The Future of Animal Agriculture in North America - Farm Foundation

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depends in large part on the reopening of Japan, Korea and
other markets to U.S. beef. Prior to BSE, Japan, Korea and
Mexico accounted for 77 percent to 84 percent of U.S. beef
exports, with Korea and Mexico growing significantly during
the past 10 years. Canada’s beef trade surplus was reduced in
2003 as a result of a case of BSE. However, in 2004, the beef
trade balance grew substantially as exports of boned beef resumed.
Before 2004, the main competition for U.S. beef in the
Japanese market was Australia, usually exporting slightly less
beef to Japan than the United States. U.S. exports capture
about 47 percent of the volume of the Japanese beef import
market and Australia 45 percent (Figure 3). Because U.S. grainfed
beef is generally considered to be of higher quality than the
predominantly leaner, grass-fed Australian beef, it sold at much
higher prices. In 2004, Australia was able to increase beef
exports to Japan to nearly 90 percent of total market volume in
the absence of U.S. beef. Another Japanese beef import market
competitor is New Zealand, which has also increased exports in
the absence of the United States’ and Canada. Australia and
New Zealand were able to capture 47 percent of the lost
volume from the United States previously exported to Japan
due to limitations in the size of their beef industries.
The United States dominated the Korean market prior to BSE,
typically capturing more than 65 percent in recent years. Australia
and New Zealand have both been able to increase beef exports
to Korea following the ban on U.S. beef. Once these trade bans
are lifted, prospects for the United States regaining market share
will depend largely on rebuilding consumer acceptance.
Mexico typically buys more than 90 percent of its beef imports
from the United States and Canada, with U.S. beef dominating.
Mexico mainly imports U.S. boneless beef, as well as about
one-third of all U.S. beef offal exports. The Mexican market for
offal is important to the U.S. industry, as domestic demand for
that product is relatively low.
The United States continues to import significant levels of beef;
Australia and Canada each typically account for 30 percent to
40 percent, with New Zealand in the 20 percent to 30 percent
range. The average for the last 10 years has been 864 tmt, with
an all-time high of 1.1 mmt in 2004. U.S. beef imports have
increased recently due to the increase in beef demand spurred
by the low-carbohydrate diets, the popularity of fast food
(creating the need for lean Australian and New Zealand beef
trimmings), and the low point in the cattle cycle in the United
States. If interest continues to decline in low-carbohydrate diets,
and if the U.S. beef cow herd rebuilds, U.S. beef imports may
fall during the next several years.
During the last 10 years, the three nations of NAFTA have
accounted for 32 percent of world beef consumption, 50 mmt
in 2004 (Figure 4). This is up slightly from the early 1990s.
Other major beef consumers during the past 15 years were the
Global Competitiveness and Trade
EU (17 percent), Brazil (12 percent), China (8 percent), Russia
(7 percent) and Argentina (5 percent).
When considering market potential for North American beef,
there are several country issues to consider:
• The EU is a large beef producer and exporter, but more
than 85 percent of its beef trade occurs among EU
countries. Beef imports from outside EU nations are
primarily from Brazil and Argentina. The EU will not
import most U.S. and Canadian beef due to concerns
about the use of beef growth hormones. The United States
and Canada are allowed to export a small quantity of nonhormone-treated
beef to the EU, sharing an 11.5 tmt quota.
• As a result of the Free Trade Agreement negotiated between
Mexico and the EU, no preferential market access was
provided by Mexico to the EU due to trade concerns
related to export subsidies. Therefore, the EU will not
become a player in the Mexican market in the short run as
long as “export restitutions” are still granted to EU exports.
• With a growing middle class and relatively low
consumption of red meats, China has as yet unrealized
market potential. Prior to BSE, the United States,
Australia, New Zealand and Canada supplied 99 percent
of the Chinese beef and beef offal market. Market growth
will have to be developed. China imported 3.5 tmt of beef
in 2004, down from 11.4 tmt in 2002. China also
imported 39 tmt of beef offal in 2002.
• Despite political and economic uncertainties, Russia is a
potential growth market. Russia averaged about 450 tmt of
beef imports from 1995 to 2003. Most beef imports come
from Ukraine, the EU and Brazil. For 2005, Russia has an
announced quota of 457.5 tmt for fresh and frozen beef,
with the EU allocated 366.7 tmt and the United States
17.7 tmt, pending post-BSE approval.
Beef and Cattle Policy and Trade Issues
Policy plays an important role in shaping beef trade. Policy
considerations for potential markets and competitors that may
impact North American beef exports include:
• Brazil claimed to have made significant progress in
eradication of foot-and-mouth disease (FMD). However,
an October 2005 outbreak will likely force Brazil to
reconsider its expectation of being FMD-free by 2006.
Brazil has an array of support mechanisms available for
beef producers, processors and exporters, including
subsidized loans and programs to modernize
agricultural machinery.
• Australia and New Zealand export to North America and
to major U.S. beef markets. The United States has a