They'll Be BACK

March 1, 2002 Beef by Doug McInnis
After smooth sailing in the 1990s, U.S. beef exports have hit some rougher water.

Efforts to boost exports were among the successful beef industry initiatives of recent years, wracking up growth of 1,500% since 1980. And, American export officials hope to still carve large new markets from more than 50 countries that have curtailed or banned European imports because of bovine spongiform encephalopathy [BSE].

For the short term, however, exports have hit the doldrums. The biggest problem is Japan, where consumers have balked at beef consumption in the wake of their country's own BSE. In theory at least, the discovery of BSE should boost Japan's taste for U.S. beef, which is free of the disease. For the moment, however, it's dampened Japan's appetite.

"They're afraid to eat it," sums up Philip Paarlberg, an agricultural economist at Purdue University.

The U.S. Meat Export Federation [USMEF] cites poll results that found a third of Japanese were eating less beef, while a quarter has stopped eating it altogether. This is a major problem for the U.S., as half its beef exports go to Japan.

Three other factors are also depressing exports:

Europe's long-term refusal to buy implanted beef, the high value of the dollar in relation to foreign currencies and

the Sept. 11 attacks on America.

The attacks on America worsened worldwide economic troubles, which has a direct impact on a discretionary product like beef. But the biggest weight on exports may be the strong dollar, which has undermined American foreign trade prospects throughout the 1990s.

When the dollar is strong, it costs Americans less to buy foreign goods. And American exports, including beef, become more costly in foreign markets.

The trade between the U.S. and Canada is a case in point. In the early 1970s, one U.S. dollar was worth roughly one Canadian dollar. Now, it's worth about 1.5 Canadian dollars.

In today's environment, the Canadians have the clear advantage. The predictable result is that sales of Canadian beef to the U.S. have grown steadily, according to a North Dakota State University study.

The industry is hoping two measures will aid beef trade - a new round of World Trade Organization [WTO] talks and an emergency plan to reassure Japanese consumers about beef safety.

The trade talks won't help now. "This is definitely a long-term proposition," says David Orden, an agricultural economist at Virginia Tech University.

The last round of WTO talks took eight years to conclude, he notes. "We don't know that the new round will take eight years," Orden says, "but it could take more than three or four years."

The effort to reassure Japanese consumers, on the other hand, could yield timely results. The USMEF plans to launch a campaign to stress the safety of U.S. beef, and promote its consumption. To underwrite the program, the federation is seeking $8 million from the federal government, packers and other companies that do business with Japan, as well as beef checkoff dollars.

There's no time to waste, USMEF says. Japan spends $1.8 billion/year on U.S. beef, and the BSE scare is diminishing exports by $80 million/month.

While the immediate impact is severe, the Japanese problem may not persist.

"In the long run, I don't think it's going to matter," says Ross Korves, chief economist for the American Farm Bureau. "The Japanese will get a handle on it. Given their sophisticated system of handling meat, they have the ability to get on top of this thing."

While fear of BSE is damaging the Japanese market, it may help sell U.S. beef in other parts of the world. The export federation believes there are numerous potential markets among the 50 countries that have full or partial bans on European beef as a result of BSE in Europe. The primary targets are Egypt and Saudi Arabia. Secondary targets include the Philippines, other Middle Eastern countries and Russia.

Doug McInnis is a Casper, WY, journalist specializing in business management topics. Trade Is An Industry Growth Machine

From just 88,000 tons in 1980, exports now exceed 1.3 million tons/year, and they account for one in every eight dollars the cattle business takes in.

Overall, beef exports total 2.7 billion lbs./year. Pull out exports, and that much extra beef would go into the U.S. domestic market. Moreover, foreign markets snap up cuts like short plates and liver that don't have much U.S. demand.

For U.S. beef producers, that means higher cattle prices than what the domestic market alone could provide, says Wendy Radokovich of the U.S. Meat Export Federation.

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