On Jan. 28, U.S. Trade Representative Ron Kirk and USDA Secretary Tom Vilsack announced that the U.S. and Japan had agreed to terms that will allow expanded access for U.S. beef. The changes, which took effect Feb. 1, will allow Japan to import beef from U.S. cattle up to 30 months of age, compared to the previous age limit of 20 months.

Prior to the first BSE case in December 2003, Japan was the leading market for U.S. beef exports. Export value to Japan peaked in 2000 at $1.7 billion and totaled $1.3 billion in 2003 before the market closure. Limited trade resumed in 2005, and the U.S. industry has made progress in rebuilding demand for U.S. beef.

Through November of last year, Japan was the No. 2 market for U.S. beef exports in terms of value ($970 million), and No. 3 in volume (143,900 mt). To bring the market back to its full potential, however, expanding the pool of eligible U.S. cattle was absolutely critical.

“This is an extremely positive development that successfully addresses one of the longest standing issues between our two governments,” says Philip Seng, U.S. Meat Export Federation (USMEF) president and CEO. “Every sector of the U.S. beef industry will benefit from increased exports to this premium market.”

Seng explains that Japanese consumers will reap the benefits as well, as many of Japan’s foodservice and retail outlets are anxious to offer an expanded range of U.S. beef products.

“More and more consumers in Japan have a favorable perception of U.S. beef, and that trend will continue as we are able to make a broader range of high-quality, affordable products available to them,” he says.

USMEF Economist Erin Borror projects that with expanded access to Japan, exports could increase by as much as 45% in the coming year – reaching 225,000 mt, valued at about $1.5 billion. This increase would equate to about an additional $20/head of fed slaughter (in 2012, total export value equated to a record $215/head).

Another Perspective: Recovering Japan Market Will Take Time

These healthy growth projections illustrate how much of an obstacle the 20-month cattle age limit has been for the U.S. industry. With most U.S. calves being born in the traditional spring calving season and a smaller crop born in the fall, maintaining a market-ready supply of fed cattle that qualified under the 20-months-or-younger restriction proved difficult. Borror says this void was especially problematic through the late fall and winter months.

“This time of year we have some fall-calving cattle that are clearly young enough for Japan,” she explains. “But for spring calves that were backgrounded longer, most would not meet the 20-month eligibility requirement. This increase in the age limit really helps with the seasonality issue and will make it easier to provide a reliable year-round supply. That was not only a problem for U.S. producers but for customers in Japan as well, some of whom were reluctant to feature U.S. beef for this reason.”

BEEF Poll: Will The U.S. Recover The Lost Japan Market?

Borror expects the U.S. share of Japan’s imported beef market (about 26% in 2012) to increase quickly, eventually climbing above 50% as the U.S. reclaims its position as Japan’s No. 1 beef supplier. Australia is currently Japan’s leading supplier with nearly 60% market share, but a decline is expected in the coming months – especially for Australia’s grain-fed exports – due to increased competition from U.S. beef. The strong Australian dollar is also expected to be a headwind, as its recent appreciation against the yen has been even more dramatic than that of the U.S. dollar.

Seng is confident that a more reliable supply of U.S. beef will not only recapture more of Japan’s existing demand, but will also help grow Japan’s overall beef consumption – which never fully recovered after U.S. beef exited the market in December 2003.

“When compared to the peak reached prior to BSE, the total beef market in Japan is down about 250,000 mt,” he says. “This is tonnage that was never made up by our competitors in the market – not by Australia, New Zealand or any other beef supplier. We see this as a void that can still be filled, so the prospects for U.S. beef in Japan are very encouraging and this is a very exciting development for our cattle producers.”