U.S. Beef Industry Risks Big Export Losses

Feb 3, 2016

In 2015, Japan and Australia signed an economic partnership agreement that provides significant tariff reductions for Australian beef to be imported into Japan. The Japan-Australia Partnership Agreement (JAEPA) is to be phased in over a 15 year period and could result in the U.S. Beef Industry losing up to $100 million in beef exports to Japan. This is all according to a report issued by the USDA Economic Research Service (ERS) titled, “Tariff Reforms and the Competitiveness of U.S. Beef in Japan”.

The report notes that the ground beef market in Japan is overwhelmingly supplied by Australian frozen beef trimmings. However, export of beef offal to Japan is primarily product from the U.S. The report also noted that both U.S. and Australian beef whole muscle cuts are strongly competitive in the Japanese market.

The USDA ERS report states that, “Assuming that no other events intervene to influence trade, the scenario indicates that imports of Australian beef would rise by $100 million over baseline values, while imports of U.S. beef would fall by about $100 million,” the report concluded.

The report did say that if Japan were to open up its beef market to the U.S. similar to its agreement with Australia, then beef exports from the U.S. to Japan would be expected to increase with a net gain of $130 million for the U.S. Beef Industry.

Currently, Japan is only able to supply less than 40% of its total consumer beef demand through domestically produced beef. This primarily comes from Wagyu beef cattle, Holstein dairy cattle, and a cross between Wagyu and Holstein. The Japanese beef market is highly segmented with high priced Wagyu beef being offered at the high end and hamburgers at the low end.

The Japanese beef market is similar to the U.S. beef market with everything from high end cuts (Wagyu vs. USDA Prime) to low end cuts (Lean Australian Grass Fed Beef vs. USDA Low Select and Standard) to ground beef. The primary difference is that the offal market, particularly related to beef organ meats and tongue, is much more highly developed in Japan.

In 2015, the U.S. Beef Industry saw beef exports decrease more than 18% over the year prior and beef imports into the U.S. increase by more than 33%. That is certainly a direct threat to overall revenue and net profits within the U.S. Beef Industry and bears our attention. Beef production in other countries of the world is increasing and their ability to supply countries such as Japan, Korea, China, and the EU will continue to grow. For the U.S. beef producer to remain viable and profitable, more attention will have to be devoted to development of our own domestic consumer market share and the expansion of U.S. consumer tastes for cuts from the entire carcass and the organ meats.

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