Global beef

Jan 4, 2014

It’s going to be an interesting year for the beef import/ export business. USDA has forecasted that beef production will be down somewhere around 6 percent to 7 percent this year and that our beef exports will be down 6 percent. Beef production for 2013 finished out at 25.1 billion pounds, just 1.4 percent below last year. And we did it processing 31.7 million head of cattle, 2 percent fewer cattle than a year ago. Clearly we produced more with less.

Most of the beef producing countries around the world are producing less beef than ever, mostly due to weather related issues. We have the lowest global cattle supplies in history, which ought to please the climate change crowd. But in the wake of a growing global economy and new wealth around the world, consumers have developed a taste for beef.

Currently about 15 percent of U.S. beef production is exported and many of the products exported are variety meats. But the point is that we’re barely producing enough beef to supply domestic demand. And we love our ground beef and hamburgers.

The U.S. is looking at the smallest beef supplies ever and a growing economy will certainly fuel beef demand. We need more beef, and especially lean beef, to mix with U.S. trim to supply ground beef for all those hamburgers. Where is it going to come from? Brazil. It may not be right around the corner, but USDA brought them one step closer.

Last week the USDA announced in the Federal Register that they would amend regulations allowing fresh beef imports to the U.S. from specific states in Brazil. That news is sure to raise some hackles among cattlemen. Brazil has been battling a chronic problem with foot and mouth disease. They have implemented a strict vaccination program but still have problems with the disease in some regions. Is there a bona fide threat of the U.S. getting FMD by importing fresh manufacturing beef?

There is always a threat from FMD, but the U.S., Canada and Mexico have all been diligent in keeping the disease out of the North American cattle industry. The last time we saw the effects of FMD in the U.S. was 1926, and the episode is still fresh in many cattlemen’s minds.

This announcement came at a strange time. USDA has been sitting on a regionalized import plan for Brazil for years that they designed just for them. Brazil has wanted to access the U.S. market for years, but chronic FMD incidents have kept things at bay. The last case of FMD in Brazil was in 2006.

This episode with Brazilian beef and FMD has more to do right now with politics than securing more beef for consumers. Relationships with Brazil have been on thin ice for the past few years, but became worse in the past few months. The National Security Agency who has been listening in on phone calls was recently caught listening in on Brazilian President Dilma Rousseff’s cell phone calls. This created a political situation where the Obama administration had to be politically expedient and give Brazil something they wanted, which is access to the U.S. beef markets. We also had a trade dispute with Brazil over cotton subsidies. In 2009, the World Trade Organization, in a rare move, allowed Brazil to take cross-retaliatory measures worth $830 million in response to U.S. subsidies to American cotton producers, ruling they were discriminatory. That episode has been costing American taxpayers $147 million a month. Cotton subsidies are expected to be reckoned with in the new farm bill, which is expected to be finished this month. As you can see, politics trumps industry.

Will importing beef from Brazil create a threat of FMD for the U.S beef industry? That’s hard to say. USDA says they have done diligence on the risk and that there is little at stake. The regional plan is exactly how Uruguay has been selling us fresh beef over the past five years. Argentina attempted to implement the regional plan but botched it up. Will Brazil be capable of operating within the plan without incident? We’ll have to wait and see, because I think this is a done deal. You do have the opportunity to comment on the regulations. The comment period ends on Feb. 22.

Incidentally, the U.S. has a regional FMD plan, just in case we do contract FMD. But I like the idea of being disease-free better. — PETE CROW