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Global trade

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Apr 7, 2017

Pete Crow

Trade has been the talk of the past few weeks, especially meat trade out of Brazil. It appears that Brazil has some image problems to straighten out after their inspection fiasco. Many countries have banned meat products from Brazil—the world’s largest meat exporter—but many of their larger customers like China and South Korea have resumed meat trade with them. It’s kind of remarkable that this inspection episode hasn’t cost them more.

Brazilian government data showed that meat trade was down but not that much. Beef export sales dropped 11.3 percent, chicken fell 6.8 percent and pork was only down 3.4 percent. A ministry official said, “After a brief scare in the fourth week of March, when there was a drop in average daily meat exports, shipments have normalized.”

Seems Brazil may have dodged a bullet on maintaining their markets. However, the European Union is still holding out. One EU health official said Brazil needs independent controls over its meat industry and that increased European checks on Brazilian meat exports would not be removed soon.

One would think that global meat traders would be trying to find alternative sources for meat, especially here in the United States. I called the U.S.

Meat Export Federation (USMEF) to find out if there has been any overseas inquiry to establish new supplies; they said it was too soon to tell. I was told that the U.S. and Brazil don’t often have the same trading partners so there is little competition.

The meat industry is hoping for big things from the summit meeting between President Donald Trump and Chinese President Xi Jinping. I’m sure the first thing they talk about is North Korea, but all the major meat organizations are hoping that there is serious talk about trade, and specifically beef. I’m pretty sure that they will dine on premium grain-fed beef. But we have to get moving to expanded meat trade.

China promised to open their markets to U.S.

beef last fall, but it’s been a slow process getting the governments together to figure out what the export specs will be. Traceability will be one of the major obstacles to accessing the Chinese markets. The USMEF demonstrated a tracking system last September for a Chinese delegation visiting feedlots and slaughter plants. Sources close to the negotiations tell me they are optimistic that we will have trade with China by the end of the year.

It would be great if it could come sooner. Cattle numbers will start building and feedlots will be placing lots of cattle that should be ready for slaughter in late summer and fall, just as we always do. These export markets will become more vital. They have performed very well to date and I would expect that we will feel some benefits from Brazil’s problems somewhere in the meat business, and it may be poultry that gets the boost.

John Nalivka of Sterling Marketing spoke at the North American Meat Institute’s Meat Industry Summit last week and said that exports are going to be crucial as the U.S. beef and pork industries continue to expand production in an era in which, unlike drought-ridden 2014, the industry is dealing with demand risk rather than supply risk. “The only way the industry is going to remain profitable and have any support on the price side is going to be exports,” he said.

February exports accounted for 12.6 percent of total beef production and 10.1 percent for muscle cuts only, which was steady with last year. January-February ratios were also fairly steady at 12.4 percent and 9.8 percent, respectively. Export value per head of fed slaughter averaged $276.96 in February, up 13 percent from a year ago, while the January-February average was up 10 percent to $266.34 per head.

“With trade deficits being a hot topic of conversation, especially with countries such as Mexico, China and Japan, it’s important to highlight the sectors in which U.S. products are competitive throughout the world and exports are thriving,” said USMEF President and CEO Philip Seng. “The red meat sector is certainly in that category, as exports have helped fuel growth in the U.S. industry and, in turn, larger U.S. production has opened further export opportunities and generated positive returns for the entire supply chain.” — PETE CROW

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