As you can see there is wide variability in the volume of beef moved from country to country. It also is obvious which countries have a relatively strong beef production industry and those which do not. The point being, a tremendous amount of beef product is moved around the globe and this movement inevitably has an effect on the prices you receive for your cattle.
While much of this is dependent also on supply and demand, a significant factor is politics. As you are probably aware, the European nations have limited the importation of U. S. beef because of the common use of implants or hormonally based growth stimulants in our cattle. While their argument is that this decision is based on science, health and food safety issues, once the circumstances are examined it all comes back to politics. The result of this is that a significant exportation market for U. S. produced beef is limited dramatically, opening that market wide to other beef producing nations such as Brazil, Argentina, etc.
Unfortunately we find that these import/export relationships aren't as simple as the participants would like. One very significant factor over the last few years has been the effect that diseases such as bovine spongioform encephalopathy (BSE, mad-cow disease) and Foot and Mouth Disease (FMD) outbreaks have had on the system. Let's 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.
Disease Effects on Beef Import/Export
Unless you've been working on an ice pack in Antarctica for the last 8-10 years you have no-doubt heard of the effects BSE and FMD outbreaks have had around the world. The wide-ranging effects of these two diseases have, in many cases had negative effects on beef markets in different ways.
Based on data presented by Morgan in her paper entitled “Repercussions of BSE on International Meat Trade,” it was noted that “the growth in world meat trade, expanding at an annual rate of seven percent over the past decade, has surpassed that of nearly all other agricultural commodities. After meat exports registered a value of $41 billion in 1999 (approximately 10 percent of the $417 billion worth of total agricultural products exported in the same year), meat trade stumbled in 2000. In particular, growth in the global beef industry, besieged over the past decade by increasing competition from other meats, has been stopped in its tracks by BSE and FMD problems. Animal disease outbreaks coincided with herd rebuilding in many exporting countries, leading to higher beef prices and limited trade prospects.”
This effect can be noted in Figure 1 below along with the relationship to the production of other meat products. Note that while the production of beef has stalled, that of poultry and pork has shown an overall growth trend over the past 10 years.
Figure 1. Trends in Meat Production.
The most obvious result is the fear that it creates in the average consumer that they could accidentally purchase a tainted piece of meat and subsequently contract the disease via consumption. This affects demand and has been noted in Europe, Japan and the U. S. More than likely it had at least temporary effects in all beef consuming populations. The buzz-phrase here is that it “had a negative effect on consumer confidence.” If you look at Table 1, “Beef Consumption in Selected Countries” in the previous article in this series, you will note that from 1995 to 2005 this is an anticipate 22.6 percent drop in per capita beef production in the EU.
A second effect was that on supply. With the onslaught of the disease we saw thousands of cattle being destroyed resulting in their elimination from the production chain and in many cases putting the owner out of business. Thus, this eliminated the animals as well as producers. This, however, may not equal the decline in consumption. Consider, also from the previous article, Table 2, “Beef Production, Selected Countries,” that anticipated production declines in the EU will equal 19.15 percent. Consider the following:
If we look at the effect this has had on the European Union (EU) alone we see several things at work. A major problem faced by the EU is that production cannot be adjusted quickly enough to address the market imbalance, resulting in a substantial stock buildup over the next few years. The United Kingdom's (UK) 6-year cattle eradication program will account for about a three percent animal production decline. But this alone will not be enough to bring production in line with consumption. Production will exceed consumption by as much as 500,000 tons and World Trade Organization (WTO) limits on subsidized exports (enter the politicians) and the ban on British beef exports will inhibit the EU's ability to export this surplus to world markets. This imbalance results in large excessive stocks of beef in the near future, until beef production more closely reflects the shrunken demand. Obviously this situation plays a significant role in beef pricing in Europe as well as around the world.
It has to be considered that while Americans are the largest consumers of beef, absorbing one-fifth of global availabilities on average, Europeans annually consume approximately 7.7 million tons of beef, accounting for approximately 13 percent of global intake. Meanwhile, shipments from the EU, the world's second largest beef exporter through the mid-1990's, accounted for 16 percent of world trade in 1999, an estimated 10 percent in 2000 and a 8 percent in 2001 (which may be optimistic given that more than 40 countries have restricted access to EC livestock and bovine meat products due to BSE and more recently FMD). It is clear from the above that changes to European consumption and trade patterns have major implications for global meat markets.
Effect on Producers in the U.S.
While we could carry this discussion on for days and eat up many pages of paper, the bottom line comes down to how this effects the prices producers receive for their product world wide but in particular here in the United States.
The one thing that U. S. producers have to realize is that the world is looking for a
guaranteed, safe source of beef and that this will have an absolute effect on markets. Many beef exporting countries are scrambling to attain this recognition, i.e. that they are capable of producing a safe product, guaranteed to be safe, free from BSE, FMD or other disease contamination. The demand for safe product is not only found in Europe. Domestic consumers have long been searching for food products they could rely on, however the focus of most American consumers over the last 10-20 years has been more related to “healthfulness.” This means they were looking for leaner, lower cholesterol stimulation product, drug, hormone and pesticide free. To this list we now add disease fee.
Long term, this is going to result in a demand that producers both in the U. S. and abroad be able to “certify” that the product they are producing is free from any number of potential contaminants. This will be dictated largely by economic stimulus to produce beef in such a manner. In other words, payment for the production of certified, safe, disease-free product either by domestic or export markets. Working out the logistics for such a program could be challenging although a number of safe product certifying programs are currently under development. It will be up to producers to adopt these programs and practices rapidly in order to take advantage of the market this will present. Considering the aggressive manner in which foreign producers are pursuing programs of this nature, U. S. producers will need to accelerate their acceptance of the same just to stay even.
Ultimately it may come down, once again, to the fact that the producer may not be paid extra for the knowledge that his product is “safe and clean” but that he will be discounted for not producing such a product.
With only a little examination it becomes obvious that many factors affect our cattle markets today that were once completely unknown. A time will come when knowledge of local, regional and national markets will be inadequate to forecast anticipated pricing changes. An understanding of the world market situation by even grass-roots producers will be vital.
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 email@example.com.