Cattle and Beef
U.S. beef exports in the latter part of 1998 are expected to slow from the moderate pace which characterized the first half of the year. The Asian crisis continues to weigh on beef imports, although Japanese imports have shown surprising strength. In 1999, Asian beef demand will advance modestly, while the crisis in Russia in the aftermath of the ruble devaluation is expected to substantially lower Russian import demand.
Many of the major cattle-producing countries are liquidating their herds. On January 1, 1999, cattle inventories of the countries covered in this report are expected to decline slightly from 1998. Russian cattle inventories are continuing the long-term decline in 1998 due to the ruble devaluation in August 1998; the liquidation had already been occurring due to market-oriented reforms and low disposable incomes.
North American cattle inventories are expected to decline by 3.1 million head to 135 million head. High grain prices in 1996 accelerated liquidation in the United States and Canada, which is still ongoing, while a severe drought is plaguing Mexican herds. Declines will also be notable in South America, except Argentina where cattlemen are rebuilding their herds due to high cattle prices. EU cattle numbers are also falling, reflecting policies intended to deal with the Bovine Spongiform Encephalopathy crisis.
Overall in 1998, total beef production among the countries in this report is expected to remain at about the same level as 1997. Production gains will be notable in North America (especially the United States and Canada), but output losses will be experienced in the Former Soviet Union, South America, and the European Union. North American cattle are experiencing record weights at slaughter, while production losses in the other regions reflect declining inventories. In 1999, beef production is forecast to decline generally among the major producing regions. In North America, output is expected to fall 791,000 tons to 13.9 million tons due to falling slaughter.
Continuing the trend, beef consumption is expected to continue rising in 1998. Gains are expected to be especially strong in North America. In Asia, consumption growth in Japan is expected to be sluggish, while Korean consumption is being affected by the economic crisis there.
Beef consumption declines in 1998 are expected to be particularly strong in the Former Soviet Union, reflecting primarily the effects of the ruble devaluation on real incomes. In 1999, overall consumption is expected to decline slightly as beef supplies tighten and prices rise.
Following moderate growth in 1997, beef exports among the selected countries in 1998 are forecast to decline as a result of continuing weakness in Asia as well as the new crisis in Russia. Export losses are expected to be particularly strong among EU exporting countries, confronting a sharp slowdown of imports into Russia, their biggest export market, in the last months of 1998.
Despite increased exports from Brazil, total South American exports are forecast to decline substantially in 1998 as high domestic cattle prices in Argentina make their beef uncompetitive in world trading. Oceania is expected to show a slight increase in exports this year, while North America will experience a modest decline.
In 1999, export weakness is expected to continue for the European Union. North American exports are expected to rebound modestly next year, while Oceania's exports are expected to fall modestly.
U.S. cattle inventories are forecast to fall 2 percent to 97.5 million head by the end of 1998. Cattle inventories are expected to tighten even more over the next couple of years. Mid-year data indicated the number of replacement heifers were below a year ago, and heifers on feed were up. It will be next summer before heifers can be retained from this year's calf crop and bred to calve in 2000, which points toward a tightening inventory.
Cattle imports are expected to decline nearly 250,000 head in 1998 to the lowest level since 1989, then decline again in 1999. Imports from Canada began to fall in 1997, as cattle shipments were down 9 percent compared with 1996. Imports were down 6 percent for January-August 1998. Canada's cattle sector has been in liquidation and export supplies have begun to tighten. Cattle imports from Mexico were up 11 percent through August 1998 as severe drought conditions moved cattle into U.S. feedlots. The strong increase in shipments this year would indicate that Mexico's herd rebuilding has not begun and stronger expected U.S. prices could draw more cattle in 1999.
U.S. beef production in 1998 is forecast to be slightly higher at nearly 11.8 million tons compared with last year. Despite a decline in the number of cattle slaughtered, continued large female slaughter and record cattle weights boosted beef production. The U.S. is expected to set a record for commercial beef production. Beef production is forecast to fall 7 percent to 11 million tons as slaughter and cattle weights are projected to decline in 1999.
Beef consumption is expected to increase 2 percent to 12 million tons, the highest since 1989. Consumption is expected to decline in 1999 as production drops sharply as a result of the cutback in cattle inventories.
Imports are expected to reach 1.15 million tons, 8 percent more than in 1997. In 1998, imports from Canada have increased 15 percent through August as the strong U.S. dollar continues to attract imports. Imports from Australia and New Zealand have increased 22 percent and 6 percent through August. New Zealand will likely fill most of its 213,000-ton quota (PWE) in 1998 but Australia only filled about 52 percent through the end of September.
Beef imports are expected to increase 9 percent to over 1.25 million tons in 1999. U.S. beef prices are expected to rise in 1999, attracting more imports, especially for manufacturing grade beef. Although Canada, Australia, and New Zealand will have lower cattle inventories in 1999 and are projected to export less beef, the economic uncertainties in Asian markets and Russia will make the United States a more attractive market.
U.S. beef exports are expected to decline about 1 percent to 957,000 tons in 1998. Exports have been stronger than earlier forecast because of strong sales to Japan, which were 12 percent higher through August 1998 than a year earlier. Exports have also remained strong to Mexico, increasing 40 percent through August. In 1999, exports are projected to increase 1 percent, returning to the 1997 level on a slight increase in projected beef imports by Japan and marginal gains in other markets.
The downturn in the Canadian cattle cycle which began late in 1996 intensified in 1997 and 1998. Beginning cattle inventories in 1998 were 13.1 million head and will fall to 12.9 million head by year's end. The Canadian cattle breeding inventory is not yet increasing, and the cattle cycle is not expected to show an upturn until at least the year 2000.
In 1998, total cattle exports are expected to fall 10 percent to 1.25 million head, and decline 8 percent in 1999. Virtually all of the exports are destined for the U.S. market, with fed cattle for immediate slaughter representing about 80 percent of total shipments going to the United States. The decline in exports reflects declining cattle inventories as well as expanding slaughter capacity in western Canada. Cattle imports are forecast to rise almost 60 percent in 1998 to 70,000 head, and rise more moderately in 1999. The United States supplies virtually all of Canada's cattle imports.
Record high carcass weights in 1998 are expected to put downward pressure on cattle prices throughout the year. Beef production is expected to rise nearly 5 percent in 1998 to a peak of 1.1 million tons; production is expected to fall slightly in 1999 as total slaughter declines.
Total beef exports are expected to rise slightly in 1998 to 365,000 tons. The increase reflects increased sales to the U.S. market, which represented nearly 95 percent of total exports from January to May. The Asian economic crisis adversely affected Canadian beef exports to Japan, Korea, Taiwan, and Hong Kong, but the losses were more than offset by gains to the U.S. market.
Exports to the U.S. have benefitted from the sharp decline in the value of the Canadian dollar vis-a-vis the U.S. dollar. In 1997, fresh chilled boneless beef and bone-in beef cuts comprised 82 percent of total exports while frozen boneless beef and bone-in beef cuts made up about 14 percent. In 1999, total beef exports are expected to increase to 375,000 tons.
Canadian beef imports are expected to fall almost 9 percent in 1998 to 230,000 tons. The United States typically supplies about half of total imports. U.S. shipments are forecast to drop about 10 percent due to displacement by large domestic beef supplies, reduced Canadian exports to Asia, fierce competition from western Canadian packers, and a strong U.S. dollar. Imports from New Zealand rose sharply in the first part of the year, while imports from Australia dropped; beef supplies from the two countries comprised 46 percent of imports in 1997. In 1999, beef imports are expected to remain at the 1998 level.
The Northwest Pilot Project (NPP) was implemented in October 1997 and aims to facilitate trade of feeder cattle from the states of Montana and Washington to Canada. On August 13, 1998, the Canadian Cabinet approved a set of regulatory amendments which is expected to further facilitate trade under the NPP.
Among the approved amendments was a regulation which allows for antibiotic treatment of imported NPP feeders for anaplasmosis (rather than testing for the disease as previously required), as well as a provision to allow greater freedom of movement of other, non-NPP cattle belonging to a feedlot participating in the project.
While there were signs of intentions to rebuild herds in Mexico early this year as evidenced by increased cow numbers, cattlemen were forced to continue liquidating their herds in 1998 because of prolonged dry weather conditions and rising feedstuff prices. Total cattle inventories are thus expected to decline nearly 4 percent during 1998 to 24.6 million head. Inventories are expected to fall further in 1999.
Inventories are being depleted not only in the northern region of Mexico, but also in the central and southern areas. Dry weather led to lower cattle fertility while producers are being squeezed by large outstanding debts, tight credit, and low profit margins.
In early July 1998, the Mexican cattle industry filed a petition with the Mexican Commerce Secretariat (SECOFI) to bring an anti-dumping investigation against imports of U.S. live cattle, beef, and edible beef offals. The petition's sponsors claim that exporters and importers of selected U.S. beef, particularly beef variety meats and boxed beef, practiced price discrimination from June 1997 to March 1998. In October, SECOFI declared it would initiate the anti-dumping investigation.
Mexican cattle exports in 1998 are forecast to decline 10 percent to 600,000 head, reflecting reduced inventories. The severe drought conditions in northern and central Mexico have resulted in some exports of slaughter cattle, especially slaughter cows, to the United States. In 1999, cattle exports are expected to rebound to around the 1997 level as U.S. feeder cattle markets tighten.
Cattle imports are expected to show moderate strength in 1998 at 174,000 head, though down from the robust imports of 1997. The United States supplies 91 percent of cattle imports, primarily slaughter cattle. There may be temporary disruptions in U.S. cattle exports to Mexico as SECOFI proceeds with the anti-dumping investigation.
Beef production is expected to rise slightly in 1998 reflecting higher slaughter, and is forecast to decline slightly in 1999. Beef consumption is expected to increase 2 percent this year due to the larger domestic and import supplies.
Beef imports are expected to grow 17 percent in 1998 to 174,000 tons, and are forecast to increase moderately in 1999. The U.S. share of imports was 98 percent in 1997.
Rising imports reflects continued growth in the Mexican economy as well as the inability of the domestic cattle/beef sector to offer sufficient quantities of consistent quality beef, especially grain-fed beef. Despite this outlook, there may be some temporary disruptions in beef imports from the United States due to the anti-dumping investigation.
Following two severe droughts in 1995 and 1996, and high grain prices in 1996 which forced cattle production into more marginal lands, Argentine cattle inventories fell to 50.1 million head by the end of 1997, their lowest level in 25 years. Since cattle prices began rising in late 1997, however, Argentine cattlemen started to rebuild their herds. Returns on cattle are now the highest in the last several years, and prices of female breeding stock have almost doubled in the last two years. Inventories are expected to increase during 1998 to 50.8 million head and rise further in 1999.
The retention of cattle is expected to result in lower slaughter and beef production in 1998; 1999 beef output is forecast to rise modestly to 2.3 million tons. Beef consumption in Argentina in 1998 is expected to be the lowest in the last 15 years, at 2 million tons, reflecting tight beef supplies and high prices. Yet, despite the high prices compared with alternative meats, beef continues to be the preferred meat among Argentine consumers.
In 1998, beef exports are forecast at 280,000 tons, the lowest level since 1986. This weakness reflects strong domestic demand which is encouraging domestic plants to bid product away from international traders. Low exports also reflect soft international beef prices, abundant supplies in the United States, competition from other beef exporters such as Australia and New Zealand, extremely high domestic cattle prices, and reduced Argentine beef supplies. Exports are expected to remain near the 1998 level next year.
Due to its FMD-free status, Argentina became eligible as of August 1997 to ship 20,000 tons of fresh chilled and frozen beef annually to the United States under a tariff rate quota. In 1997, Argentina shipped 5,897 tons of beef under the quota. Frozen cuts accounted for half the total, followed by quarters, trimmings and chilled cuts. In 1998, a maximum of 9,000 tons is expected under this quota, as high cattle prices and scarce supplies weigh on exports.
In 1999, Argentine beef imports are forecast to remain at the 1998 level of 40,000 tons. This is the highest level in the past 25 years and reflects the limited domestic supplies and high prices. Although Uruguay continues to supply the bulk of imports, weak markets in much of the world have encouraged imports from nontraditional sources such as Australia, New Zealand, and the United States.
Brazilian cattle inventories continue to fall from their recent peak in 1995, to 142.9 million head by the end of 1998. Sluggish economic growth is resulting in weak domestic demand for beef, with soft beef prices lowering producer profit margins. Inventories are expected to fall further in 1999 due to high slaughter levels.
Pasture-based production continues to represent the majority of cattle production, with only 1.5 million head raised in feedlots. Beef production is expected to grow slightly in 1998, to 6.1 million tons. Production is forecast to grow marginally again in 1999.
Following a boost to beef consumption from 1995-97 resulting from stabilization of the Real under the Real Plan, beef consumption is now stabilizing at about 5.9 million tons. Beef imports are expected to decline substantially in 1998 and 1999 with a renewed, but gradual devaluation of the Real currency.
Beef exports grew more than 20 percent in the first half of 1998 as a result of expanded fresh and frozen exports to the EU, which comprises almost three-fourths of total Brazilian exports. The expansion is related to scarce and relatively expensive supplies of Argentine beef for export, as well as weakness of the Real. However, the pace of export growth is expected to slow somewhat in the latter part of the year due to a backup of beef supplies in the EU resulting from the Russian crisis. Total exports are expected to rise to 335,000 tons in 1998 and remain at this level in 1999.
In 1998, the Brazilian government obtained disease-free status with vaccination for foot-and-mouth disease (FMD) from the Office International des Epizooties (OIE) for two southern states: Rio Grande do Sul and Santa Catarina. The government hopes to extend FMD-free status progressively northward and achieve national FMD-free status by the year 2002.
Japan's domestic beef production is expected to continue its downward trend in 1998 and 1999. Imported beef continues to account for a greater share of Japanese consumption- estimated at nearly 65 percent in 1999-despite the effects of Japan's prolonged economic stagnation and the weak yen. Beef consumption and imports are forecast to rise in both 1998 and 1999 but at a slower rate than in the early 1990's.
Beef consumption has yet to return to the level reached in 1995, prior to the outbreaks of BSE in Europe and E. coli in Japan. During the first half of 1998, household consumption of beef declined about 4 percent compared with a year earlier. Retail sales indicate that Japanese consumers were interested in lower cost imported beef, especially short-plate and brisket type cuts. Retail demand for higher-priced loin cuts was weak.
Increased Japanese beef consumption is occurring in the hotel/restaurant industry (HRI) and home meal replacement (HMR) sectors. In the HRI and HMR sectors, frozen beef used in dishes such as barbecue, beef bowl, and lunch boxes is in demand, but demand for loins remains weak.
Beef imports have remained surprisingly strong in 1998, and are estimated to rise 4 percent to 964,000 tons. But there has been a shift away from chilled products in favor of frozen beef. Import growth is expected to slow in the last half of 1998 because of continued economic uncertainty in Japan, but the recent strengthening of the yen could spur buying for end-of-year needs.
According to Japanese statistics, imports from the United States through August were 7 percent higher at 206,000 tons (PWE), and imports from Australia rose 9 percent to 217,000 tons (PWE). The United States captured a 46-percent share of the Japanese beef import market through August, slightly below its 47-percent share in 1997. Australia's market share has increased 1 percent to 48 percent.
The shift in consumer demand has led to a 2-percent decline to 209,000 tons (PWE) in chilled beef imports through August. Japanese imports of U.S. chilled beef were up nearly 2 percent but chilled imports from Australia were 4 percent lower. Frozen beef imports were 17 percent higher at 240,000 tons (PWE) than a year earlier.
In 1999, Japan's beef consumption and import situation is expected to be little changed from 1998. Consumption is expected to again increase about 1 percent as demand is expected to remain sluggish until the economic situation turns and consumer spending accelerates. The slowdown that is expected in the last half of 1998 is likely to carry into 1999, and imports are projected to increase 1 percent to 975,000 tons.
Korean cattle inventories are forecast to fall to 3 million head by the end of 1998, a decline from almost 3.4 million head at the beginning of 1997. Producers have marketed cattle at a rapid pace as the economic crisis has overwhelmed the cattle sector. Government support for domestic Hanwoo cattle in the past created inefficiencies and caused artificially high domestic beef prices that are being severely tested during this period of economic uncertainty.
By mid-year, the market price for Hanwoo cattle had fallen 26 percent to 1.7 million won per head, down from 2.3 million at the end of 1997. The Government of Korea stepped up its purchases of Hanwoo cattle, but lowered the purchase price 200,000 won to 2 million won per head. However, Korea's ability to continue providing support to the cattle sector is constrained by shrinking budgets.
At the onset of the economic crisis, beef consumption plunged 50 percent, then gradually recovered during 1998. Consumption is forecast to decline 12 percent in 1998; as consumption of domestic beef began to rise during the year as domestic prices fell. However, demand for imported beef plunged and did not recover following the devaluation of the won which boosted the relative price of imported beef.
As consumption and imports fall in 1998, beef stocks are expected to build during the year and end at about 54,000 tons, significantly above the historic average.
The import beef market has collapsed thus far in 1998 with consumption remaining about 50 percent less than last year. Korean beef imports through August 1998 were 41,000 tons (PWE), about 60 percent less than a year earlier. Under WTO agreements, Korea is obligated to import 187,000 tons of beef in 1998. The SBS supergroups-private sector groups that purchase beef for endusers-have suffered financially and have had difficulty importing beef. The Livestock Product Marketing Organization (LPMO) , the government purchasing arm, did not issue its first tender for beef until May and are gradually tendering for the beef they are obligated to import in 1998.
In 1999, the slaughter rate is expected to fall, slowing the decline in Korea's herd size. Beef production is forecast to fall 15 percent to 270,000 tons (CWE). Consumption is only expected to improve slightly and imports should expand marginally. Korea is obligated to import 206,000 tons of beef in 1999. The SBS supergroups are allocated 70 percent, or 144,000 tons, and LPMO is obligated to import about 62,000 tons.
Taiwan imports more than 90 percent of the beef its population consumes. Although consumers in Taiwan eat much more pork and poultry than beef, beef consumption increased 25 percent in 1997 in the wake of the foot-and-mouth disease outbreak on the island. Beef consumption in 1998 and 1999 is expected to remain near the level attained in 1997, at 82,000 tons.
Although the Taiwan dollar has depreciated against the currencies of beef supplying countries, it appears that beef importers have not passed the full increase in import costs onto consumers in order to support beef consumption.
Beef imports are forecast to increase slightly to 76,000 tons in 1998. Australia is expected to expand exports in 1998 because the Australian dollar did not strengthen as much as the U.S. dollar did versus the Taiwan dollar. This has made Australian beef prices more attractive to price conscious consumers. Imports from the United States and New Zealand are not expected to increase in 1998. Australia, which supplies the shin, shank and intercostal cuts market, is expected to supply about 54 percent of the market in 1998, a gain of 1 percent in market share. The U.S. and New Zealand market shares are expected to remain about 23 and 22 percent, respectively.
The United States supplies special-quality beef-served primarily in hotels and restaurants-which enjoys a reduced tariff rate. Consumption of U.S. beef may have briefly stalled during the summer because families stopped going to restaurants to avoid possibly exposing their children to an enterovirus outbreak. If there were an impact on beef consumption, it would be temporary, and U.S. beef would probably be affected more than Australian or New Zealand product because a greater share of their beef is consumed at home instead of in restaurants as is the case with U.S. beef.
In February 1998, the United States and Taiwan reached a bilateral market access agreement that established a 5,000-ton quota for U.S. beef offal. Tariffs for beef offal range from 20-50 percent. The quota will be in place until Taiwan accedes to the WTO, at which time the quota will be converted to a global tariff-rate quota. U.S. beef offal imports are expected to begin entering Taiwan in the last half of 1998.
Beef consumption in Hong Kong is expected to increase in both 1998 and 1999 but at levels below the early 1990's. Hong Kong's economy has slumped since the middle of 1997 and tourism has fallen sharply, subduing consumption growth for many products. However, beef appears to have escaped the slump in consumption thus far. Imports, accounted for 85 percent of beef consumption, have not declined except for some of the higher quality and higher cost product.
The Hong Kong dollar's peg to the U.S. dollar has eliminated the relative price increase for imported beef that other Asian countries faced as currencies depreciated. Also, as other markets cut back on beef purchases, prices declined, and it appears that beef was redirected to Hong Kong. Beef imports through the first half of 1998 were about 25 percent higher than a year earlier. In 1998, beef consumption and imports are forecast to increase 8 percent to 66,000 tons and 12 percent to 56,000 tons, respectively.
Imports of fresh, chilled beef-consumed in the hotel and restaurant industry-declined 8 percent in the first quarter of 1998, which was expected as tourism has dropped. However, trade sources indicate that top hotels have continued to purchase U.S. beef, while some second tier hotels have shifted to lower priced New Zealand beef.
A portion of almost all products exported to Hong Kong end up being transshipped to China. An estimated 8 percent of beef imports are sent to China and over 50 percent of Hong Kong's beef offal imports are re-exported to China. However, through the first half of 1998, trade with China appeared sluggish because of economic uncertainty. Furthermore, in July China launched a campaign to rein in the underground trade that has developed between Hong Kong and China. If China rigorously pursues this anti-smuggling campaign, beef shipments to Hong Kong could slow if the movement onto China is slowed.
In 1999, beef consumption and imports are forecast to increase but at a slower pace than in 1998. However, if Hong Kong's economy continues to weaken and/or there were a policy shift on the Hong Kong dollar's peg to the U.S. dollar in order to boost export competitiveness, the outlook for beef imports would likely weaken substantially.
The effects of the 1996 Bovine Spongiform Encephalopathy (BSE) crisis continue to weigh on the EU beef sector in 1998. The sector is characterized by falling production, slowly recovering consumption, and large intervention stocks. It is now confronting a new crisis in the export market, as the recent Russian currency crisis is taking its toll on EU beef exports.
EU cattle inventories continue the decline which began in 1996. The decrease has been particularly severe in Germany, France, and the United Kingdom. The UK herd has been especially hard hit since the 1996 crisis, reflecting reductions under the Over Thirty Months Scheme (OTMS). Under this policy, U.K. cattle over thirty months of age are removed from the food chain in an effort to control the spread of BSE. It is expected that, from the scheme's inception through 1998, 2.8 million animals will have been destroyed under the scheme.
Under the calf processing aid scheme (CPAS), implemented in May 1996, calves must be slaughtered before they are 20 days old and their meat may not enter the food chain. By March 1998, about 1.2 million calves had been destroyed under the scheme (93 percent in the UK, 3 percent in France). As a result of the OTMS, CPAS, and early marketing scheme (early marketing of veal calves), beef production is expected to fall 2 percent in 1998 to 7.6 million tons, and decline slightly in 1999.
EU beef consumption in 1998 is expected to continue recovering from the BSE crisis and stabilize in 1999; consumption will nonetheless remain lower than levels prior to 1996. The EU Commission has been actively promoting and marketing quality beef and veal in the aftermath of the BSE crisis. Also, in an effort to restore consumer confidence in the beef supply, the Commission established the beef labeling regulation in April 1997 which will require all fresh/frozen beef sold at the retail level to bear a label with the country of origin beginning January 1, 2000. Despite these efforts, the outlook for EU beef consumption is for it to resume its long-term decline.
Due to the recent Russian financial crisis, exports are expected to drop dramatically in 1998 and 1999, to 714,000 and 574,000 tons, respectively. Russia accounts for over 40 percent of EU beef exports. The impact of the crisis is expected to be tempered by the EU Commission's recent increase in export refunds on beef to all destinations. The EU's main exporters are Ireland, Germany, the Netherlands, France, and Italy, whose shipments comprised about 80 percent of total exports in 1997.
After declining slightly in 1998, beef imports are expected to remain stable in 1999. Together, Argentina, Brazil, Uruguay, Botswana, and Australia supplied 75 percent of all extra-EU imports in 1997.
Stocks had diminished substantially leading up to the 1996 BSE crisis, and began to balloon following the crisis due to weak consumption and exports. Despite falling production currently, sharply lower exports and continued weakness in consumption are expected to result in increased intervention stocks in 1998 and 1999. The Commission is reportedly trying to sell large quantities of intervention stocks internally or for export. However, due to BSE, many third country importers are requiring traceability on the beef they purchase from the EU, which is impossible to provide on intervention beef.
While there were signs in early 1998 that the herd liquidation in Russia which has continued for eight years was soon leveling off, the recent economic turmoil in Russia is expected to lead to further declines in cattle inventories. Breeding animal numbers are expected to continue to fall in 1998 and 1999, resulting in a reduced calf crop. Beef production is expected to decline from 1997 levels, reflecting lighter weight animals in the slaughter mix and reduced slaughter levels because of weak consumer demand for beef.
The crisis is expected to deal a severe blow to beef imports for the remainder of 1998 and 1999. A shortage of foreign exchange and a substantial decline in the value of the ruble has resulted in a temporary suspension of imports. Beef imports experienced strong gains this year through August, tempering the abrupt shock to the market in the final months of the year. Total beef imports are expected to fall 17 percent in 1998 to 496,000 tons. Imports are forecast to decline nearly 30 percent in 1999 due to continued effects of the crisis.
Russia typically imports the majority of its beef from EU countries (primarily Germany, Ireland and the Netherlands); the Ukraine is also a main supplier of beef imports. The United States ships very little beef to Russia. However, Russia is the United States' second biggest market for beef variety meats following Japan; these exports, which primarily consist of frozen beef livers, totaled 55,000 tons in 1997.
Beef consumption in Russia is also expected to be adversely affected by the crisis in both 1998 and 1999. Once meat imports resume, the significant loss of purchasing power caused by the devaluation is expected to lead to a substitution away from beef into other, cheaper meats such as poultry leg quarters or frozen pork. Lower-priced beef variety meats are expected to weather the crisis better than frozen beef.
Australian cattle inventories are forecast to fall about 1 percent to 25.3 million head at the end of 1998 as slaughter rates, while below 1997, remained higher than historic averages, especially for cows. Slaughter is estimated at 8.5 million head in 1998, as poor pasture conditions early in the year and the loss of export markets moved more cattle to slaughter. The poor weather conditions are also expected to result in a reduced calf crop in 1998, to 9.2 million head.
Partially as a result of poor pasture early in 1998, combined with falling grain prices and cheaper feeder cattle prices, Australia significantly expanded its feedlot production. Cattle on feed in March 1998 was 23 percent higher than in March 1997, but remains a very small proportion of cattle inventories.
Australian cattle exports are forecast to fall sharply from nearly 900,000 head in 1997 to 470,000 in 1998. The current economic crisis, especially in Indonesia, has severely depressed live cattle exports this year. Through the early part of 1998, shipments to Indonesia-the largest market for Australian cattle in recent years-had plunged 99 percent compared with 1997. Australia has offset some of the loss in Southeast Asia by expanding exports to markets such as Libya and Mexico. The weak Australian dollar aided the expansion of shipments into other markets in 1998.
Beef production in 1998 is estimated to decline 3 percent to nearly 1.9 million tons on decreased slaughter. Slaughter weights rose with improved pasture conditions later in 1998 which kept production from falling as much as slaughter numbers. Production is expected to fall about 40 million tons in 1999, reflecting the beginning of herd rebuilding. Beef consumption is expected to decline as production decreases in 1998 and 1999. Increased production of lamb, pork, and poultry meat will lower these meat prices which could boost consumption at the expense of beef.
Beef exports are expected to rise 1 percent to nearly 1.2 million tons in 1998 but then fall in 1999. Exports to the United States in 1998 are projected to increase about 12 percent to 250,000 tons (PWE) as tightening U.S. supplies of cow beef and Australia's weak dollar make the United States an attractive export destination. Exports to Japan are expected to be slightly higher than in 1997 at 325,000 tons. Australian shipments to Korea are down sharply this year but Australia's shipments should pick up somewhat during the last few months of 1998 as Korea's Livestock Products Marketing Organization (LPMO) has begun to tender for beef imports. A significant share of LPMO's tenders call for grassfed beef.
In 1999, Australia is expected to begin retaining animals for herd rebuilding. Slaughter is expected to fall 4 percent to 8.2 million head. Cattle exports are projected to rise to about 500,000 head. Live cattle exports could rise slightly to some Asian markets, but Australia will likely face more competition- particularly in North African and Middle Eastern markets as Ireland resumes its live cattle exports.
Australia's beef exports are forecast to decline 2 percent in 1999 as production falls. The U.S. market offers a strong outlet for Australian manufacturing grade beef as cattle supplies in the United States continue to tighten in 1999. The Japanese beef import market is not expected to expand much in 1999 which limits growth there, but Australia could enjoy an exchange rate advantage over the United States that will support shipments. Korea remains an uncertain market next year.
New Zealand's cattle inventory is expected to fall to 8.9 million head by the end of 1998. Higher than anticipated slaughter, especially of cows, was the result of severe drought in the eastern portions of New Zealand. Slaughter is estimated to reach nearly 3.9 million head in 1998. Livestock operators are expected to begin retaining dairy calves in the fall (New Zealand's spring) to begin the rebuilding of the beef herd. In 1999, cattle slaughter is expected to drop 5 percent to about 3.7 million head, and cow slaughter is expected to fall to a four year low.
Beef production in 1998 is expected to rise to a record high 652,000 tons because of increased slaughter. Beef consumption is likely to be unchanged and exports will be slightly higher. With decreased slaughter in 1999, production is forecast to fall 7 percent, and consumption and exports are expected to follow.
New Zealand exports a high proportion of its beef production. The United States is New Zealand's largest market and has a 213,000-ton quota (PWE). New Zealand is expected to nearly fill its U.S. quota in 1998 as New Zealand had few alternatives for marketing its record beef supplies. In 1998, New Zealand's exports to Indonesia, Malaysia, and Korea have fallen sharply, and shipments to Japan have slowed. New Zealand's exports are forecast to fall 7 percent in 1999. New Zealand will have little room under the quota to expand in the U.S. market next year, and the Asian markets remain highly uncertain.
Cattle inventories in Turkey are forecast to remain stable at about 11.6 million head in both 1998 and 1999. Most cattle are raised on small farms-average herd size of 5 head-following traditional farming practices. Cattle raised in eastern Turkey are generally raised for beef, and cattle raised in western Turkey are used primarily for milk production. Government grain policy has led to higher grain prices which has hampered the development and modernization of the cattle sector.
An outbreak of foot-and-mouth disease in the Thrace region in 1996 led to ban on all cattle imports. The Turkish government has maintained the ban even though the FMD was brought under control by the end of 1996. It is estimated that Turkey will soon lift the ban and began importing breeding cattle to began rebuilding the domestic herd. Prior to the ban, Germany, the Ukraine, and the Netherlands were major sources of cattle.
Turkey also bans beef imports. In May 1998, the EU and Turkey reached agreement that set up a 19,000-ton tariff rate quota at a reduced duty for EU beef that will go into effect when the ban is lifted. Turkey has also worked out similar agreements with Romania and Hungary.
Cattle inventories in Egypt are building in 1997 and 1998. Large imports from 1993-1996 helped build animal numbers. The goal of Egypt's National Buffalo Project is to fatten animals to increase meat production and reduce imports. The Project currently involves about 250,000 head of cattle. Most of Egypt's cattle and buffalo are raised on small farms, 1-5 head average, operating with traditional methods. Ireland was the major supplier of cattle prior to the ban on shipments due to BSE. Australia has become the major supplier in 1997 and 1998 but at a much reduced level. Beef imports are forecast to decline in 1998 and 1999 as consumption is expected to drop and increased domestic production covers demand. U.S. imports of high-quality beef are used in the hotel trade but have been hurt by the decline in tourism.
India's cattle and buffalo inventories are estimated to increase 4 million head to 307 million by the end of 1998. Almost one-third of the herd is buffalo. New census revisions released by the Government of India indicate that the herd was about 20 million head higher than previously estimated. Expansion has been greater for buffalo because of higher milk yields and butterfat content. Most of India's herd is used for milk and as draft animals. Only about 4 percent of the herd is slaughtered and in states that permit slaughter, most of the animals are older, unproductive animals. India imports no beef , but is expected to export about 160,000 tons in 1998; growing to 170,000 tons in 1999. Most of India's exports go to the Middle East, Malaysia, the Philippines, and Iran. Demand for Indian beef exports is driven by the expatriate Indian communities.
The Philippines imports primarily manufacturing grade beef from India and Australia. In 1998, beef production and consumption is expected to stagnate because of the declining economic situation and Filipino consumers' price sensitivity. Beef imports are forecast to fall about 30 percent to 65,000 tons. In 1999, the Philippines is forecast to expand domestic production to meet increased consumption while imports are expected to remain flat.
Thailand's cattle industry has been in a steady decline, and inventories are expected to fall again in 1998 and 1999. Beef consumption fell sharply in 1997 because of concern about disease and the economic decline is expected to lead to another decline in 1998. Slaughter is expected to decline as consumption demand falters. However, the slaughter of high-quality fattened cattle has increased in 1998 because the devaluation of the Thai baht is likely to boost tourism some and create demand for the higher quality Thai beef. High-income consumers also switched from imported beef, as prices doubled with the devaluation, to domestic beef.