Skeptical about the value that beef exports bring to your ranch? No need, says Will Sawyer, CoBank’s protein economist. While it won’t show up as a line item on the check stub when you sell your calves, the value is clearly there, he says.
Sawyer and I sat down for a chat during the Cattle Industry Convention in New Orleans to discuss his recent report on beef exports, and what he told me reaffirms what I’ve always believed—international trade is good for everybody. Keep in mind, however, that global trade is a two-way proposition.
Sawyer says many producers are familiar with the estimates of the value that exports add to a fed steer. Last spring, BEEF columnist Nevil Speer put that value at $325 per head. I suspect it’s greater now. That value allows feedyards to stay competitive in the calf and feeder market.
“To me, what’s really important is what does it mean to the domestic [cattle] market, to domestic consumption that we’re asking the U.S. consumer to eat?” Sawyer says. “Let’s take beef as an example. Beef production has grown year after year for the last three or four years. Prices have been relatively good and producer margins have been strong as well,” he says.
“Why is that? Well, one of the things we’ve asked the beef consumer in the U.S. to do [in 2018] is not a whole lot different than what we asked them to do a few years ago,” he explains. “Because exports have been so strong, that additional production has been able to find its way into Korea, into Japan, into Mexico. So it’s kept the domestic [cattle] price relatively strong.”
Indeed it has. But 2019 will be another year of bigger production for all three proteins—beef, pork and poultry. During the CattleFax outlook session at the convention, Kevin Good said he expects cattle prices to remain strong, but a larger supply of cattle outside feedyards coupled with limited profitability in the feeding sector will hinder demand and pressure feeder cattle prices this year.
“We’ve been on one heck of a good run for a few years and I expect that to continue into 2019. However, we expect to see margins begin to compress and leverage shift from the cow-calf and stocker sectors to the feeder as we expand the supply of cattle,” he told beef producers.
Clearly, beef exports aren’t the only positive in cattle prices the last few years. But clearly, exports played a big part and it’s something we have some influence over. That’s why we need to keep pushing for more export opportunities.
During the session, CattleFax CEO Randy Blach noted the importance of international trade. “Long-term, the profitability of our industry is tied to trade,” he said. “We must have open markets and science-based trade standards for our products if we’re going to continue the run of profitability we’ve experienced in recent years.”
The messages from CoBank and CattleFax are the same—international markets matter. Sawyer looked at the export situation with our major global competitor for beef, Australia, as well as Canada for pork.
“What we realized is those internationally-focused markets have a better risk-to-reward proposition for their producers. They have slightly more volatile prices but their prices have risen year after year more than ours have.”
Australia and Canada have far fewer people to feed than the U.S., so it makes sense that they need to depend on export markets more than we do. But U.S. grain-fed beef is the worldwide standard for quality and countries worldwide are willing to pay a premium for it.
“So that to me says exports are a good proposition for us, something we should look at as a positive as we continue to produce more,” Sawyer says.