Room for growth in Japanese market

Feb 12, 2010
by DTN

Japanese demand for U.S. beef continues to grow, but as the trade here can’t get enough age-verified supply, it prefers the stable availability of Australian product.

“We hear regularly from retailers and the foodservice industry that they want a larger and more consistent supply of U.S. beef,” said Susumu Harada, Meat Export Federation (MEF) Japan director for trade projects and trade communications.

Aeon operates several different supermarket chains, totaling 1,959 stores, making it the biggest retailer in the country. The company showcases its private Australian beef brand, Top Value Tasmania Beef. “As U.S. beef is not in regular supply, we purchase it only in small volumes,” said corporate communications manager Satoshi Ohtsuka.

After a December 2003 ban because of bovine spongiform encephalopathy (BSE) concerns, Japan let U.S. and Canadian beef return two years later, albeit limited to meat from cattle 20 months old and younger without specified risk materials. The product has since struggled to regain footing in an import market that had become a virtual Australian monopoly.

Nao Nakai, managing director of the Japan Food Service Association (JF) that represents 480 regular members with 8,000 stores, said he foresees purchases greatly rising if the beef age limit relaxes. Same goes for the executive director of the 30-member Japan Meat Traders Association (JMTA), an importers’ organization helmed by Tatsuo Iwama.

“Because of the 20-month age limit, there is concern over instability of supplies,” Iwama said.

Demand growth for imported beef in the next few years is difficult to forecast because it is unclear how long the current deflationary spiral, as defined by the administration of Prime Minister Yukio Hatoyama, will last and affect consumer purchasing intentions as well as government support programs for beef production and promotion, Harada said.

Imports of U.S. beef rose 28 percent from 54,109 tons in 2008 to 69,192 tons in 2009, figures from Japan’s Ministry of Finance show. But that’s barely more than a quarter of 2003’s 267,277 tons. Can the U.S. ever return to past volumes? “The key to that happening, obviously, is the expansion of access to beef from cattle over 20 months of age,” Harada said.

Beef low on DPJ agenda

Yukitake Okamura, international health affairs section chief at Japan’s Ministry of Agriculture, Forestry and Fisheries, said workinglevel talks over changing the import rules have been ongoing with the U.S. and Canada since 2007. However, observers say the Japanese political situation prevents any short-term move.

After winning last August’s national elections, the Democratic Party of Japan (DPJ) is facing many pressing issues such as the U.S. base in Futenma, Okinawa, and the financial crisis. DPJ is also striving to wrestle government control away from the bureaucrats. “Raising the beef import age is not a priority and won’t be for a long time,” said Canada Beef Export Federation Japan Director Tomoshige Sakamoto.

The maximum possible level of beef exports to Japan that the U.S. industry can aspire to is difficult to estimate based on current conditions. The majority of cattle processed in the U.S. are under 20 months of age but are not age-verified. However, Japan is a highvalue market for beef exports, which should provide an incentive, over time, for more U.S. producers to provide age verification, Harada said.

“Even if there’s no change in current policy, we would expect that the volume of age-verified cattle would increase and enable the U.S. to continue to recoup market share,” he said.

After BSE was discovered in Japan in 2001, the national government enforced testing of each beef carcass for the disease. In 2005, the government restricted testing to carcasses aged 21 months or more, with testing of younger carcasses turned over to the prefectural governments using national funds. Since 2008, testing the younger carcasses is done using only prefectural funds.

BSE testing costs the prefectures a yearly total of 30 billion yen ($335 million), Sakamoto said. “If Japan’s cattle can be scientifically proven to be safe, the DPJ may judge that the testing is a waste of money,” he said.

Japan has had 36 confirmed BSE cases, according to figures from the country’s Ministry of Health, Labor and Welfare and from the Paris-based World Animal Health Organization. Although much greater than in Canada (18) and the U.S. (two, plus one imported from Canada), the number is statistically insignificant, but people here don’t understand that, Sakamoto said.

Misinformation grips consumers

Sakamoto blames the Japanese media for misinforming the population. “In the U.S., when an issue arises, a media report soon comes out, even when it’s just a small thing,” he said. But the Japanese media either doesn’t pay attention to such things or won’t report them, so the population doesn’t know. Or, Sakamoto said, if a newspaper article does come out, it will only appear tiny on a page somewhere. “People don’t see it.

It doesn’t get on TV,” he said.

BSE fears linger because of the ignorance of the general population, Sakamoto said. When BSE appeared in Japan, all people saw on TV were images of a sick cow walking unsteadily. “That’s the only image they have of it,” Sakamoto said.

“In Canada, young cows are now given safe feed, so they don’t get BSE, but the Japanese government doesn’t explain that to the local population, so people here don’t know,” Sakamoto said.

Japanese trade people almost never talk about BSE, Sakamoto said. “When the odd person who does have worries asks, ‘Is the beef OK?’ and you answer, ‘No problem,’ they are reassured,” he said.

JMTA’s Iwama said there are still people who worry about BSE, but less than before. “If the government would explain things properly to people on a scientific basis, they would understand,” JF’s Nakai said.

MEF does not consider BSE fears as a mask to cover up a barrier to trade, as limitations on beef from the U.S. and Canada are not being offset by commensurate growth in Japanese domestic beef. “We believe it’s less a trade barrier issue and more of a need to adopt the international scientific standard,” Harada said. — Richard Smith, DTN

“We hear regularly from retailers and the foodservice industry that they want a larger and more consistent supply of U.S. beef.”