Asian financial crisis leaves U.S. beef exporters wary and pursuing other markets.
Wall Street sentiment is that the Asian financial crisis is moving into recovery. But that sentiment alone likely won't help increase U.S. beef exports to that region in 1998. The fallout from the crisis has consumers in South Korea and Indonesia, both major beef buying countries, facing double-digit inflation this year. Japan, still concerned with its food safety scare, has its own persistent economic woes as well.
Nonetheless, major beef exporters the world over won't neglect the Asian giants. For instance, Richard Bond, IBP president and chief operating officer, says he's moderately bullish on 1998. "We don't think we'll see as strong a year in Asia as 1995," he says, "We expect it will be better than 1997 in Japan but not in Korea."
Accommodating Asian Concerns To spawn more opportunities in Asia, IBP is becoming more customer-sensitive. For example, boxed beef destined for Asia will be shipped in downsized boxes so Asian workers can better lift and move them. Heavy boxes were one of the major Asian complaints in the International Beef Quality Audit. IBP beef destined for Asia will also be vacuum-packaged.
In addition, IBP will try to develop new products for the Asian market to match the success that intercostal meat has enjoyed in Japan. This product, which is the meat between the back ribs of beef cattle, is marketed by IBP as rib fingers.
Australia will also be in the hunt, though it has a perception problem. Their studies show that Asians believe U.S. beef is superior to Australian.
John R. Cox, managing director of Stanbroke Pastoral Co., Australia's largest ranching operation with 500,000 head on 30 properties, says that means Australia must change to compete. Australia, he says, needs to export 60% of what it produces. "Korea has stopped buying beef from us. And, America and Australia are competing for buyers in the other Asian markets," Cox says.
Competition will force Australia to feed grain to its cattle for the Asian market. Of 100,000 calves produced annually by Stanbroke Pastoral, for example, the company finishes for export about 50,000 head for 120 days on cereals, maize, wheat and barley.
Cox expects Asian sales to pick up by the latter part of 1998.
The global view of Asian exports is not as optimistic, however. The United Nation's Food and Agriculture Organization (FAO) predicts beef exports to South Korea, Japan and the Philippines will drop this year.
Federal Programs To Aid Asia Much of the economic future for U.S. agriculture, according to USDA's Foreign Ag Service (FAS), depends on how much boost the International Monetary Fund (IMF) and USDA credit programs will provide South Korea and Southeast Asian countries.
FAS says IMF loans offer financial stability that allow importers to open letters of credit. They can then take advantage of export credit guarantees.
Many IMF supporters point to Mexico's 1994-95 economic crisis. IMF money greatly helped the country rebound economically. U.S. beef purchases by Mexico in 1997 moved it past Canada into second place among major U.S. customers.
FAS also points to IMF-led trade liberalization measures as another reason Asia needs the bailout. For instance, IMF measures have encouraged South Korea to reduce high price supports for rice and beef.
There are critics of IMF capital infusions in these countries. One is former presidential candidate Steve Forbes, chairman of Americans for Hope, Growth and Opportunity.
FAS, however, says the risk to American ag is too great not to use IMF funds. With Southeast Asia and Korea accounting for 12% of U.S. ag exports, FAS says any major decline in exports to these markets will have implications for the U.S. and other major exporters.
No one knows if Wall Street is right and Asia is recovering. But until that happens, beef exporters aren't just waiting for the next Asian beef boom. They're working to develop new markets in the Near East and former Soviet Union to help pick up the slack.