Japanese consumers buying lower-priced cuts of meat

Feb 27, 2009
by DTN

Japanese consumers have shifted their buying habits to lower-priced cuts of meat and U.S. beef exporters can take advantage of that move, but must overcome an unfavorable exchange rate hurdle.

Still, the beef exporters will have to accept a partial consumer shift to other protein sources as well, market observers say. “Purchases have shifted from pork to chicken, which are more moderately priced than beef,” said Masaharu Watanabe, head of public relations and consumer affairs for the Japan Chain Stores Association (JCSA).

The JCSA represents 72 companies with a total of 8,827 outlets. Seafood remains the preferred protein source though, said Japan’s deputy regional manager for Meat and Livestock Australia. “It is my view that seafood will more than likely remain a close competitor to beef over and above pork and chicken, as has been the tradition,” Travers Nicholas said. And when they do buy beef, Japanese consumers go for less expensive cuts. “For example, people are buying more briskets and chuck rolls, while cube rolls and strip loins have become harder to move,” said John Hundleby, Japan representative for Meat and Wool New Zealand.

The U.S. beef industry is well-positioned to take advantage of the trend, points out the Meat Export Federation’s (MEF) Japan director.

“U.S. chuck roll and short plates have traditionally been high-demand items in Japan, and we expect that to continue,” Greg Hanes said. To increase volumes of exports, hampered by Japan’s anti-BSE rules restricting U.S. product to meat from cattle aged 20 months or less, MEF has in the last few years promoted 17 “underutilized” cuts in addition to the four or five traditional highdemand cuts. “Although we estimate that almost 28 percent of beef exports to Japan are now made of these underutilized cuts, such as briskets and clod, the shift to lower-priced cuts may actually help this strategy to bring in a wide range of these cuts from the cattle that are age-verified for Japan,” Hanes said. Another strategy MEF adopted this year to counterbalance the age-limit volume restriction is to promote the usage of “Select” grade and “Ungraded” U.S. beef. “The shift to lower-priced cuts may actually help this strategy to move more beef from the ‘Japan verified’ animals that didn’t grade ‘Choice,’” Hanes said.

Any decrease in consumption does not emerge in MEF’s statistics. Exports to Japan in December 2008 amounted to 3,946 tons, 30 percent more than the previous December’s 3,028 tons. Overall, exports rose 55 percent last year compared to 2007, from 44,718 to 69,274 tons. The question then is: How does U.S. beef stand next to its competitors? The largest impact will probably be felt by Japan’s Wagyu beef, the highest end of the price range, observers say. “The inventory of frozen Wagyu continues to grow, which is hurting the domestic Wagyu producers as demand for their product drops,” Hanes said. U.S. corn-fed beef is relatively well positioned as being high-quality but reasonably priced compared to domestic beef, Hanes said.

“The strong yen is also making U.S. beef, as well as other imported beef, more cost-competitive,” he said. However, among the four main beef countries exporting to Japan, the U.S. is the foreign exchange rate “loser.” In the year following New Year 2008, the U.S. dollar went down only 18 percent, from 110 to 90 yen. During the same period, the Australian dollar fell 36 percent from 98 to 63 yen, the Canadian dollar 35 percent from 114 to 74 yen, and the New Zealand dollar 40 percent from 87 to 52 yen. Australia, with large export volumes and a much lower dollar, stands, therefore, in a more competitive position. “We can see a trend towards purchases of lowerpriced Australian beef,” said Shoji Nomura, Japan marketing manager for the Canada Beef Export Federation. — DTN