BEEF MARKETS AFFECTED BY GLOBAL IMPORTS/EXPORTS
by: Stephen B. Blezinger
The day when the price cattlemen received for the cattle they marketed was controlled solely by local or even regional factors is long gone. In today's world we find a multitude of causes and effects which manipulate the price producers receive for their cattle at any point in the production pipeline. The most readily understood is simple supply and demand. When cattle numbers are down and production is less than sufficient, prices obviously go up. Likewise they go down when supplies are plentiful. We also see an increase or depression in cattle prices depending on weather conditions, grain prices, etc.
As we move toward a global beef marketplace and economy, we have to look at what world production and demand is like. For instance, based on a report by the USDA Economic Research Service (International Agricultural Baseline Projections to 2007), world beef production is expected to increase about 1.4 percent through the year 2007. China, the world's population leader, is also expected to lead the world in growth in beef demand although it is very unlikely that Chinese beef production will expand to meet this demand. Additionally, growing economies and increasing incomes and initially low inventories in the Former Soviet Union (FSU) and Brazil will stimulate production. This is occurring at the same time U. S beef production continues to recover from poor grain crops in the mid 90's. U.S. beef production also declined through the year 2000 due to herd liquidations and the subsequent biological cycle. Production growth has resumed at a moderate rate and is expected to continue through '07. In Europe, however, production has declined and is expected to continue to do so for several years largely due to complications from the BSE (Mad Cow) and Foot and Mouth disease (FMD) outbreaks and subsequent depressed consumer confidence in beef products. Other sources, including the Commodities and Trade Division of the Food and Agriculture Organization feel that it may be 2010 before European consumption returns to baseline demand seen prior the disease events. Of course that is all contingent on the prevention of another large outbreak of either disease.
Demand Anticipated to Increase
As various world economies and individual incomes increase, a common result is an increase in beef consumption. As the various worlds' peoples become more affluent a common reaction is for their consumption of red meat even though it may be more common for them to eat other meat products such as pork, poultry or fish. Beef is considered by most to be a premium food product and most individuals will prefer beef when economics allow. The Table 1 outlines some past and anticipated per capita beef consumptions. The data is presented in kilograms per person per day so multiply this by 2.2 to get a pounds per day figure. Remember, these are average consumptions across the entire population of the given country.
1. Per Capita Beef Consumption,
Selected Countries, kgs
Former Soviet Union
a/ Central and Eastern Europe
So we see that overall demand is expected to grow over the next few years, once again, barring some unseen event that might negatively affect consumer confidence in the safety of the beef product or events that might have wide-reaching socioeconomic implications (i.e. September 11). We note the significant decrease in beef consumption through the late 90's and into the 2000's which is related to the outbreaks of FMD and BSE as noted above. This decline is expected to reverse itself as the European cattle industry rebuilds itself but also as the European Union (EU) increases importation of beef products from other countries, especially those in South America and Australia. A possibility always exists that the EU could reverse its stance on importation of beef from the U. S. should it ever decide to throw aside the politics and discard the position it takes on the use of growth hormones (i.e. implants). Much of the change in consumption of beef in Europe will come as consumer confidence in beef products increases. This will have to be through measures taken both domestically and internationally by exporters to establish policy and infrastructure which can guarantee a safe product. A number of programs are in the works. Overall, as noted above most experts believe that long term we can expect to see a global increase in beef consumption. Therefore, if demand increases, where will the production come from to meet this demand?
Meeting the Need
Certainly portions of each country's demand for beef will be produced domestically. Some countries are certainly better suited to accomplish than others. Consider U.S. production for a moment. If the domestic production of U.S. beef grows at the moderate rate anticipated in 2002, we are expected to produce 11,140,000 tons of beef. By 2005, this number will increase to 11,386,000 tons. Something to consider is that this isn't necessarily from the production of more animals. Over the last couple of years, we have seen an increase in the typical weight at which cattle have been marketed out of the feedyard. Consider this, if we slaughter, on the average, 700,000 head of finished cattle per week and the average weight goes up from 1,100 to 1,150 pounds per head, that's like killing an additional 31,800 head of cattle in that week's period. Annually that equates to an additional 1,705,600 head. So while we are still processing the same number of cattle we are producing 4.5 percent more beef. Much of this comes on the heels of the trend in marketing to go to use of the pricing grids developed by the packers and the various alliances that have formed over the last few years. Most of which emphasize grade and yield which comes with cattle possessing a higher degree of finish as a result of higher weights and longer periods on feed.
Similarly we are looking at increases in production from other countries as well. Brazil, for instance is positioning itself to become a major player in the world beef trade. Already possessing the worlds largest cow herd (160 million head), Brazil is setting it's sights on becoming the global leader in exporting beef within the next three years. While American beef exports have sagged somewhat, Brazil has seen its exports more than double in the past five years, jumping almost 39 percent in 2001 to 632,000 tons. Granted that figure is still about ½ of the total volume of U.S. beef and beef variety meat exports for the same period. Much of the increase Brazil has seen has been a result of the drop in the value of its currency, called the Real, against the dollar. As long as the dollar remains strong, many analysts expect Brazil's exports to climb. Additionally, one of Brazil's strongest markets has been Europe. Recognizing that consumer confidence is the driving factor, Brazil is focusing on building that confidence in the safety of its product in the eyes of the EU. Also, as policy, Brazil has banned the use of implants in it's cattle although a fair number of cattle are, in fact, implanted illegally by producers who believe that the use of growth stimulants is the answer to production woes.
Other countries are also geared to be major producers and exporters of beef in the foreseeable future. Table 2 outlines some of this anticipated production.
Table 2. Beef Production, Selected Countries,
1,000 tons annually
European Union 7,860.0
Former Soviet Un. 4,468.0
a/ Central and Eastern Europe
As you can see, with only a few exceptions, production of beef is expected to increase globally over the next few years. In some cases, substantially.
In the next issue we'll continue our examination of this situation and the role world exports and imports of beef will play on meeting supply and demand. We'll also take a look at the more wide-ranging effect some of the disease outbreaks have played and what we might be looking at to insure the secure production of safe beef.
Dr. Steve Blezinger is a nutritional and management consultant with an office in Sulphur Springs, TX. He can be reached at P. O. Box 653 Sulphur Springs, TX 75483, by Phone at (903) 885-7992 or by e-mail at firstname.lastname@example.org.
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