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USMEF Beef and Allied Industries Committee Report

by Jennifer Houston

Jennifer Houston

Potential benefits of the Trans-Pacific Partnership (TPP), ongoing efforts to gain market share around the globe and updates on U.S. beef promotions in Asia were among the highlights of the USMEF Beef and Allied Industries Committee meeting at the USMEF Strategic Planning Conference in Tucson, Arizona. I was pleased to chair this meeting on behalf of committee chair Kevin Kester and vice chair Larry Pratt, who were both called away on family business.

Challenges facing the U.S. beef industry in 2015 and beyond, as well as strategies for developing new markets, displacing the competition and defending existing markets were also placed front and center by USMEF staff and representatives.

USMEF Economist Erin Borror gave committee members a global market update, noting that after five record-breaking value years, U.S. beef exports slowed over the past 12 months. Factors include the strong U.S. dollar, lack of access to China and the West Coast port backlog.

“Those of us in the cattle market had been riding a high, but we knew the market would be a wild ride and we are seeing that now,” said Borror, who noted that global beef export value doubled between 2009 and 2014 to $38 billion, but is projected to decline by about 7 percent in 2015.

Lack of access to China continues to frustrate the U.S. beef industry, Borror said, estimating the lost opportunity to be in the neighborhood of $100 per head.

“China’s domestic production will not keep pace with future demand, so opportunities remain large for those suppliers willing to meet China’s requirements,” she said.

Borror summarized the situation for U.S. beef in the world market:

  • Relatively tight global supplies and stable demand should support trade and solidify prices in 2016
  • The U.S. maintains a competitive advantage in grain-fed, high-quality beef production but is not considered a low-cost supplier
  • With herd rebuilding well underway, the U.S. is in a position to grow and win back market share, especially as Australia’s herd hits a low and Canada enters a period of herd rebuilding
  • Only a modest increase in Brazil’s production is expected, but domestic demand will be lackluster, forcing a greater reliance on exports

As for TPP, Borror said the pact will benefit U.S. exports through a phase-down on Japan’s tariff on chilled/frozen beef from 38.5 percent to 9 percent over 15 years. Currently, U.S. beef is at a significant disadvantage compared to its leading competitor, as tariffs on Australian beef under the Japan-Australia Economic Partnership Agreement have already dropped to 28.5 percent for frozen beef and 31.5 percent for chilled beef.

Borror said the U.S. beef industry should also focus on Vietnam, another country with high tariffs.

“Vietnam is a small market right now, but if we can get TPP implemented, we will see growth there,” she said.

Borror also reminded the committee that the TPP agreement will benefit many other countries.

“So our competitors will have the same advantages,” she said. “That is why we need to stay focused on how we can promote the quality of U.S. beef and other attributes.”

TPP’s narrowing of this tariff gap is one of the drivers behind a resolution co-introduced by the Beef and Allied Industries Committee and the Pork and Allied Industries Committee calling for USMEF to support ratification and implementation of TPP. At the end of the meeting, the committee voted unanimously to support the resolution.

Greg Hanes, USMEF assistant vice president for international marketing, gave the committee a look at USMEF’s Strategic Market Profiles (SMPs), stressing initiatives to develop demand for U.S. beef, displace the competition and defend market share in key global markets. The committee voted unanimously to approve the SMPs.

“Although the U.S. is not a low-cost supplier, customers are willing to pay higher prices for U.S. beef,” said Hanes, who discussed top priority markets such as Japan, South Korea and Mexico in detail. Hanes also pointed to China, saying strategies are being planned out “so once we have access to China we will be ready to hit the ground running.”

Hanes added that other key markets are Taiwan, Central and South America and the ASEAN region.

“Underutilized cuts of U.S. beef are being marketed in these countries, and there is potential for great success,” said Hanes. “This is part of developing a sub-market inside an existing market. The market itself may not be new, but we are working to develop and grow demand for cuts that may not currently be used there.”

Hanes’ presentation was followed by “Asian Displacement Initiatives – New Cuts and Cooking Styles,” which began with Ryan Moorehouse of the Texas Beef Council discussing efforts this summer by the Southwest Barbecue Team. Organized by USMEF, this team of U.S. producers promoted U.S. beef in Japan and Korea by training chefs, restaurant owners, retail buyers and importers/distributors about “low and slow” barbecue and other American cooking traditions.

“The goal was to put a face on the U.S. producer and to build trust,” said Moorehouse. “In Japan and Korea, there is an emphasis on where there food comes from, so we wanted to educate them about U.S. beef production.”

Moorehouse said that the team emphasized that the “low and slow” concept is ideal for underutilized cuts and lower grades of U.S. beef.

Takemichi Yamashoji, USMEF marketing director in Japan, and Jihae Yang, USMEF director in Korea, followed Moorehouse with updates on the effects the Southwest Barbecue Team had in the two markets. Yamashoji told the committee that about 450 retail outlets participated in a campaign to introduce and promote American barbecue. Yang said the American style is slowly catching on in Korea, and the team’s visit helped connect Korean consumers to U.S. beef producers and chefs.

Summarizing USMEF efforts in a new market, Dan Halstrom, USMEF senior vice president for marketing, outlined the Sub-Saharan Africa initiative. Halstrom spoke of the rapidly expanding population in the region and future demand for beef and pork.

Halstrom recapped USMEF’s first seminar and buyers showcase, which was held in late September in Accra, Ghana.

“This event kind of confirmed our hypothesis about the potential of the market, and we have to plant the seed to be able to harvest success in the market in the future,” Halstrom said, adding that marketing U.S. beef and pork to restaurant and retail development in Sub-Saharan Africa is the goal. He then outlined the next steps in the region:

  • Continued trade relationship building in Ghana, Benin, Angola, Nigeria and South Africa
  • Organize a Nigerian buyer trade team to Ghana in November 2016
  • Bring an African buyer trade team to the USMEF Board of Directors Meeting and Product Showcase in St. Louis in May 2016

Trade servicing and educational programs are also helping build demand in other emerging markets, such as the former Soviet republics making up the Commonwealth of Independent States (CIS).

Yuri Barutkin, USMEF representative in the Greater Russia region, discussed the challenges of working in more than a dozen countries surrounding Russia, a large market that is closed to U.S. beef. He noted that the primary markets targeted by U.S. beef are Azerbaijan, Georgia, Kazakhstan, Moldova, Ukraine and Uzbekistan.

“It is very sad that we lost access to the Russian market, and it is very important to get back in the market,” Barutkin said. “But for now it is important that we realize there are 11 other countries in that region, which have 100 million consumers. They have very low self-sufficiency when it comes to beef, yet they love beef. So there is opportunity.”

Ross Wilson, president and CEO of the Texas Cattle Feeders Association, reported on the U.S. China Cattle Industry Development Symposium, which was held in China in October. Wilson spoke at the symposium, which was designed to explore technology and feedlot management, as well as cattle production practices in both China and the United States.

As a cattle producer, I felt this committee meeting certainly drove home the challenges we face in the international marketplace while also reinforcing the important returns our global markets deliver – even in times when exports are struggling. I am excited to see new opportunities on the horizon in 2016, but capitalizing on them will require our continued commitment and investment.

Jennifer Houston is a cattle producer from Sweetwater, Tennessee, who represents the Federation of State Beef Councils on the USMEF Executive Committee. We will have reports from USMEF’s other standing committees in upcoming editions of the Export Newsline.