Cattle and Beef
Due to a marginal increase in world beef production, beef exports in 2000 are forecast to edge up slightly from last years level. U.S. exports are expected to remain near the record 1999 level this year as export growth is constrained by slightly lower beef production and strengthening prices.
Cattle inventories in the selected countries covered in this report were nearly unchanged on January 1, 2000 from a year earlier, at 1.0 billion head. In 1999, herd expansions were notable in India and China, while the largest liquidations occurred in the Former Soviet Union countries, North America, and the European Union (EU). Low animal feed supplies and shortages of other production inputs forced continued liquidation in Russia, while North American cattle inventories were reduced due to low, albeit improving, prices in the United States and Canada. EU herd liquidation was related to Bovine Spongiform Encephalopathy (BSE) policy measures aimed at reducing beef overproduction.
Following two consecutive years of decline, slaughter in the selected countries is expected to grow slightly in 2000, to 213.9 million head. China and Brazil are expected to show the largest gains, while declines are expected for the United States, Australia, Ukraine, and the European Union, the latter reflecting a large decline expected for Ireland. Mirroring the increase in slaughter, beef production among the selected countries is expected to rise marginally in 2000, to 49.3 million tons.
Beef consumption among the selected countries is expected to rise slightly in 2000, to 48.2 million tons. Consumption growth is expected to be largest for those countries with strong production growth, China and Brazil. Beef consumption gains are also expected to be robust in Mexico and Korea as these countries continue to experience healthy economic growth. Consumption declines are expected to be widespread in 2000, the largest occurring in the Former Soviet Union, Argentina, and Australia.
Beef exports among the selected countries are expected to increase slightly from last years level in 2000, at 5.7 million tons. EU beef exports are expected to undergo a sharp decline this year as no new Russian food aid package is currently envisioned for 2000 and stocks have been reduced. Export growth is expected to be strongest among the South American countries, particularly Brazil and Argentina. Brazilian exports continue to benefit from the January 1999 devaluation of the Real, while Argentine exports are expected to grow due to low Argentine prices and an improved world market.
Now in its fifth year, the U.S. cattle herd liquidation is expected to continue in 2000, leaving ending inventories this year at 96.8 million head. However, despite continuing inventory declines and near record heifer slaughter over the past 3 years, cattle feedlot placements remain unusually large. Fed cattle prices and especially feeder cattle prices have been on the upswing beginning in 1999, reflecting tightening supplies.
Higher feedlot placements, particularly among heavier feeder cattle, are expected to bring large domestic beef supplies through summer. Slaughter weights are likely to remain at record levels as demand for higher quality beef of consistent quality remains strong. Nonetheless, U.S. beef and veal production is forecast to decline slightly overall in 2000, to 12.0 million tons.
Despite continuing strength in feeder cattle exports to Canada under the Northwest Cattle Project, cattle exports in 2000 are expected to dip 9 percent to 300,000 head. Cattle exports to Mexico continue to be depressed as beef exports replace live cattle exports and Mexican cattlemen are discouraged from importing breeding stock due to continuing drought and tight credit. Cattle imports are likewise expected to drop in 2000, by 7 percent to 1.8 million head. While feeder cattle imports from Mexico remain strong due to strengthening U.S. prices, live imports from Canada are expected to continue falling as Canadian cattle slaughter expands and beef exports increase.
U.S. beef exports in 2000 are expected to remain near the record level set in 1999, 1.06 million tons. Japan, Mexico, and Korea will likely remain top destinations, but tighter U.S. supplies (particularly in the second half of the year) and rising prices will dampen export growth. U.S. beef exporters are awaiting the final decision by the Mexican Commerce Secretariat (SECOFI) in the Mexican antidumping investigation against U.S. beef and beef offals, expected in early spring 2000.
After rising 9 percent in 1999, beef imports are expected to rise 5 percent in 2000. Imports of both manufacturing grade beef and higher quality cuts are expected to grow. Canada remains the top supplier to the United States, and beef imports from Canada are expected to remain strong as their live exports decline and throughput increases in the recently expanded slaughter plants in western Canada. Declining U.S. cow slaughter in 2000 will attract imports of lean beef from Australia, New Zealand, Argentina, and Uruguay. The two South American countries filled their separate 20,000-ton beef quotas for fresh, chilled, and frozen beef to the United States last year and are expected to do the same in 2000.
The Canadian cattle herd liquidation that began in 1997 is expected to continue in 2000 although at a much slower rate than in recent years. Beginning inventories in 2000 were 12.7 million head, down 2 percent from a year earlier. Prospects for declining inventories point to strengthening cattle prices, particularly for feeders. Despite the continued contraction, slaughter is expected to rise slightly in 2000 to 4 million head. The increase reflects sharply lower slaughter cattle exports and rising feeder cattle imports from the United States under the Northwest Cattle Project.
Expanded slaughter and chilling capacity in western Canada in addition to reduced inventories are largely driving the trend in falling cattle exports, forecast to drop 23 percent in 2000 to 800,000 head. Cattle imports have been rising sharply with the implementation of the Northwest Cattle Project (NWCP). Now completing its third season, the NWCP was established to facilitate trade in feeder cattle from participating U.S. states. Currently, six U.S. states are participating in the Project (Alaska, North Dakota, Montana, Idaho, Washington, and Hawaii), with Montana providing roughly three-fourths of the exports. Total Canadian cattle imports are expected to rise 7 percent in 2000 to 250,000 head.
Beef production, which beginning in 1996 had been rising nearly 8 percent per year, is expected to rise just 1 percent in 2000 to 1.24 million tons. This reflects slower growth in slaughter numbers this year despite expected new record slaughter weights. Following the 18-percent growth in 1999, beef exports are expected to rise more moderately in 2000 to 515,000 tons. The United States proved to be the strongest growth market last year; however, the most significant rate of increase occurred in beef exports to Mexico.
Beef imports rose 8 percent in 1999 to 260,000 tons. The growth was due to a substantial increase in frozen boneless beef. Growth was particularly strong for product from Uruguay and Argentina which supply primarily grinding beef; imports from these countries were nonetheless only about 13 percent of the total. Total imports are expected to rise 4 percent in 2000.
The Canadian Cattle Identification Agency remains on schedule to implement the mandatory identification system and database for all dairy and beef cattle by December 31, 2000. The system will involve individual tag retention through carcass inspection. The industry believes that trade dependency in the future will demand a quick response in the event of any disease outbreak or food safety issue.
Plagued by the continuing drought in northern Mexico, Mexicos cattle population continues declining. Beginning inventories in 2000 were 23.6 million head. Mexican cattlemen are discouraged from expanding production due to low profitability, overdue loans, and tight credit. Nonetheless, calf production is expected to rise slightly in 2000, to 8.5 million head.
Cattle exports rose sharply in 1999 to 960,000 head. Cow-calf operators in northern Mexico have expanded feeder cattle exports to the United States, taking advantage of strengthening prices due to declining U.S. supplies. Cattle exports are expected to rise slightly in 2000, attracted by further U.S. price increases.
Cattle imports fell sharply in 1999 to 114,000 head as tight credit, rising cattle prices, and drought conditions discouraged expansion. Cattle imports are expected to decline slightly in 2000. Slaughter is expected to rise slightly in 2000, and beef production is forecast to rise 2 percent to 1.9 million tons.
Healthy economic conditions in 1999 resulted in continued growth in Mexicos beef imports, which rose 11 percent to 247,000 tons. Beef imports are expected to rise 5 percent in 2000 to 260,000 tons. The United States continues to be Mexicos foremost beef supplier. High quality U.S. beef cuts continue to be favored by the upper income class and tourist sector, and imports of end meats for sale in supermarkets continue to rise.
SECOFI continues its investigation into allegations of dumping of U.S. beef and beef offals. In its August 2, 1999 preliminary determination, SECOFI announced it would impose duties on imports of U.S. beef and beef offals due to what were determined to be artificially low prices. A final decision in the case is expected in early spring 2000.
Due to adequate beef supplies and competitive retail prices, beef consumption is expected to rise modestly in 2000 to 2.16 million tons. Most of the increase will occur in regional markets in northern and central Mexico. In Mexico City, per capita beef consumption is rising due to higher incomes and substitution of cheaper variety meats for muscle meats.
Argentine cattle inventories have stabilized from the liquidation that began in 1993 and brief rebuilding in 1998, standing at 49.4 million head on January 1, 2000. Although cattle slaughter is expected to rise slightly this year, beef production is forecast to fall 3 percent to 2.8 million tons due to lighter average slaughter weights. Argentine consumers increasingly prefer more tender meat from younger cattle. Beef consumption is expected to fall 6 percent in 2000 due to lower production and increased exports.
Exports rose 15 percent in 1999 to 335,000 tons. The top markets were the European Union, the United States, and Chile, which together comprised about three-fourths of the total. Some Argentine exporters are expanding their shipments of natural or organic beef to the EU market, especially the Netherlands, Belgium, and the United Kingdom (UK).
For the first time, Argentina filled its 20,000-ton quota for fresh, chilled and frozen beef to the United States in 1999. While still a niche market, Argentina is shipping small quantities of Argentine Certified Angus premium cuts to the United States. Most of the beef shipped under the quota, however, is manufacturing grade beef.
Despite lower production, beef exports are expected to rise 12 percent in 2000 to 375,000 tons. This reflects relatively low and stable domestic cattle prices and an improved world beef market expected in 2000. Argentina will be Foot-and-Mouth Disease (FMD) free without vaccination for 1 year as of April 2000, and Argentine exporters are hoping to gain market access for fresh, chilled, and frozen beef to currently closed markets such as Japan, Korea, and Mexico by the end of 2000.
Declining since 1995, Brazils cattle inventories are expected to stabilize in 2000. Beginning inventories were 143.3 million head in 2000. Cattle slaughter is expected to rise moderately in 2000, which, in addition to a slight increase in slaughter weights, is expected to boost beef production 4 percent to 6.3 million tons.
Beef production growth is being driven by export market growth. In 1999, beef exports benefitted from the massive January devaluation of the Real (40 percent), increasing 47 percent to 550,000 tons. The EU accounted for nearly 70 percent of Brazils beef exports, but Brazilian exporters expanded other existing markets (such as the United States) and opened new markets, principally in the Asian countries. U.S. imports of Brazilian beef (entirely prepared and preserved beef due to FMD rose 50 percent in 1999 to 50,376 tons (PWE).
Brazils FMD eradication campaign is moving from south to north, and the goal is to eradicate the disease throughout the country by 2004. In late January 2000, the Technical Committee of the Office of International Epizootics (OIE) recommended to the OIE Board that they approve Brazils request for regional recognition of the Center West circuit of being FMD-free with vaccination. OIE is expected to give final approval to the Brazilian request at its May 2000 meeting in Paris.
The Brazilian government is actively pursuing USDA recognition of the two southern states (Rio Grande do Sul and Santa Catarina) as FMD-free with vaccination in order to export fresh, chilled and frozen beef to the United States. USDA is currently completing a risk assessment which will be followed by an economic impact assessment. The government of Brazil is also seeking APHIS recognition of the Center-West circuit as FMD-free with vaccination as soon as the OIE makes this determination in May 2000.
Still affected by the BSE crisis which erupted in March 1996, EU cattle inventories continued to fall in 1999, falling to 76.1 million head by years end. Cattle inventories are expected to fall further in 2000. EU policies aimed at dealing with the BSE crisis by removing cattle and beef from the distribution chain are being phased out. The Calf Processing Aid Scheme (CPAS) was terminated in July 1999. Throughput in the Over Thirty Month Scheme (applied to UK cattle only) is expected to begin declining in 2000.
BSE continues to be an important health issue in the EU, and although the EU Commission decided to lift the EU ban on British beef in 1999, France continues to ban British beef from its market. U.S. beef from cattle produced with hormones continues to be banned in the EU, and in July 1999 the United States imposed WTO-approved trade sanctions against EU goods valued at US$116.8 million. The new U.S. Non-Hormone Treated Cattle Program is encountering difficulties in the EU.
On March 9, the EU Standing Veterinary Committee voted to accept the U.S. plan for the EU Additional Residue Testing Program based upon the commitment to use an approved EU laboratory. The United States is still awaiting EU concurrence on the standards and methods that would be used to qualify a North American laboratory. If U.S. exporters of red meat (pork, horsemeat, and non-hormone treated beef) do not sign a contract with an approved EU laboratory before March 31, the EU will not permit red meat imports from the United States until a North American laboratory is qualified.
EU cattle slaughter is expected to fall 2 percent in 2000 to 25.5 million head, the decline attenuated by the new Agenda 2000 cattle slaughter premium. Some EU slaughter that would have normally taken place in the fourth quarter of 1999 was delayed until early in 2000 when the new EU slaughter premium took effect. Despite higher slaughter weights expected in 2000, EU beef production is expected to decline 1 percent this year to 7.4 million tons. Irish beef production is expected to fall 21 percent, reflecting low inventories. Exports of Irish cattle more than doubled in 1999 to 410,000 head and will remain near that level in 2000.
EU beef exports to third countries were much stronger than earlier anticipated in 1999, growing 20 percent to 810,000 tons. Denmark was the only EU country to show an export decline, while strongest gains took place in Ireland and Germany. Exports were boosted by the 150,000 tons of beef food aid sent to Russia. Main export destinations for EU beef in 1999 were Russia, Egypt, and Saudi Arabia. At the December 17 EU Beef Management Committee Meeting, export refunds for beef were reduced by between 5 and 30 percent depending on the cut. The export refund cuts were driven by the strong commercial exports but also made necessary by the Agenda 2000 budgetary restrictions.
EU beef stocks, which rose sharply with the onset of the BSE crisis, have returned to near pre-BSE levels. Beef consumption continued to edge back up in 1999 as consumers became more confident in their beef supply; consumption is expected to remain somewhat flat in 2000.
The EU country-of-origin beef labeling regulation is now scheduled to go into effect in September 2000 and will involve elements of the scheme which do not require full traceability and animal registration, such as slaughterhouse name and country. As of 2003, the second stage of the labeling scheme will come into effect and will cover elements that guarantee full traceability.
Shortages of veterinary supplies, animal feed, and poor genetics and management practices continue to plague the Russian cattle sector. Cattle inventories at the beginning of 2000 were less than half the size in 1991, at 27.0 million head. Beef production fell 9 percent in 1999, but is expected to stabilize in 2000 at 1.9 million tons.
Rising demand for raw material by Russian meat processors is boosting cattle prices, and the continuing devaluation of the ruble has resulted in beef prices 2-3 times higher than they were following the ruble collapse of August 1998. Due to domestic shortages of beef, Russian meat processors continue to rely on foreign suppliers for raw material. Beef imports rose 24 percent in 1999 to 600,000 tons. A sizeable share of 1999 imports was comprised of food aid shipments from the European Union and the United States.
Beef imports in 2000 are expected to fall 20 percent reflecting the lack of beef food aid prospects. Low consumer purchasing power combined with weaker imports and lackluster beef production are expected to result in further declines in domestic beef consumption. Consumption is forecast to fall 4 percent in 2000 to 2.5 million tons.
Japans total beef imports in 2000 are forecast to decline modestly from 1999 levels to 957,000 tons despite an anticipated increase in beef consumption as stocks are sufficient to meet the additional demand. Beginning stocks were at a higher level than a year ago due to increased imports, higher domestic production, and slightly reduced consumption in 1999. In 2000, the relative shares between U.S. and Australian beef in the Japanese market will likely remain the same as last year, 48 percent and 46 percent, respectively.
Japan continues to struggle with economic recovery, and consumers are seeking value by purchasing less expensive cuts. Beef consumption in Japan is expected to be around 1.5 million tons in 2000, a slight increase from 1999. Japans beef production for 1999 and 2000 is estimated to remain relatively flat at 540,000 tons and 530,000 tons, respectively.
Japans 1999 beef imports rose by 1.5 percent over 1998 to 965,000 tons. Strong sales of less expensive beef parts such as short plate, brisket, and chuck used for sliced barbecue packs, resulted in increased imports of inexpensive chilled parts from the United States, Australia, and Canada. The situation in Japans HRI/HMR sector in 1999 is analogous to the retail sector where sales have also been affected by thrifty spending when dining outside the home. The slower sales in the HRI/HMR sector is reflected by a small decline in Japans frozen beef imports.
With Koreas economy rebounding from its 1998 economic crisis, beef consumption increased nearly 17 percent in 1999 to 498,000 tons and is expected to increase another 8 percent in 2000. Beef production is dropping as inventories fall. Imports are increasing to meet the renewed demand for beef. Beef imports increased nearly 90 percent in 1999 to 202,000 tons and are expected to increase again in 2000 to 240,000 tons.
The contraction of the nations Hanwoo herd continued in 1999. Given significant reductions recorded in cow and replacement heifer ranks, the contraction is expected to continue into 2000. As the January 2001 date for market liberalization draws near, more Korean beef producers are exiting the sector, fearing the unknown risks associated with market liberalization. Small and medium-sized farm operations (those under 30 head) are leaving the industry in the greatest numbers.
Although imports are increasing, Korea did not meet its WTO minimum purchase commitment for 1999 and is not expected to meet its 2000 commitment. Koreas retail distribution system continues to discriminate against beef imports by requiring that imported beef be sold through restrictive distribution channels and only in specialized stores. After unsuccessful consultations on Koreas import policies, the United States requested a WTO panel. The results of the panel are expected in the Spring of 2000.
In December 1999, the Korean Ministry of Agriculture and Forestry announced it would auction the 2000 import quota held by LPMO. The first auction was held on January 28, 2000. Quarterly auctions are anticipated until LPMO has fully allocated its quota share (67,500 tons of 225,000 ton quota (PWE)).
Over 90 percent of Taiwans beef demand is met by imports, which continue to trend upward along with consumption. Taiwans 1999 imports exhibited strong growth of nearly 16 percent to reach 95,000 tons. In 2000, imports are expected to increase to 99,000 tons. U.S. market share declined slightly in 1999 to 21 percent and is expected to remain in that range in 2000. Australia continues to be the main supplier of beef to Taiwan, with 50 percent market share.
Beef consumption soared nearly 15 percent in 1999 to reach 100,000 tons. High pork prices and increased consumer exposure to beef in several newly opened hypermarkets and price club stores are driving the demand. Taiwans beef consumption is expected to continue to grow, albeit at a slower pace, as the diet of the average Taiwanese consumer becomes increasingly westernized. In 2000, beef consumption is expected to grow 4 percent as pork prices begin to fall and consumers switch back to pork.
For the year 2000, Taiwan merged the U.S. and non-U.S. quotas for beef variety meats into a global quota open to all WTO members on a MFN basis. The global quota for the first half of 2000 (equal to half of the 10,000 ton combined quota) was announced by Taiwans Board of Foreign Trade on January 26, 2000. Countries which meet Taiwans quarantine/food-safety requirements for beef and beef offal are the United States, Canada, Australia, New Zealand, Japan, Korea, and Sweden.
On January 7, 2000, Taiwans Bureau of Animal and Plant Health Inspection and Quarantine approved FSIS export form 9285-1. Completion of this form satisfies additional information requirements required by Taiwan for U.S. exports. Therefore, all U.S. meat and poultry exports to Taiwan accompanied by this FSIS export form are eligible for import into Taiwan.
Hong Kongs beef imports increased 8 percent in 1999 and are expected to increase again in 2000 by roughly 5 percent to reach 69,000 tons. This increase is fueled by a turnaround in beef demand following a downward trend in consumption from 1994 to 1997. In 1999, beef consumption increased 8 percent to 81,000 tons, and the consumption outlook for 2000 is for a slight increase to 82,000 tons. The China re-export market is also driving Hong Kongs beef imports. Hong Kongs beef re-exports to China increased 5 percent during the January - November 1999 period compared to the same period in 1998. U.S. short plate is a favored item for hot pots and is much in demand in China.
After China, the United States and Brazil are the major suppliers of beef to Hong Kong, with each holding roughly a 23-percent market share. However, the United States does not compete directly with China or Brazil as the United States supplies the higher end of the market.
Chinas beef consumption for 1999 increased 7 percent to 5.07 million tons and is expected to increase 6 percent in 2000. Similarly, estimated beef production for 1999 increased to 5.1 million tons and is forecast to reach 5.4 million tons in 2000. China's beef imports are negligible at 6,000 tons in 1999, with Australia, at 60 percent market share, the major supplier. However, the United States has been gaining market share over the past several years. In 1997, the U.S. market share was 13 percent. By 1999, U.S. market share increased to 31 percent.
Chinas bid to become a member of the World Trade Organization is ongoing. The agricultural package, which was agreed to in April 1999, provides improved market access for U.S. products via lower tariffs and sanitary measures based on science. When China joins the WTO, tariffs on frozen beef will be phased down from 45 percent to 12 percent by 2004, and on chilled beef from 45 percent to 25 percent. Beef offal tariffs will be reduced from 20 percent to 12 percent by 2004. As part of the April 1999 agreement, China recognized the U.S. certification system for meat and poultry. This recognition, coupled with tariff reductions, could significantly improve market access for U.S. meat products.
Australias 1999 cattle slaughter decreased around 5 percent to 8.9 million head as inventories fell. Despite the decrease in slaughter, beef production rose slightly in 1999 to 2 million tons as increased slaughter weights, due to improved pasture conditions, and increased feedlot activity stabilized beef production.
Following 3 years of declines, cattle numbers are expected to rise 1.5 percent in 2000 to 25.9 million head. Cattle slaughter and beef production are both expected to decrease by roughly 6 percent to 8.3 million head and nearly 1.9 million tons respectively this year.
Exports of live cattle increased 25 percent in 1999 to 775,000 head and are expected to increase again in 2000 by nearly 6 percent. Exports of cattle to South East Asian markets have recovered from the Asian financial crisis with substantial increases to the Philippines, Indonesia, and Egypt. Exports are expected to increase again in 2000 to 820,000 head.
Australias beef exports are declining from a 1998 high. Exports for 1999 declined to 1.24 million tons, down approximately 1 percent from 1998, and are expected to drop again to 1.22 million tons in 2000. The strengthening Australian dollar and tightening beef supply are contributing to higher prices and making other suppliers more attractive.
New Zealand continues to rebuild its cattle herd after the 1997/98 drought with cattle inventories increasing 3 percent during 1999. The mild winter and spring of 1999, coupled with a summer of higher than usual rainfall throughout New Zealand, has resulted in a January 1, 2000 cattle herd forecast of 9.1 million head.
In 1999, total cattle slaughter dropped 6 percent to 3.48 million head, resulting in a drop in beef production of 10 percent to 558,000 tons. The large decline in beef production was also attributed to lower beef slaughter weights. New Zealands beef production is expected to rebound in 2000 to 592,000 tons. New Zealands exports declined 19 percent in 1999 to 420,000 tons as New Zealand focused on rebuilding its cattle herd. New Zealands exports are projected to recover in 2000 to 460,000 tons.
For further information, contact Monica Castillo (202) 720-7285, or Tony Halstead (202) 720-4185.