Just as the U.S. beef industry was slogging its way out of the BSE mire, the current global economic calamity reminds us again how important the global picture is to our beef businesses.

“We've had financial crises before, but this is different in that it's a true global issue,” says Deborah Perkins, Rabobank International's executive director of food and agribusiness research. “Even though food is less of a discretionary item, it's still affected in a recession.” She adds that another factor affecting beef demand very soon could very well be food price inflation.

Looming inflation in a sluggish global economy combined with a strong U.S. dollar points to a tough environment for U.S. beef in foreign markets.

“The weakness of the U.S. dollar assisted U.S. export growth up until mid-2008,” Perkins explains. “Exporters in the U.S. must now deal with a stronger dollar.”

She says it's important to remember that small ripples in international currency markets can create large waves in commodity markets.

Though Mexico and Canada have held their positions as the top two destinations for U.S. beef, slumping currencies in both Mexico and Canada have been affecting U.S. beef exports to those two markets.

“It's a tough marketing environment for U.S. beef right now, both globally and domestically,” agrees Phil Seng, president and CEO of the U.S. Meat Export Federation (USMEF). “We currently have some high-end cuts to offer at very competitive prices, and we're also encouraged to see the currencies of some of our key trading partners beginning to stabilize. That will also help make U.S. beef more affordable overseas.”

Despite continued economic uncertainty in key markets, Seng reiterates USMEF's commitment to growing the reach of high-quality U.S. middle meats globally.

On a value basis, in 2008 the U.S. returned to being a net cattle/beef exporter, a situation that hadn't occurred since the discovery of BSE in 2003. The combined value of U.S. beef, cattle and product imports declined from 2007 mostly due to a decline in the value of beef and veal imports, says Jim Robb of the Denver-based Livestock Marketing Information Center (LMIC).

Outlook for Asia

Taiwan was among the first countries to reopen U.S. beef imports, but market-access restrictions for U.S. beef are plaguing exporters. Taiwan prohibits all bone-in cuts and variety meats — and allows only cuts from cattle 30 months of age or less.

“Taiwan has been very important to us, especially in the wake of BSE, because it was one of the first markets in Asia to open up in a meaningful way,” explains Seng. “But because we can only sell boneless beef less than 30 months of age, we're working on chilled middle-meat promotions. The real volume for our products, though, would be the short ribs and other bone-in cuts.”

While consumers in some global markets are “trading down” in terms of the U.S. beef cuts they're purchasing, Seng notes that customers in Taiwan aren't as well-positioned to do that because of the market-access limitations.

Increased beef exports to South Korea and Vietnam helped overcome declines in the beef industry's leading markets of Mexico and Canada. This places Korea third among all destinations for U.S. beef in both volume and value.

Vietnam ranks fourth in volume and fifth in value for U.S. beef.

Japan continues its steady rise as a destination for U.S. beef exports. The current trade-access agreement with Japan requires U.S. beef imports to be from cattle 20 months of age or younger.

“With a favorable exchange rate for U.S. beef exports to Japan, the big challenge for the new team at USDA will be to get this market back to product less than 30 months of age,” says Chuck Lambert, former USDA deputy under secretary for marketing and regulatory programs.

Notably, the South Korean government said last month it will take “active measures” on a Canadian government request for World Trade Organization (WTO) review of South Korea's ban on Canadian beef imports. South Korea has been putting a ban on Canadian beef imports since May 2003 when Canada confirmed its first BSE case.

The Canadian government claims a wide range of scientific evidence supporting the safety of Canadian beef and cattle.

European situation

The outlook for U.S. beef exports to the European Union (EU) continues to brighten as the continent's beef production declines. The U.S. is currently limited to supplying beef from non hormone-treated cattle (NHTC) processed at six EU-approved facilities.

In an agreement related to the long-standing trade dispute over use of growth promotants in cattle, the EU announced last month it will increase the annual 11,500 metric tons (MT) tariff-rate quota of U.S. beef imports. And, after three years it will allow a total of 45,000 MT/year at zero duty.

Next Page: Latin America