Will U.S. beef rise to export opportunities?

Markets
Feb 3, 2014
art9541

—International beef competitors are aggressive, consumer focused

Like it or not, the world is getting smaller every day.

Not literally, of course, but the global market is connecting people across the globe in ways that make the proverbial flap of a butterfly wing in one part of the world cause a hurricane somewhere else. At least as far as the market goes, anyway.

Global trade in food (consumable crop products, as measured by the World Agricultural Supply and Demand Estimates report, WASDE) has been keeping a steady pace throughout the last few decades. As of the most recent WASDE report, export of commodity crops around the world was 15.2 percent of total global production. In 1984, that number was 14.8 percent, in 1994 it was 14.2 percent, and in 2004 it was 14.1 percent.

Though the global export of crop products has stayed mostly steady and inched up a bit in recent years, global trade in meat is growing as the incomes and appetites of the world increase.

“In recent years, the U.S. meat industry has become increasingly dependent on exports as a source of growth,” pointed out Steve Meyer and Len Steiner of the CME Daily Livestock Report. And so it is.

According to 10-year beef export data (2003-2012, most recent complete) from the U.S. Meat Export Federation (USMEF) compared to the corresponding years of WASDE total beef production data, the amount of U.S. beef and beef products that are exported has grown following the 2003 BSE scare, as can be seen in Table 1. In 2011, U.S. beef finally regained the export level it had had prior to the BSE scare; a little over 10 percent of total product exported. Table 2 shows the value of those exports to the U.S. economy.

Given the growth of the global middle class and the increasing demand for proteins, particularly beef and pork, in developing or recently developed nations, opportunity exists for increased U.S. beef exports.

The question is: can the U.S. beef industry rise to that opportunity?

“Are we prepared to compete to meet the international customer demands?” asked USMEF CEO Philip Seng at the International Livestock Congress, held in Denver, CO, in January.

While other speakers at the event focused their presentations on the topic of looking forward to the future of the U.S. beef industry within the country’s borders, Seng urged the audience to think globally.

“Ninety-six percent of the world’s population is outside the U.S. and 80 percent of the world’s buying power today is outside the U.S.,” he said poignantly.

Competition

This level of opportunity doesn’t go unnoticed and the U.S. is not the only producer of high quality beef in the world. The U.S. beef industry has competition and in many ways those competitors are leaving the U.S. in the dust in terms of export and providing a product international consumers demand.

“The competition that we have in the international market place is formidable,” warned Seng. “They are very sophisticated. They use every tactic, every strategy, every means they can possibly muster to compete and to garner their fair share of what they call the international markets that are growing.”

Seng outlined the three-pronged direction of U.S. beef’s stiffest competition; Oceania (Australia and New Zealand), U.S.’ neighbors (Canada and Mexico), and the EU.

“Australia, naturally, is an island,” began Seng as he described the strategies of one of U.S. beef’s biggest competitors. “It has no land borders, and they know how to use this very much to their advantage.”

“You’re not only fumigated before you get off the airplane, you can’t bring an apple in there, you can’t bring U.S. beef in there. They really underscore the safety and the fact food security is extremely important,” described Seng of Australia’s biosecurity measures. New Zealand has similarly stringent biosecurity rules.

Seng explained that both countries have created a “brand” out of the safety of their beef, an effort that sells well in Asian countries where food safety is large in the public consciousness. Also in this effort, both Australia and New Zealand promote their extensive animal traceability systems.

“Traceability is something that they have really extolled. They’ve talked about the traceability that you can trust.”

Canada and Mexico have similarly worked aggressively to build national “brands” in the minds of international beef consumers. Canadian “branding”— while also literal—has abstract element. Like New Zealand, Canadian beef marketers are selling beef to international customers on the back of the qualities of the country, particularly highlighting things like the natural state of Canada.

Mexico’s branding is a far more literal sense, as in the creation and support of actual beef brands like SuKarne.

“They don’t have the traceability that Australia has or Europe has or some of these other countries have, but they’ve really started to extol the Mexican brands and they highlight the fact they have traceability through the brands.” said Seng of Mexican beef.

“This is something, when we talk about trends going forward—brands, the integrity of brands, the intrinsic value of brands—these are things we’re starting to see more and more advertised by our worthy competition.”

Though Seng gave examples of the countries’ advertising campaigns, for the Mexican efforts in Japan he specifically drew attention to their choice of words. In their advertising for the Japanese market, Mexican beef marketers use the Japanese words for “safe” and “anxiety-free” which carry significant cultural importance for Japanese consumers and are often used in their domestic food marketing.

Finally, Seng described the late-comer to the party of international beef trade, the EU.

“Now with the OIE [World Organization for Animal Health] and with the classifications of ‘negligible risk’ and ‘controlled risk’ in these countries, and the fact many people understand what these classifications mean in these countries due to the familiarity of dealing with BSE in these countries, we’re starting to see the Irish, we’re starting to see the French, we’re seeing the Dutch, we’re seeing the Poles, we’re seeing other countries that are now applying and have also been approved to sell their products in Japan. We’re starting to see a very aggressive push by a lot of European markets in the Asian theatre. Not only in Japan and Korea, but also in China.”

Seng pointed out that while the EU is relatively new to beef trade with Asia, they are tackling the effort with enthusiasm and gusto. He reported that the EU is effectively taking notes on the Trans-Pacific Partnership with an eye to create a similar economic partnership with Asian countries, and have said they will triple spending for the promotion of EU products internationally.

“So what we see from the Europeans is a very aggressive effort to become export-driven, export-oriented, especially in the beef and pork area.”

U.S. vs. the World

“It’s no accident that all of these countries I’ve talked about are focusing on Asia in a very big way,” said Seng. “They’re laying down the bricks. They’re putting down the stakes. Because this is where the growth is going to be, this is where the major battle is going to be.”

The problem for U.S. beef, however, is that the competition has some decided advantages.

“Our competition is very export focused. The domestic market in many of these countries is the residual market. Maybe a little different in Mexico, but Australia exports over 60 percent of their production.

New Zealand exports over 80 percent of their production.”

By comparison, the U.S.

often focuses exclusively on the domestic market which consumes the vast majority of its beef production as can be seen in Table 1. Seng described the U.S. attention to the international beef market “almost an afterthought.” He also pointed out that major U.S. companies are intensely internationally-focused, saying that the business plans of every major American company trading internationally puts the international market at least on par with the domestic market, if not above par.

“So when it comes to standards, specifications, whatever you want to have, they are very adaptable,” he said of the U.S.’ beef competition. “They will meet the specs of whatever country they’re dealing in and this is a huge advantage.”

Ongoing conflicts with China, South Korea, and Japan to a lesser extent over growth promotants such as hormones and beta agonists are a good example of some of the areas where U.S. beef is not meeting the demands of the growing Asian beef consumer base. Regardless of how much sound science exists to substantiate the safety of beef produced with such products, if potential international customers don’t want it, and other beef producers are willing to produce beef without it, those customers will continue to favor the competition.

Speaking mainly about tech-savvy consumers in the growing Asian middle class—be they in China, Japan, or South Korea— Seng stressed the need for American beef producers to understand international customers.

“We’re very producer driven,” he said of the U.S. beef industry. “But my question is: are we checking where we’re driving?” — Kerry Halladay, WLJ Editor

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