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Report: Beef industry growth to rest more and more on exports

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New insight highlights value of international beef trade on U.S. beef sector.

A new trade report analyzing the effects of beef imports and exports highlights the strong economic value of the U.S. beef industry’s participation in a global marketplace.

The report, “Assessing Economic Impact That Would Follow Loss of U.S. Beef Exports and Imports,” was authored by Derrell Peel, Oklahoma State University Extension livestock marketing specialist, and Glynn Tonsor, professor of agricultural economics at Kansas State University.

Commissioned by the Kansas Beef Council, Oklahoma Beef Council and Texas Beef Council, Peel and Tonsor spent six months preparing the 80-page document that was recently released.

Peel said he has fielded questions his entire career concerning beef imports, and many people are not aware of the value of exports, believing more than enough beef is grown in the U.S. to sustain its population. His findings prove otherwise.

“One of the main points that came out of this report is the recognition that while producers produce cattle as a single product, what they sell becomes thousands of different products,” he said. “The marketplace plays a big role in sorting out where the best value is for all those products that ultimately contribute to the overall value of cattle.”

When opportunities are available, the U.S. exports specific products to certain markets, and the vast range of different beef commodities helps the industry grow.

“Beef exports and imports combine to provide opportunities to increase value to the U.S. industry by exporting products that have more value in foreign markets and importing products that can be sourced more economically in international markets,” the report highlighted.

Peel explained that the U.S. is “a relatively mature market” in terms of beef demand, adding that there is a lot more potential in the global market. “Potential growth in the industry is going to rest more and more with the trade sector, and we highlight the fact that the marketplace has grown a lot in the last 20 to 30 years,” he said.

Peel and Tonsor’s research shows that a 10% reduction in beef imports and exports over a 10-year period would result in a $20 billion impact to cattle producers. A full 100% loss scenario would have a catastrophic impact, the report suggested, with an estimated loss of $129 billion for feeder cattle sellers and $68 billion for fed cattle sellers.

“Bottom line, there would be huge economic losses if we did not trade, and the beef industry would be much smaller,” Peel said.

Ground beef driver of imports

Peel and Tonsor analyzed the sources and composition of beef imports to explore the role beef imports play in the U.S. beef industry. What they found was that ground beef is the main driver of beef imports due to the tremendous hamburger demand in the U.S. 

On average, ground beef represented approximately 31% of total beef production over the five-year period of 2016-2020. Of the 8.1 billion pounds of ground beef, roughly 24% of this is imported beef.  

“Without the imported beef, there simply would not be enough lean beef to utilize all the fed trimmings produced in the U.S. for ground beef,” the report noted, adding that this would lead to one of several outcomes.

One possibility, Tonsor and Peel said, would be to simply reduce the amount of ground beef produced, with excess fed trimmings rendered in the tallow market at much lower values. “This would result in sharply higher ground beef prices and a significant reduction in ground beef volumes.”

A second possibility would be to simply grind higher percentages of fed carcasses for lean to balance with fed trimmings. While enough round products might be available to meet the ground beef lean requirements, Peel and Tonsor said this would cause enormous upheaval in other beef markets that currently utilize those products. 

“Round and other beef cuts are not ground today because they have higher value in other uses. Using these products for grinding would lower the overall value to the industry.”

Another scenario would be to raise some proportion of steers and heifers as nonfed beef (think Australian range beef) to produce more lean meat comparable to cow and bull meat. These animals also have more value in the current system to be produced as feedlot finished animals, they explained.

Overall, however, beef imports allow the U.S. beef industry to expand total beef production and add value by utilizing fed trim most efficiently, Peel and Tonsor stated. “Beef imports are simply a part of vastly complex set of markets that make up the beef industry.”

For more insight, the full report is available here.

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