caucus met May 21 during the USMEF Board of Directors meeting in San Antonio. Included in the topics examined and discussed by caucus members were the outlook for the U.S. grain and livestock industries, the value of marketing corn-fed beef in the ASEAN region, USMEF efforts to increase value and markets for underutilized cuts of U.S. red meat and lingering effects of the West Coast port situation.

U.S. meat production is expected to increase significantly as the entire U.S. protein sector continues to expand rapidly. Pork production is leading the way and is expected to jump 6 percent in the next year. While not nearly as dramatic, U.S. beef production should also climb – the predicted growth of .01 percent is small, but many in the industry had expected a decline.

On the demand side, factors such as the millennial generation eating more meat and the U.S. meat industry’s ability to market value-added products internationally have steadied the market.

As for the grain markets, the caucus was told that world stocks have grown significantly in the past few years – and with that has come an increase in the U.S. stock-to-use ratio. John Anderson, deputy chief economist with the American Farm Bureau Federation, told the caucus that the U.S. finds itself in a less favorable situation compared to recent years. Global stocks of grain – especially soybeans – are very high, most notably in Brazil and Argentina. Anderson noted that farmers in Argentina have been sitting on a lot of soybeans as they wait out results of an election to be held this fall in that country. Heavy tariffs are imposed on the Argentine farmers, and if a new government is elected, the tariffs could be lowered, motivating the farmers to sell the soybeans they’ve held in storage. Even if the tariffs aren’t lowered, Anderson said, Argentine farmers may simply give up and sell their soybeans after the election anyway. The effect on the global soybean market could most certainly be substantial, he predicted.

At the same time, U.S. soybean acreage is expected to see a substantial increase. The combination of rising world soybean stocks and increased U.S. soybean production has experts forecasting a 13.5 percent stock-to-use ratio by the end of 2015-16, Anderson said, adding that the current ratio is about 9.4 percent and that anything over 6.5 percent is considered large.

Corn appears to be in a somewhat better position, Anderson reported. Even with a current 13.5 percent stock-to-use ratio, estimates indicate that some acreage in the U.S. will be shifted out of corn next year. Meanwhile corn usage is expected to remain steady in the livestock sector and in the ethanol industry.

Back on the topic of U.S. meat, USMEF staff presented to the caucus insights into marketing techniques that promote and leverage product quality attributes to drive exports. For example, USMEF-ASEAN has been promoting U.S. beef as “Corn Fed to Tenderness.” The next step in the region is to promote U.S. pork as “Grain Fed to Perfection.”

The ASEAN region has built-in challenges for U.S. beef, including the fact that competitors Australia and New Zealand are much closer geographically and, in the case of Australia, producing large volumes of beef due to persistent drought conditions. USMEF-ASEAN has highlighted the corn-fed aspect and pointed out the differences in flavor and tenderness between U.S. beef and the beef produced in other countries.

USMEF staff also detailed efforts to market underutilized cuts of meat that command little value in the domestic market. Critical to this effort is the identification of processors and other customers in each market and tailoring these products to meet their specific needs.

John Zarella, sales manager for Preferred Freezer Services, a global cold storage company, provided the caucus with an update on efforts to alleviate port congestion on the West Coast. Zarella reported that the situation has improved from earlier this year when there were as many as 25 container ships docked at the Port of Los Angeles due to a slowdown related to stalled labor negotiations. A tentative labor agreement was finally reached in late February, prompting a concerted effort to relieve the backlog of containers and cargo. Zarella said that while ships are no longer backlogged, lingering congestion in the Port of Los Angeles and the Port of Long Beach is expected to continue until June. He then noted the importance of the West Coast ports, which handle about 40 percent of the container traffic in the entire U.S. As meat exporters know, the West Coast ports are especially vital for shipping chilled meat to Asian markets, because limited shelf life makes it difficult to move these products by another route.

In wake of the World Trade Organization’s decision on country-of-origin labeling, the caucus briefly discusses its implications – most notably the potential for retaliatory measures by Canada and Mexico. The caucus also entertained a resolution presented by Beef and Allied Industries Committee Chairman Kevin Kester. It encourages those organizations that support expanded trade with Cuba to advocate for the statutory and regulatory changes necessary to allow USDA program funding and checkoff funding to be used for market development and research in Cuba. The resolution was approved the following day by the USMEF Board of Directors.