Though there's no official word yet, numerous reports during the past month suggest Japan is getting closer to raising the age limit on beef imported from the U.S. to 30 months and younger. The current requirement is 20 months and younger.
In the Nov. 7 In the Cattle Markets newsletter, Glynn Tonsor, Kansas State University ag economist, discussed the implications of the increased age limit on current premiums paid for source and age verification required to make beef eligible for export to Japan.
"As overall demand for U.S. beef expands, the value of all U.S. cattle rises," Tonsor explains. "Thus, even producers of beef 'ineligible' for export to Japan are benefactors. Some individual producers already active in SAV (source and age verification) programs with comparatively lower participation costs may lose from the change in age restrictions. However, even if SAV dollars per head premiums notably decline, the industry as a whole benefits from increased overall revenue of expanding markets. Recognition and appreciation of related implications of operating in a global marketplace is critical for industry stakeholders not only in discussions regarding age restrictions but a multitude of other issues facing the industry," he says.
Tonsor also discussed some of the specific wonderments if Japan broadens eligibility for U.S. beef imports.
"First, the timing of when new age limits may be implemented is uncertain with several reports suggesting the middle of 2012 is likely," Tonsor says. "The reduced U.S. fed cattle supplies that are expected at that time may present limitations on the extent to which exports to Japan can instantly be expanded. Moreover, this would continue the trend of displacing domestic consumption with expanded exports which, while certainly beneficial to the industry, will supplement already heightened 'high food price' discussions."
Moreover, Tonsor points out the methods of age verification ultimately deemed acceptable under an expanded age rule will play a role in how quickly U.S. beef exports to Japan could expand.
As for the premiums currently and periodically available for Japan-eligible beef, Tonsor says, "The impact on premiums for cattle enrolled in third party-administered SAV programs is likely dynamic. If an alternative form of age verification became accepted, premiums for SAV eligible cattle would probably decline. Conversely, if SAV enrollment remains the prevalent method of supplying beef eligible for export to Japan, SAV premiums likely would expand initially given the limited supply of eligible cattle. However, over a longer period, SAV premiums on a dollars per head basis would likely fall as additional cattle would be enrolled."