“Exports are still recovering from a slow start to the year, but the April results confirm that the U.S. industry is regaining global momentum,” says USMEF President and CEO Philip Seng. “April was really the first time this year that we saw relief from the West Coast port situation – not that shipping traffic was completely back to normal, but the worst of the congestion was clearly behind us. And despite the U.S. dollar continuing to be very strong relative to the currencies of most key customers and competitors, demand for U.S. meat is holding up well.”
From January through April, beef exports were 9% less than the previous year in total volume but were 4% ahead of last year’s record pace in terms of value at $2.12 billion.
January-April beef exports equated to 13% of total beef production and 10% for muscle cuts only – down slightly from last year. Export value per head of fed slaughter averaged $292, up 10% from a year ago.
Seng cautioned that the strong dollar leaves the U.S. industry in a vulnerable position when competitors gain tariff advantages in key markets.
“Australian beef is enjoying its second round of tariff rate reductions in Japan, and the projected slowdown in Australia’s beef production has not materialized,” Seng explains. “A similar situation may develop with regard to European pork, as the EU and Japan have pledged to complete their trade agreement negotiations by the end of this year. There are a number of FTA negotiations that bear watching, because they have the potential to further shake up the competitive landscape.”
Despite bans or restrictions in most markets for U.S. poultry—due to avian influenza—Derrell Peel, Oklahoma State University Extension livestock marketing specialist, explains in his weekly comments that broiler exports in April were fractionally higher, although down 8.4% for the year to date.
“Most importantly among broiler export markets is Mexico, which was up 1.5% year- over-year in April and is up 4.8% for the year to date,” Peel says.
As for worries about lower pork and poultry prices dampening domestic beef demand, Glynn Tonsor, agricultural economist at Kansas State University, suggests, “…the magnitude of substitution from beef to competing meat products may well be declining over time.”
In a recent issue of In the Cattle Markets, Tonsor explains, “When one observes the increased prevalence of dual-income households, adjustments in food-away-from home consumption, etc. over the past couple of decades, a strong argument can be made that significant change in meat purchasing patterns has occurred, leading U.S. consumers to be less sensitive to relative prices of competing meats than they used to be.”
Tonsor considers two prominent meat demand studies from the mid 1990s that included demand data for 1970-1993 and 1976-1993, respectively. These support the common notion that increased supplies of cheaper pork and poultry serve as substitutes for more expensive beef.
However, Tonsor also considers two more recent studies accounting for demand data for 1982-2007 and 1982-2008. He explains these found no statistical evidence that cheaper pork and poultry serve as substitutes for more expensive beef. In other words, consumer meat purchasing patterns are evolving.
“While there will always be an economically relevant impact of developments in the pork and poultry industry on the beef industry, there is no reason to believe those impacts must be the same as they were in the past,” Tonsor says. “Similarly, it is not written in stone that future impacts across industries will resemble those observed today. All industry stakeholders are encouraged to recognize these broader changes and implications.”
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