Cattle and Beef
Continuing the upward movement which is expected to characterize 1999, beef imports next year are forecast to rise modestly. Import growth is predicted to be strongest in North America and Korea. Despite a fairly sluggish year in 1999, beef exports from major producing countries are forecast to rise moderately next year. U.S. exports are expected to decline somewhat in 2000 as tightening beef supplies and higher prices limit export sales.
Cattle inventories in the selected countries covered in this report were virtually unchanged on January 1, 1999 from a year earlier, at 1.02 billion head. Inventories are expected to rise slightly by the end of this year. Herd expansions are expected to be strongest in 1999 in China, India, South America, and Oceania. Continued herd liquidation is expected at a strong rate in the Former Soviet Union, particularly in the Russian Federation and the Ukraine. North America continues to reduce cattle inventories due to low prices, while herd liquidation in the European Union is related to BSE control and policy measures to reduce beef overproduction.
After rising slightly in 1999, cattle slaughter in the major producing countries is expected to decline modestly in 2000, to just over 206 million head. The countries which have been liquidating herds are slowing the pace of slaughter and are approaching a rebuilding phase. Slaughter declines are expected to be sharpest in the Former Soviet Union and North America, where herd liquidation in recent years will constrain available supplies for slaughter. Beef production among the selected countries in 2000 is forecast to drop modestly, to 47.8 million tons.
Due to a slight increase in beef production in 1999 and low world prices, beef consumption is expected to rise modestly. However consumption is expected to edge back to about the 1998 level next year at just under 47 million tons. Consumption losses will be strongest in North America, where rising beef prices will encourage consumers to substitute their beef purchases with lower priced meats. Declining beef consumption in the Former Soviet Union is related to severely diminished domestic supplies in the region and constrained incomes.
Following a somewhat sluggish year in 1999, beef exports are expected to rise moderately in 2000 to more than 5.5 million tons. Export growth is expected to continue to be robust for the South American exporting countries. Taking advantage of the boom in exports realized by the Brazilian currency devaluation in January 1999, Brazil is expected to continue expanding its exports in world markets in direct competition with its neighbor, Argentina. The European Union is expected to increase exports next year by 12 percent, but these will remain well below levels seen before the BSE crisis of 1996. North American beef exports are expected to decline 2 percent in 2000 as tightening beef supplies and higher prices limit export sales.
The United States continues along the downward slope of the cattle cycle which began in 1996. U.S. cattle inventories are set to decline through 2000, with beef production likely to decline through 2001. Although beef cow liquidation has largely ended, heifer slaughter remains near a record high. With 3 percent more heifers on feed as compared to a year ago, heifer slaughter will remain high and will push beef production up. After setting a record for both commercial and total beef production this year, beef production will begin to decline fairly sharply through at least 2001. Market prices are continuing to strengthen, so it will not be long before the cycle will turn upward once again.
U.S. cattle imports are expected to decline 8 percent in 1999, reflecting sharp declines in slaughter cattle imports from Canada despite rising feeder cattle imports from Mexico. Canadian shipments are falling due to increasing slaughter capacity in western Canada and declining Canadian cattle inventories. Should a final determination (expected in early November 1999) by the U.S. International Trade Commission in the antidumping case against imports of Canadian cattle prove in favor of the petitioners, it would likely hasten the declining trend of Canadian imports.
Cattle exports are expected to fall 7 percent in 1999 and decline modestly in 2000. The decline in 1999 is related to a sharp drop in exports to Mexico, reflecting tightening U.S. cattle supplies and stronger prices. Beef exports are expected to rise about 9 percent this year, compared with a lackluster 2 percent in 1998. The rise reflects strong markets in Mexico, Korea, and Taiwan; reduced competition from Australia and New Zealand; and food aid to Russia. In 2000, with higher domestic beef prices as supplies tighten, exports may fall about 4 percent. Nonetheless, U.S. exports are still the second largest on record.
Beef export growth to Mexico has been strong this year, but below the rapid growth of last year. Exports to Mexico for the rest of this year may be further moderated by antidumping tariffs. These tariffs vary by company and type of product. While the demand for beef has declined in the Japanese home consumption market, the lucrative hotel-restaurant market has grown slightly. Additionally, Japan's stagnant economy is resulting in consumers purchasing less expensive beef cuts, which gives Australia a boost in the market.
U.S. beef imports are expected to increase by 6 percent in 1999 and 7.5 percent in 2000. As U.S. beef supplies tighten and prices increase, Canada and Australia are expected to increase exports to the United States.
The Canadian cattle herd liquidation which began in 1997 is drawing to a close. Inventories stood at 12.9 million head at the beginning of 1999, and are expected to drop 2 percent over the year. While heifer slaughter remains high in 1999, an increase in heifer retention for breeding in 2000 is expected from this year's calf crop. During 2000 or 2001, cattle inventories are expected to reach their cyclical low. Feeder cattle prices are expected to be supported by low feed prices and a smaller calf crop, and slaughter cattle prices will be strengthened by tighter supplies.
Live cattle exports were down sharply in the first half of 1999, and total shipments for the year are expected to be 28 percent lower than 1998 exports. Lower exports are related to reduced inventories, higher slaughter rates, and good pasture conditions. The trend indicates declining cattle exports to the United States but rising beef exports.
On October 13, 1999, the U.S. Department of Commerce announced its final determinations in the antidumping and countervailing duty investigations of live cattle from Canada. In the antidumping case, Commerce determined that the imports are being sold at less than fair value; however, the countervailing duty investigation was negative (de minimis). The International Trade Commission must now make its final injury determination, expected on November 8, 1999. Tariff results may force more cattle to be slaughtered in Canada with more beef available for export.
Canadian cattle imports rose sharply in 1998, reflecting higher imports from the United States under the Northwest Cattle Project (NWCP). Over the 1998-99 season, a total of 51,009 head were imported under the Project. So far, 100 western Canadian feedlots (mostly in Alberta) are approved under the NWCP, and four U.S. states are now approved to export under the Project: Washington, Montana, Hawaii, and North Dakota.
Despite falling inventories since 1997, cattle slaughter continues to rise in Canada. Recent expansions of slaughter facilities in western Canada have led to higher domestic slaughter and fewer cattle available for export. The pace of slaughter expansion is nonetheless expected to slow in 1999, rising 1.5 percent to 3.8 million head. Beef production is expected to rise less than 1 percent in 1999 and decline in 2000 with lower slaughter.
Beef exports rose sharply in the first part of 1999. Exports to the United States, Canada's leading market (93 percent), showed the largest increase in absolute terms, but shipments also rose sharply to South Korea and Mexico. Canadian exports to the U.S. are likely to increase next year because of tightening U.S. supplies and higher beef prices. However, should the U.S. antidumping investigation against Canadian live cattle exports prove in favor of the petitioners, Canadian beef exports may increase further.
Canadian beef imports are expected to rise modestly in 1999 due to increased imports of frozen boneless beef, mostly from Australia. This trend is expected to continue as supplies tighten in Canada. Beef imports from the United States have weakened, reflecting continuing efforts by Canadian beef packers to displace U.S. beef in eastern Canada.
The Canadian Cattle Identification Agency, a private agency, is working to have a mandatory bovine tagging system in place by December 31, 2000. The system being geared for potential disease outbreaks or food safety related issues. U.S. feeder cattle imports will be required to be tagged with an official Canadian tag once the program is implemented.
The plight of Mexican cattlemen has continued in 1999, forcing continued liquidation of herds. Mexican cattlemen are discouraged by low profitability and credit problems. The drought, which has characterized northern Mexico for the last few years, constrained weight gains of cattle and reduced fertility in the first half of 1999. Seasonal rains in the second half of the year have been providing some relief to producers; however, flooding in southern Mexico recently has had an adverse effect on cattle production in that region. Demand for beef remains strong throughout the country, reflecting income growth and renewed optimism in the Mexican economy.
Complaining that low-priced beef offal, beef, and cattle imports were harming their industry, Mexican cattle feeders and certain packers petitioned their government in July 1998 to investigate allegations of U.S. dumping. On August 2, 1999, the Mexican Commerce Secretariat, SECOFI, announced a preliminary decision in the antidumping case, stating that tariffs would be imposed on U.S. beef and beef offals due to what were determined to be artificially low prices. In the case of live cattle, no duties were imposed.
Despite efforts to rebuild herds as evidenced by a 2-percent increase in the 1998 calf crop, cattle production in 1999 is expected to slow as high interest rates, rising feed costs, and poor breeding conditions due to poor weather conditions discourage expansion. Cattle imports are expected to drop sharply in 1999, reflecting a worsening producer credit situation, tightening U.S. cattle supplies and the trend toward increased beef imports. Mexican cattle exports, virtually all destined for the United States, are expected to rise 23 percent in 1999, but rise more slowly in 2000 as supplies tighten.
Despite high slaughter in the first half of 1999, cattle slaughter is expected to fall slightly overall this year as moisture in the second half of the year encourages some cattle retention. Beef production is expected to decline to 1,765,000 tons. Mexico has 149 federally inspected (TIF) plants of which 36 are currently accredited by USDA to export beef to the United States. Recently, 5 plants were delisted by FSIS inspectors who found them deficient. The Mexican Agriculture Secretariat (SAGAR) reports that some non-TIF plants are rebuilding facilities to convert into TIF plants which would produce meat for export.
A rebound in world oil prices and a continuing robust U.S. economy are yielding renewed optimism in the Mexican economy. Income growth is expected to continue, translating into increasing demand for beef, the more expensive and preferred meat in Mexico. Nonetheless, tight domestic supplies in 1999 are expected to constrain consumption growth. Beef consumption is expected to increase 2 percent in 2000.
Beef imports are expected to rise 13 percent in 1999 to a record 228,000 tons, reflecting lower domestic production and higher consumption. About 93 percent of Mexican imports are supplied by the United States. The preliminary antidumping duties imposed on U.S. beef and offals are expected to primarily affect the offal trade which were assessed the highest duties. Beef imports in 2000 will be dependent on the final antidumping determination against U.S. product, expected by early 2000.
Following a brief rebuilding in 1998 due to strong cattle prices in the first part of the year, the Argentine cattle herd is expected to stabilize in 1999 and 2000. In the past year, cattle and beef prices have dropped sharply. This reflects the current deep recession in Argentina, rooted in the financial crises in Asia and Russia, and the major devaluation in Brazil, Argentina's main trading partner. Beef production is expected to rise 8 percent in 1999 to 2.8 million tons and will stay at about this level in 2000 as slaughter stabilizes. Beef consumption is expected to fall slightly in 2000; Argentina will nonetheless remain the country with the highest per capita beef consumption in the world.
With production gains outpacing consumption gains in 1999, more product will be available for export. Beef exports in 1999 are forecast to increase 17 percent to 340,000 tons, and rise modestly in 2000. For the first time since it was established in 1997, the 20,000 ton U.S. beef quota for fresh-chilled and frozen beef from Argentina is expected to be filled in 1999 due to stronger beef prices. Most of the beef is comprised of trimmings and manufacturing grade beef, but chilled cuts are slowly growing. There are 25 Argentine exporters eligible to export under the quota.
Germany is expected to remain the top export market for Argentine beef due to the attractive price of high quality chilled cut exports. The United States is also expected to remain an important market because of stronger domestic beef prices, but fresh, chilled and frozen exports from Argentina will be limited by the quota. Currently undergoing a severe recession, Chile is expected to undergo economic recovery in 2000 which will boost demand for Argentine beef in that country.
In April 2000, Argentina expects to be declared free of foot and mouth disease without vaccination, the same status as countries without the disease. The countries which still do not accept chilled or frozen beef from Argentina include Japan, Korea, and Mexico. Argentina expects to gain access to those markets in the next year and a half. However, low Argentine inventories combined with the difficulty of entering any new market suggest the process of initiating sales to those countries would be slow.
The Brazilian economy has experienced a notable recovery since adopting the new floating exchange regime in January 1999. The devaluation has greatly benefitted the beef sector by helping boost exports. Cattle prices are very attractive, leading to expected herd stabilization in 1999 and 2000. The Brazilian herd had been undergoing a liquidation since 1995, but will edge up slightly in 1999 to 144.2 million head.
Cattle slaughter is expected to rise moderately in 2000, and beef production is forecast to rise 3 percent to 6.5 million tons. Brazilian beef exports have grown very sharply in 1999, displacing some Argentine product, particularly in the European Union. Exports are forecast at 485,000 tons in 1999 and are expected to grow more modestly in 2000.
Brazil is undertaking an FMD eradication program aimed at having brazil FMD-free by 2004. In early 1999, two foot and mouth outbreaks occurred in the southern area of the state of Mato Grosso do Sul, which has 13 percent of the Brazilian cattle herd. The outbreak led to an emergency slaughter program involving over 500 animals. Government officials claim the outbreak was caused by clandestine cattle imports from Paraguay.
The Brazilian government requested that the United States review the animal health conditions of the southernmost states of Rio Grande do Sul and Santa Catarina, both FMD-free with vaccination. An APHIS team arrived in Brazil during August 1999 to observe the veterinary infrastructure in these states, examine disease control programs, and observe diagnostic capabilities. The team is now compiling and reviewing the information, and will later begin a risk assessment of the probability of introduction of FMD to the U.S. herd through imports of fresh chilled and frozen beef from the two Brazilian states. Brazil is hoping to export fresh, chilled and frozen beef from these regions. It would be some time before there could be any proposed rule on regionalization.
The decline in EU cattle inventories which began in 1996 with the BSE crisis is expected to continue into 2000. The composition of the herd is shifting towards increasing numbers of beef cattle and a contraction of the dairy herd. Nonetheless, 60 percent of EU beef and veal production still comes from dairy animals. EU beef production is expected to decline in 1999 to 7.39 million tons as a result of BSE measures and dairy herd reductions.
BSE measures such as the Over Thirty Month Scheme (United Kingdom only) and Calf Processing Aid Scheme (CPAS--primarily used in the United Kingdom and France) are estimated to have taken a total of 5.4 million head out of the market since their implementation. A measure used to lower EU beef production through encouraging slaughter at lower weights, the Early Marketing Premium (EMP) was applied in the slaughter of 3.6 million EU calves, primarily in the Netherlands, France, and Italy. The CPAS and EMP were phased out in November 1998; however, the CPAS was extended in the UK where it ended in July 1999.
Beef consumption in the EU continues to make a slow recovery following the 1996 BSE scare. The short term recovery is being aided by promotion campaigns throughout the EU as well as national campaigns which have focused attention on the national origin of beef and its traceability to the farm level. Long term trends point toward a renewed gradual decline in consumption which existed prior to the 1996 crisis.
Intervention stocks stood at about 510,000 tons at the beginning of 1999, of which Germany had the largest share, followed by the United Kingdom, France, and Ireland. The EU Commission hopes to dispose of all stocks by the end of 2000, but this task will prove difficult in light of the EU beef market situation, poor success of sales out of intervention, and weak export prospects. Many foreign markets refuse to purchase intervention beef due to its lack of traceability and length of time in storage, despite its low price.
EU beef exports suffered a sharp decline in 1998 as a result of the crisis in Russia, the EU's top export market. The EU Commission reacted to the crisis by adding flexibility to exporting rules, i.e., by extending the validity of export licenses and making the security refundable. Asian countries were made part of the same destination code (with higher refunds) as Russia, in an unsuccessful attempt to develop new markets for EU beef. The Commission raised export refunds twice in late 1998, each by 8 percent, apparently with little success in rasing export volumes. Commission officials are apparently resisting demands for higher export refunds, arguing that the beef market is much more balanced than the pork market which has received higher refunds.
EU exports are expected to decline to 664,000 tons in 1999 and rebound to 771,000 tons in 2000. While the EU ban on exports of beef from Great Britain was lifted after three years on August 1, 1999, strict conditions on exports suggest that resumption of trade is likely to be minimal in 1999 and 2000.
In March 1999, EU heads of state passed the EU beef reform package as part of the Agenda 2000 Common Agricultural Policy (CAP) reform deal. The beef reform falls well short of the Commission's goals of restoring a better balance between supply and demand in the EU market by reducing production, increasing the sector's competitiveness, abolishing intervention, and simplifying the CAP. The reform includes a 20- percent cut in support prices, increases in existing premia (or direct payments to producers) and creation of a new slaughter premium, stricter criteria on extensification, a new intervention buying system, and additional "national envelopes" for direct aid to the sector.
The 20-percent support price cut compared to the original 30-percent cut proposal will likely have little effect on reducing the need for export subsidies and increasing competitiveness. Production incentives are likely to remain unchanged. The increased premia provide 100-percent compensation for the reduction in support prices (versus 80-percent in the original proposal), without counting the added benefit of the new slaughter premium.
Because of the EU's failure to comply by May 13, 1999 with the WTO arbitrator's decision that the ban on imports of beef from cattle treated with growth promotants was inconsistent with the principles of the SPS agreement, the United States suspended concessions on EU products as of July 31. On July 26, the WTO confirmed the right of the United States and Canada to impose 100-percent punitive tariffs on European goods. The trade sanctions against EU goods valued at US$116.8 million were granted in the case of the United States, while Canada was able to impose duties on Can$11.3 million worth of foodstuffs.
On July 20, 1999, the United States and the EU signed the Veterinary Equivalency Agreement. This agreement establishes a framework for recognizing equivalency of U.S. and EU production standards for over 40 different animal and animal products, including meat and meat products. The objective of this agreement is to facilitate trade between the two partners. The United States has begun to implement the agreement, and U.S. officials will be meeting with the EU Joint Management Committee early in 2000 so that both parties can discuss the status of implementation.
The longstanding liquidation which has characterized the Russian cattle herd is expected to continue through 2000. The rate of liquidation remains high, such that cattle inventories have dropped 10 percent annually since 1995. Calf production is expected to continue falling, dropping 3 percent in 1999. The primary limiting factor for cattle production currently is low feed grain supplies. The sector continues to undergo restructuring toward more efficient, smaller operations, and still faces shortages of inputs and equipment.
The August 1998 ruble devaluation dampened beef imports that year by 22 percent, however beef production did not rise to meet higher demand for domestic product. In response to critically low cattle inventories, local governments throughout Russia implemented decrees aimed at restricting cattle slaughter. Russian beef production continues to fall sharply, reflecting the reduced inventories as well as low slaughter weights in 1998 and 1999 due to feed grain shortages.
Imports are expected to recover slightly in 1999 to 500,000 tons, boosted in part by food aid packages from the European Union and the United States. Beef food aid from these suppliers in 1999 is expected to be around 195,000 tons (PWE), including beef variety meats. Commercial traders complain that the food aid packages are thwarting commercial trade, alleging that buyers are waiting for inexpensive food aid shipments of meat. Moreover, traders believe commercial sales are disadvantaged since a recent increase in the VAT from 10 to 20 percent and a new sales tax in Moscow will affect only commercial trade. However, both U.S. and EU food aid is targeted for regions where food shortages are expected, such that commercial trade should not be disrupted. The food aid agreements also specify that product must be sold at market prices, thereby not distorting the market. Beef imports are expected to remain stable in 2000.
Imports as a share of consumption fell slightly with the devaluation in 1998 and the ratio is expected to edge up to 23 percent in 1999. Beef consumption is expected to dip in 1999 reflecting declining purchasing power in Russia, lower beef production, and stagnant imports. Consumption is forecast to remain low in 2000.
Japan's beef production for 1999 is forecast to decline slightly from 1998 with imports rising to meet consumer demand. This trend is expected to continue into the year 2000. Japan's imports of U.S. and Australian beef in 1999 are expected to rise modestly.
While Japan's overall beef consumption for 1999 is expected to remain relatively flat, sales in the hotel, restaurant, and institution/home meal replacement (HRI/HMR) sector are showing moderate growth. With Japan's stagnant economy, consumers are seeking meat value by purchasing less expensive cuts, thereby sustaining consumption levels.
The relatively strong demand in the HRI/HMR sector that prevailed for inexpensive frozen beef cuts through 1998 is expected to continue in 1999. During the first half of 1999, Japan's frozen beef imports were up 3 percent with U.S. frozen cuts of short plate and brisket continuing to meet the solid demand in the BBQ, beef bowl, and take-out lunch box segments. As a result, imports of U.S. frozen beef were up 6 percent.
Despite the overall decline for Australian frozen parts during the first half of 1999, this year's trend is a solid increase in Australian short-fed, frozen loins, up 159 percent as compared to the first half of last year. Hotel/restaurant demand for inexpensive Australian loins for steaks and shabu-shabu seemed to have displaced more expensive U.S. frozen, grain-fed loins, which were down 18 percent in the same period.
Japanese imports of chilled beef are faring well, increasing 5 percent in the first half of 1999. Australian chilled beef seems to be benefitting the most from this situation with the performance of chilled loins making the difference. During January - June 1999, Australian chilled loins were up 11 percent contrasted to U.S. loins, which were down 16 percent.
Country of origin labeling will be mandatory as of April 2000. The current food market trend is to provide more food and ingredient information to consumers to gain their trust and confidence. This change in policy is not expected to have a major effect on U.S. beef, because most retail stores are already labeling product origin.
The effect of Korea's economic crisis on domestic cattle production reveals itself in inventory trends and slaughter levels over the last three years. Inventories of Hanwoo cattle increased until the economic crisis hit in the fall of 1997. With skyrocketing production costs coupled with falling live market prices and retail sales, producers moved a record number of cattle into marketing channels in 1998. While slaughter and production numbers peaked in 1998, consumption and imports dropped by 11 and 44 percent, respectively.
Ironically, consumption of domestic beef actually increased during the economic crisis indicating consumers willingness to purchase beef given its availability. Domestic beef consumption increased 14 percent between 1997 and 1998, while consumption of imported beef fell 36 percent. Regulatory requirements under the separate retail distribution system and imported beef wholesale distribution system proved effective in limiting the movement of imported beef from moving into the lone distribution channel (butcher shops) that showed expansion in sales during the crisis.
As Korea's economy strengthens, demand for beef is expected to rebound by 14 percent in 1999 and 7 percent in 2000. Beef production is expected to fall back to pre-crisis levels with imports increasing by 68 percent to meet the renewed demand for beef. High input costs will continue to drive cattle inventories and beef production down in 1999 and 2000. This trend is expected to settle out by the end of 2000. With lower domestic beef production, higher domestic beef prices, and a strengthening economy, imports are expected to increase by 33 percent to 240,000 tons in the year 2000.
Albeit imports are expected to increase in 1999, Korea is unlikely to meet its WTO minimum purchase commitment for the third year in a row. Korean import policies continue to be a thorn in the side of U.S. exporters attempting to gain access to the Korean market. Korea has instituted a retail distribution system that discriminates against beef imports by requiring that imported beef be sold through restrictive distribution channels and only in specialized stores. After unsuccessful consultations on Korea's import policies, the United States requested a WTO dispute settlement panel. The results of the panel are expected in the spring of 2000.
In July, Korea's National Veterinary Research and Quarantine Service approved a new health certificate for U.S. meat and meat products. Issues concerning notification of new listings of approved plants under the Food Safety and Inspection Service system and clarifications on slaughter and processing dates were resolved. The form is now available for use and should accompany export shipments.
Beef consumption is expected to increase by 8 percent in 1999 as pork prices remain high. Beef imports are also expected to increase in 1999 by 7 percent to 88,000 tons to match the corresponding increase in consumption. In the year 2000, consumption and imports are expected to level out. Australia continues to be the main supplier of beef to Taiwan, with a 55- percent market share on a volume basis. The United States holds a 23-percent market share. However, on a value basis, the U.S. market share is 33 percent, reflecting that fact that Taiwan imports greater quantities of high quality beef from the United States.
In June, foot-and-mouth disease (FMD) was found in cattle farms in Kinmen, a small island only a few kilometers offshore from China. In addition, Taiwan quarantine authorities announced that cattle in ranches in Southern and Central Taiwan tested positive for the FMD virus. All cattle ranches testing positive have been depopulated. This incident harkens back to the 1997 FMD outbreak that ravaged Taiwan's swine population, crippling the island's pig industry and bringing its lucrative pork exports to a halt. In the case of cattle, Taiwan's domestic beef industry covers less than 10 percent of Taiwan's total beef demand. Therefore, the FMD outbreak in cattle is not seen to have such a devastating effect, to the industry itself, but certainly represents a set back in Taiwan's efforts to eradicate the disease.
Imports of U.S. variety meats, as agreed to in the U.S. - Taiwan bilateral WTO pre-accession agreement, have been entering Taiwan under a 5,000-ton quota since August 1998. The 1998 imports of beef variety meats totaled 1,882 tons. In addition to high U.S. prices, Taiwan's specific requirements for the cutting, preparing, and packaging of variety meats were responsible for the quota not being filled. Taiwan's 1999 import quota for U.S. beef variety meats is 8,118 tons which includes the annual 5,000-ton quota and 3,118 tons of the un-used 1998 quota. Almost all the quota, or 8,114 tons, has been allocated.
Beginning July 1, 1999, Taiwan opened a 5,000-ton global quota for beef variety meats from countries other than the United States. Applications for this quota were open between July 12-15. Of the total quota, 4,500 tons was fully allocated. Whether the remainder of this quota (500 tons) will be reopened later is undecided at this time.
In December 1998, Taiwan quarantine authorities began to closely check sanitary certificates accompanying imported meat and red meat offal. Some shipments have been rejected entry because of discrepancies on the certificates and many certificates have had to be reissued.
Hong Kong is a mature market for beef. The high growth in beef consumption and imports seen in 1998 appears to have disappeared in 1999 as the bird flu crisis recedes and consumers return to poultry. For the first four months of 1999, Hong Kong beef imports plummeted 19 percent to 12,452 tons when compared to the same period of 1998. However, imports from the United States were able to maintain their level despite the decline in total imports. U.S. chilled beef performed particularly well, showing an increase in market share from 14 percent to 21 percent in 1999. The good performance of U.S. beef imports was largely due to less competition from New Zealand and Australian beef which have been in short supply. For 2000, consumption and imports are expected to remain fairly stable with a possible 1 or 2-percent increase.
Largely due to slow growth in China's economy, consumption is expected to increase only 2 percent in 1999. Similarly, beef production is estimated to increase slightly in 1999 to 4.4 million tons. Expecting that the Chinese economy snaps out of its slump, both consumption and production are forecast to resume stronger growth in 2000. China's beef imports were negligible at 6,000 tons in 1998. Australia was the major supplier with a 74-percent market share.
There are reports of a significant outbreak of foot-and-mouth disease in eastern China, affecting both swine and cattle. The Chinese Government notified the Food and Agricultural Organization (FAO) in Rome that the FMD problems in Fujian and Hainan Provinces and Xizang (Tibet) Autonomous Region were under control. These three provinces are minor producers of livestock and meat. However, according to trade sources, the problem is most severe in and around Shanghai which was not one of the areas notified to FAO. The extent and severity of the outbreak is still unclear.
Recently, the United States and China resumed discussions on China's bid to become a member of the World Trade Organization. The agricultural package, which was agreed to earlier this year provides improved market access for U.S. products via lower tariffs and more science-based sanitary measures. If China joins the WTO, tariffs on beef will be phased down from 45 to 12 percent in 2004, and beef offal tariffs will be reduced from 20 to 12 percent in 2004. Furthermore in April, China and the United States signed a bilateral cooperative agreement which indicates Chinese recognition of the U.S. certification system for meat and poultry. This agreement, coupled with tariff reductions, could significantly improve market access for U.S. meat products.
The Australian cattle herd is expected to increase modestly in 1999 and 2000 as renewed confidence in the beef industry and favorable seasonal conditions prevail. The actual number of cattle on feed for the March 1999 quarter was 1 percent higher than during the March 1998 quarter and 9 percent higher than the December 1998 quarter. The rise in cattle on feed reflects continued lower grain prices, stronger demand from the Japanese market and a 20-percent increase in numbers of short-fed cattle destined for the domestic market.
The 1999 cattle slaughter is expected to decrease by around 8 percent, because of the retention of stock for herd rebuilding and a recovery in the live cattle export trade. Similarly, beef production is forecast to decrease by five percent to 1.9 million tons. Increased slaughter weights due to improved pasture conditions and increased feedlot activity are limiting the fall in production.
Exports of cattle to South East Asian markets have recovered after the Asian crisis, and are currently running at 50 percent above the same January - May 1998 period. Export volume is expected to reach approximately 715,000 head with substantial increases to the Philippines, Indonesia, and Egypt.
Higher prices in the United States are encouraging increased Australian beef exports to the United States in 1999, although overall exports are forecast to decline. Australian exports to Korea are also expected to rebound after the Asian crisis. For 2000, Australian exports are expected to increase slightly.
New Zealand continues to rebuild its cattle herd after the 1997/98 drought with cattle inventories increasing by 2.7 percent in 1999. Total beef slaughter is expected to drop 6 percent to nearly 3.5 million head in 1999. High slaughter levels in 1997/1998 were the result of El Nino drought conditions which forced farmers to slaughter stock when faced with tight feed supplies. Beef production is expected to decrease 10 percent to 558,000 tons in 1999 and rebound in 2000 to 580,000 tons.
New Zealand's exports are expected to decline in 1999 as New Zealand focuses on rebuilding its cattle herd. The decline in New Zealand exports is due to the fall in beef production. Beef exports for the January-May 1999 period were down 19 percent from the same period in 1998. Exports to the United States were down by 18 percent while exports to Japan, Hong Kong, and Singapore were down 22 percent, 49 percent, and 36 percent, respectively. New Zealand exports are projected to recover slightly in 2000.
For further information, contact Monica Castillo, (202) 720-7285 or Aileen Mannix, (202) 720-6553.