Across the Atlantic Ocean, in the “Old World,” a new world is emerging. No longer is the subject of beef restricted to cow-calf or feeder, Irish or German. The impact of globalization during the past five years has forced Europe to change the way it not only produces beef, but how it subsidizes and trades it.
International pressures, from such bodies as the World Trade Organization or individual exporters like Brazil, are molding a new Europe. It's one that opens possibilities for U.S. producers, while providing a warning of what's to come for producers in the world's richest countries.
In 2000, the then-15 countries of the European Union (EU) initiated a mid-term review of their Common Agriculture Policy (CAP), Europe's version of the Farm Bill. After three years of review and negotiations, farm ministers agreed in 2003 to completely overhaul farm supports. They “decoupled” subsidies from production and linked support to the amount of land held by a producer.
Beef producers were given special supports, depending on if a country wanted to protect its veal industry, suckler industry or another specialized beef industry, but not all of them. Governments were forced to choose what they wanted to protect and what they'd allow to wither out of business. Countries were given the choice to start these new payments in 2005 or 2006; about half have already begun to distribute them.
In the same year the new CAP was agreed to, but due to a completely unrelated event, the EU became a net beef importer. After years of disease problems, from BSE to foot-and-mouth disease (FMD), beef production and beef prices had fallen significantly. UK beef prices will only now begin to recover when the lifting of BSE-related restrictions begins in 2006.
Though demand for beef within the EU has returned to pre-BSE levels, production levels haven't — nor will they. With the new CAP coming into place, those levels will drop even further, opening new opportunities for beef exporters.
According to a report released this summer by Dutch ag banker Rabobank, the EU needed to import 530,000 metric tons (mt) of beef in 2005, with expected annual growth of about 2%. Intra-EU beef flows are changing as medium-quality UK beef came back onto the market in late 2005, and Irish beef that had been going to the UK headed toward the continent.
“While the Over-30-Month rule exists (a BSE-related law that kept older cattle out of the food chain), the quality of meat available on the market has increased. Now with lower-quality meat back on the market, there will be a demand for high-quality beef like that from the U.S.,” says Jeffrey Davies, a UK-based wholesale meat supplier to world-famous food retailer, Smithfield Market.
Thanks to intense investment by Brazilian beef breeders in the '90s, Brazil emerged on the European stage in 2000. Brazilian beef is grass-fed, for the most part free-range, and antibiotic-free. Add that to its price competitiveness, even when paying the full 176% tariff, and Europeans have a hard time getting enough Brazilian beef.
Just as the EU was becoming a net importer in 2003, the Brazilians were poised to take full advantage of the opportunity. Of course, the October 2005 discovery of FMD in Brazil has seriously set back Brazil's intent to remain the world's No.-1 exporter of beef.
But Brazilian beef is lean, grass-fed and without marbling. Though it fits the demand for many medium- and high-quality markets — including the strict raw material demands of Italy's Brasoula cured meat — its characteristics are very different from top-quality, U.S. grain-fed beef.
The marbling and tenderness of U.S. beef is highly prized in Europe's most exclusive restaurants, despite a price often three times that of Brazilian beef. Though the U.S. only has an EU quota of 11,500 mt of top-quality beef/year, U.S. producers don't fill it.
“It's like Black Angus beef coming home,” says Davies, who markets Creekstone Farms Black Angus beef in the UK. He expects Angus, with its breed origins in Scotland, to fetch higher quality ratings and prices than Scottish beef, which holds the top rung in the UK beef market.
U.S. opportunities in Europe
The EU market has been closed to most U.S. beef since 1989, thanks to a ban on growth hormones. Despite a lengthy trade reconciliation process between the U.S. and the EU (as well as Canada and the EU), Europeans still claim hormone-treated beef is unhealthy and the ban remains.
But, for U.S. producers willing to follow the strict regulations required for EU exports, a lucrative market awaits. Preparations for EU approval are time-consuming and can be cost prohibitive, but the end result can be a new market with little competition.
To qualify for export, producers must follow a strict set of guidelines to gain certification. Each operation must create a detailed guide on how their ranch operates, including everything from on-farm traceability to feeding ingredients.
Cattle must be Non-Hormone Treated (NHTC)-certified through USDA and slaughtered at an EU-approved plant. Random testing for hormones and antibiotics can only be done through Ontario-based Maxxam Labs, North America's only EU-approved lab.
To date, only 16 U.S. producers are EU certified for export. Creekstone Farms, based in Campbellsburg, KY, began looking to the EU last year after losing its Asian markets in the BSE fallout.
And, when USDA forbade private BSE testing in the U.S., Creekstone turned its attention east to Europe. More than eight months later, it received its EU certification Aug. 3.
Its first shipment of 750 kg arrived in London by air in mid-October for a demonstration in Butcher's Hall at Smithfields Market, as well as tasting tours throughout the UK. The first weekly sea shipment arrived Nov. 14, with Davies hoping for 60 tons/month.
Sandra Davis of Macomb, OK, was among the first U.S. producers to go through the certification process in 1999, after her ranch completed a full-scale traceability program. Since then, she's helped other small producers get certified for access to the EU market.
Davis and her family raise Japanese Wagyu cattle, which fetch top dollar for the beef's rare marbling and richness qualities. She says an average month's export to the EU is 15 Wagyu carcasses, along with Angus carcasses she buys from Small Farms Coop in West Point, NE. The coop, thanks to a USDA grant in 2003, is working to get its producers certified for export to Europe.
“If you treat people fairly and honestly, you can access the world,” Davis says. “The French want different cuts than the Germans, and they want their labels in French, but that's just part of taking care of your customers.”
Meghan Sapp is an American freelance writer based in Brussels, Belgium.