International trade relationships have been the focal point for beef producers for the past decade as they have worked to increase the demand for high-quality beef abroad. In 2003, record amounts of beef were exported to Japan, South Korea, Mexico, Russia, Taiwan and other countries before export markets were suddenly shut off following the Dec. 23 discovery of bovine spongiform encephalopathy (BSE) in a Washington dairy cow.

Countries have been slow to reopen their borders as negotiations continue, but there has been some progress.

Mexico is now allowing boxed beef, selected variety meats, veal and tallow to be imported from the U.S. The U.S. has now regained access for products accounting for $746 million — about 74% of the $1 billion in products exported to Mexico in 2003.

National Cattlemen's Beef Association (NCBA) and Cattle-Fax economists estimate it will be at least the third quarter before other foreign markets open up.

“Right now, resuming any shipment levels to Japan and South Korea would probably take place during the fourth quarter,” says Cattle-Fax specialist Mike Miller.

Negotiations with Japan are swiftly moving ahead, though, and a technical working group, made up of Japanese and U.S. scientists, has been formed to review testing procedures for BSE, removal of specified risk materials (SRMs), appropriate surveillance practices, feed regulations, status of countries, etc. The goal is to wrap up the working group's activities by the end of summer, according to J.B. Penn, under secretary for Farm and Foreign Agricultural Services.

“At the end of this process, we would hope that most of the beef trade resumes under conditions that the Japanese consumers can certainly be assure of its safety, just as our consumers are assured of the safety of U.S. beef,” Penn says.

A Look At Export Markets

The importance of reopening international markets is highlighted by looking at previous years' numbers. International sales of beef reached 2.5 billion lbs. in 2003, which amounts to 60,000 extra head of cattle per week, according to Dave Weaber, Cattle-Fax research director.

“That 2.5 billion accounts for about 10% of domestic production or about $3.8 billion worth of trade on the export side,” Weaber says. “It helps us utilize some of those cuts we are not good consumers of domestically, like short plates and briskets.”

Variety meats are also major export items because they are not well consumed in the U.S. (see Table 1). For example, Russia is the No.-1 importer of beef livers, and Mexico and Asian countries consume much of the other variety meats, including hearts and tongues.

“Tongues are a big Asian item. About 70% of the production is exported,” Weaber says. “They really only have pet food or rendering value here, but can bring about $9/kg — almost $5/lb. in the export market.”

Japan was the largest importer of U.S. beef and variety meats in 2003 (see Table 3), but doesn't have as large of market share as it once claimed. “Just five years ago, Japan would have accounted for 50% of domestic exports. Now, they are only 30% because of the growth in Mexico and Korea,” Weaber says.

“About 376,000 mt of beef and beef variety meats are exported to Japan,” he adds. “This equates to a $1.4-billion market for U.S. beef and beef products.”

South Korea is also a growing market for the U.S., Weaber says, importing 247,000 mt of beef. That's $816 million in business that was nearly nonexistent 10 years ago.

Why Are Exports Important?

“The importance of exports to American agriculture simply can't be overstated,” USDA Secretary Ann Veneman said during a recent hearing on agricultural trade. “Exports solidly underpin farm income and support almost 900,000 jobs, of which 40% are in rural areas. Every additional billion dollars in exports supports another 15,000 jobs on farms facilitating trade, in processing and manufacturing, and transporting commodities and food products,” she said.

Not only does the export market bring the beef industry additional revenue, it adds value to many products that have little value in the U.S. Products like short ribs, outside skirts, short plates, chuck-eye rolls, etc., are not popular cuts in the U.S., but are sought after internationally.

For example, Weaber says short ribs will garner $1.39-$2.09/lb. domestically, but are worth (US)$4-$10/kg in the international market and generate nearly $400 million in trade.

About 61% of the outside skirt cut is exported to Korea and Mexico. “They are worth about twice in the export market what they are domestically — about a $166 million business,” he adds.

Short plates, which go into trimmings product domestically, are marketed as a whole cut internationally.

“The same goes for chuck-eye rolls. They have a premium in the export market. We can absorb them pretty readily here, but come summertime, there isn't a great demand for chucks and rounds,” Weaber says. “If we keep those here we won't be able to accept that extra premium they would normally draw in the export market.”

Table 1. Top 5 Exported Beef Cuts Ranked by the Extra Value Generated

U.S.Value ($/kg.) International Value ($/kg.) Total Extra Value (Millions of Dollars)
Short Ribs (57% exported) $1.39-$2.09 $4-$10 $388
Tongue (70% exported) $0.22 $9.92 $328
Outside skirt (61% exported) $2.09 $3.50-$6 $166
Short plate (68% exported) $0.96 $1.74-$2.65 $63
Chuckeye roll (11% exported) $2.62-$2.68 $3.50-$6 $43
Source: USMEF/Cattle-Fax 2004

Table 2. Market impact from closed the borders

Beef Cut Exports $9.50 to $10/cwt.
Variety Meat Exports $3 to $4/cwt.
Other Export Value 50¢ to $1/cwt.
Source: Cattle-Fax 2004

Table 3. U.S. Beef & Beef Variety Meat Exports

Volume in metric tons Value in dollars
Japan 376,000 $1.4 billion
Mexico 336,000 $877 million
South Korea 247,000 $816 million
Canada 92,000 $331 million
Other 226,000 $444 million
Source: USDA/USMEF 2004