Cattle Economics

Beef Exports Up 26%, A 39% Increase In Value

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“There’s one way for our country to get out of this economic recession. We have to export our way to prosperity. Do you think China became an economic powerhouse by selling to its own people? They exported. They exported their way out of poverty.”

John Bellinger, CEO of Food Safety Net and Agri-West International, made that statement at the U.S. Meat Export Federation’s (USMEF) 35th annual Strategic Planning Conference in November. He was talking about the importance of U.S. exports to the U.S. meat industries and to the economy overall.

Logic suggests exports are the only reasonable avenue the U.S. beef business has to expand beyond cow inventory ebbs and flows that simply maintain beef production in the same ballpark as it has been in for the last three decades or so.

You’ve likely heard this version of the numbers: There were 46.9 million beef cows in this country at the beginning of 1975; there were 31.4 million head at the beginning of this year. Since 1980, beef production has been basically flat, while total U.S. red meat and broiler production has increased significantly.

On the other side of the equation, there were 309 million people living in this country in 2010. There were about 226 million in 1980. So, while the U.S. population grew 37%, neither the 83 million new arrivals at the supper table nor those already there seem to want much more beef at any price. Thus, beef industry contraction continues.

Conversely, the 7 billionth person joined the world’s population in October. Even as poverty continues as a blight on society here and abroad, the fact is folks in other countries are amassing more jingle than ever before.

An agricultural lender told me recently that one of his bank’s clients is a Chinese business that buys raw material in the U.S., then ships it back to China for manufacture. This Chinese business plans to build a manufacturing plant in the U.S. because the cost of labor is more competitive. Imagine that.

Even considering tight global beef supplies and the anemic value of the U.S. dollar, the volume and value of U.S. beef exports this year and last is extraordinary. When you consider the world was and is still trying to shrug off the Great Recession during that same period of time, the level of U.S. beef exports is mind-boggling.

Through August, according to USMEF, U.S. beef exports were up 26% for the year and were 39% higher in value ($3.8 billion). That amounted to $200.75/head of U.S. fed slaughter.

Last year, the U.S. exported 1,067 million tons of beef at a record value of $4.8 billion. That was more than $1 billion more than in 2009. That beef-export value equated to $153.09/head slaughtered last year, which was 22% more than in 2009.

Despite all this, some folks still question the value of exports. A common myopic mantra is that since the U.S. imports beef, producers in this country still aren’t sating the appetite of domestic consumers. Thus, goes the circular logic, there’s no reason to export beef that could be consumed in this country.

Such inept reasoning is a crock of hooey, of course. The fact is that domestic beef demand has been maintained at a higher level than it could have been otherwise because of imports.

You don’t have to like beef packers to recognize they’re the customers. At the same USMEF strategy session, Bill Rupp, president of JBS USA’s beef division, explained, “When you look at some of the products that we export, you see a price volatility in some cases. But there’s a constant return over what we could expect if we had to ‘disappear’ these products into a domestic market. Clearly today, we’re not in business without strong international growth.”

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Wes Ishmael provides tightly focused analysis and commentary on specific beef quality and marketing issues of practical importance to beef producers.

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Wes Ishmael

Among the industry’s most insightful thinkers, Wes Ishmael concentrates on industry price and market perspectives for BEEF magazine. Along with his monthly “Cattle Economics” column...

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