Summary - The UK Government announcement of a possible causal link between BSE and the human variant CJD sent shockwaves throughout the world beef market. The EU has been most severely affected with beef consumption down as much as 20 percent in some member states. Beef exporting countries have also had to deal with consequences of BSE as consumers in many importing countries initially reduced their beef consumption. The effects of this crisis are likely to take years to work through completely. There is concern that EU beef consumption will not return to earlier levels in the near term, and as much as 700,000 mt of EU beef stocks will overhang the market by the end of 1996.
World beef production in 1996 remained nearly unchanged from 1995. Production decreased in the EU and the Russian Federation 7 percent and 6 percent, respectively, and increased in Brazil, Canada, China and the United States. Production in 1997 is forecast to increase by 1.5 percent. The cattle sector in the Russian Federation continues to contract but output will increase in many countries.
Since 1989 cattle inventories in the Russian Federation have spiraled downward from 59 million head to 36 million in 1996. Total world inventories in 1996, however, are expected to decreasedue mainly to a-1.1 million head decrease in the United States. In 1997 cattle inventories are expected to contract further in the United States as well as in Russia. A drought in parts of the United States in first half 1996 and low feeder cattle prices due to high feed costs contributed to the decline.
The world beef sector in 1996 was fraught with speculation as meat safety concerns dominated consumer purchasing decisions. Doubts about the safety of the world beef supply contributed to a one-percent drop in the world beef consumption estimate for 1996. The European Union was the leading cause; its estimate was reduced by 13 percent to 6.5 million tons. The rise in consumption of other meats in the European Union clearly resulted from concerns surrounding beef safety.
Beef consumption is not expected to recover in 1997, and is even projected to drop by another one percent to 45.1 million tons. The Russian Federation is affecting the drop in 1997 as consumption is forecast to decrease by 8 percent to 3 million tons. However, consumption in Asia remains strong, and projected to increase by 6 percent to 7.1 million tons. Likewise, per capita consumption in Asia, particularly in China, Hong Kong, Japan, and Korea continues to surge upward. Since 1992, per capita consumption in these four countries rose 153, 42, 29, and 50 percent, respectively.
As expected, world beef exports in 1996 also were reduced. The 5-percent drop in the export estimate resulted primarily from a precipitous drop of 37 percent in estimated EU exports as the world reacted to the news that EU beef was contaminated with BSE. Estimated exports for the United States increased 8 percent in 1996. In addition to increased exports to Japan, Mexico and South America, the United States is making large proportional gains in non-traditional markets in the United Kingdom, Saudi Arabia and the United Arab Emirates. For 1997, world exports are projected to increase 3 percent, while the United States is expected to realize a 14-percent gain.
Graph: Major Beef Importers, 1992-1997
U.S. beef exports fell sharply this past summer, as the recent incidence of E.coli caused a loss of Japanese consumer confidence in the safety of all foods and lowered meat consumption. From June to July, the volume of U.S. beef exports declined 5 percent, while those to Japan, the largest foreign market for U.S. beef, dropped 10 percent. Despite these export reductions, an 8-percent, year-over-year, increase in U.S. beef exports is projected for 1996, as beef sales to Japan, Canada, and Mexico strengthen.
Improved foreign market demand is expected to continue into next year, as U.S. beef exports are forecast to increase 14 percent to reach 1.02 million tons
U.S. beef imports declined slightly in 1996, compared to 1995, and an additional import reduction is expected in 1997. In 1997, beef imports are estimated at 919,000 tons, down from an estimated 950,000 tons in 1996 and 954,000 tons in 1995. Reduced imports from Australia, the largest supplier in 1995, are the primary reason for these declines. From January to July 1996, U.S. beef imports from Australia dropped almost 30 percent, compared to same period in 1995. This steep reduction caused Canada and New Zealand to surpass Australia and to become the first and second largest suppliers, respectively, to the United States in this period. Competitive U.S. beef prices have contributed to reduced U.S. beef imports from Australia this year. In 1997, the U.S. market is expected to remain highly price competitive and result in lower beef imports from Oceania.
Cattle imports are also lower this year than last year. In 1996, cattle imports are estimated at 2 million head, down sharply from 1995 imports, which totaled 2.786 million head. Cattle imports from Mexico, primarily stocker-feeder cattle, are well below year ago levels. In the first half of 1995, cattle imports from Mexico reached record amounts following the December 1994 peso devaluation and persistant drought in northern Mexico. Cattle imports from Canada, however, are up well above a year ago, about 45 percent, are expected to reach a record 1.5 million head in 1996. Larger fed cattle supplies in western Canada are the primary reason for this increase. In 1997, cattle imports from Canada are forecast at 1.1 million head, as larger cattle supplies are purchased by Alberta packers.
For January 1, 1997, the U.S. cattle herd is estimated at 102. million head, the first inventory reduction since 1989. Drought in the first half of 1996 in the heart of the beef sector, sharply higher feed costs, and reduced market returns caused producers to lower cattle numbers this year. The beef cow herd is in decline for the first time since 1989. The beginning 1997 beef cow inventory is expected to decline 3-4 percent from the 35.3-million-head herd at start of 1996. Despite a lower cattle inventory and breeding herd next year, domestic beef production is expected to continue to increase because of larger fed steer and heifer supplies and higher slaughter weights.
Cattle-on-feed inventories, while below a year ago, continue to rise as grain prices decline seasonally and fed cattle prices are supported by marketings that are below a year earlier. Corn prices in Central Illinois averaged $4.48 in August and likely declined to about $3.39 in September as the new feed year began. Consequently, large numbers of heavier weight feeder cattle have been placed on feed as feedlots become more profitable. More cattle, at heavier weights, are likely to be carried into the fourth quarter of 1996 and early 1997.
Canadian beef imports from the United States have increased in 1996 and are forecast to do so again in 1997, as the United States captures a larger share of Canadian beef import demand. In 1997, Canadian total beef imports are projected at 200,000 tons, down 35,000 tons from the 1996 estimate because of lower beef imports from Australia and New Zealand. Canadian beef exports are well above a year ago and are expected to increase again in 1997. In 1997, Canadian beef exports are forecast at 310,000 tons, up from 260,000 tons in 1996 and 219,000 tons in 1995. Rising exports to the United States are the primary reason. U.S. beef imports from Canada increased 35 percent in the first seven months of 1996, compared to the same period in 1995. Larger beef supplies in western Canada have been key to these increases.
This year the Canadian beef cow inventory reached its highest level since the record inventory build-up of the mid-1970's. On January 1, 1996, the Canadian beef cow herd totaled almost 4.39 million head, 2.6 percent larger than at the start of 1995. The relatively low-cost of feeding cattle in western Canada fostered the beef cow herd expansion that has taken place since 1987.
Beef cow herd liquidation is now occurring as producers respond to reduced market returns and increased feed costs. Older cows are being sold-off and fewer heifers are being retained for breeding purposes. The beginning 1997 beef cow inventory is estimated at 4.3 million head, nearly 2 percent lower than at the start of 1996.
Canadian beef production is forecast to increase again in 1997. A large 1996 calf crop is projected to contribute to a 9 percent beef production increase in 1997. Part of this beef production increase is expected to result from Alberta packers bidding for cattle supplies that would typically be shipped to the United States. With Alberta's packers expanding cattle slaughter, an elevated level of Canadian beef production is the outlook through 1999.
In a positive development for U.S. beef exports, Mexican beef import demand is increasing following the December 1994 peso devaluation and resulting Mexican economic slowdown. From January to July 1996, U.S. beef exports to Mexico totaled 28,682 tons (product-weight basis) ($79 million), up 75 percent from the same period in 1995. Recent trade data also indicate a steady, gradual rise in Mexican beef purchases. Consecutive monthly export increases occurred from March 1996 to July 1996. During this period, U.S. beef exports to Mexico grew at an average month-over-month increase of 14 percent. The 1997 outlook is for increased Mexican purchases of U.S. beef. Mexican beef imports next year are forecast at 110,000 tons, up about 45 percent from 1996.
Mexican cattle import demand is also rising. U.S. cattle exports to Mexico reached 52,461 head during January-July 1996, up from 6,149 head in the same period in 1995. Most of this expansion was a result of increased Mexican purchases of cattle for immediate slaughter, an additional indication of climbing Mexican meat demand and the inability of Mexican herds to meet consumption. In the first seven months of 1996, U.S. exports of cattle for immediate slaughter totaled approximately 39,000 head, up from about 3,500 head in the period January 1995.
In the northern states, recent evidence suggests some economic improvement in the cattle and beef sector, which has been afflicted by drought and financial hardship in the past several years. Generally favorable precipitation occurred across the northeast and north-central portions of Mexico during the recent summer months, boosting forage resources and offering some relief for ranchers and dairymen reeling from rising feed costs. Mexican cattle exports to the United States remain well below 1995 exports, as U.S. stcoker-feeder cattle prices remain low.
Mexicans are purchasing more cattle for breeding purposes, suggesting at least
some herd development. From January-July 1996, U.S. exports of beef cattle
for breeding use to Mexico totaled 8,841 head, compared to 959 head during the
same period in 1995. Exports of dairy cattle also rose, nearly doubling to
4,593 head.
Graph: U.S. Beef Exports to Mexico, 1993-1996
Improved economic stability is expected to boost Brazilian beef consumption in 1997. Since the introduction of the Real currency and other economic reform measures beginning in mid-1994, reduced price inflation and moderate economic growth have helped to increase beef consumption. Per capita beef consumption in 1997 is estimated at 29.6 kilograms, up from 26.4 kilograms in 1992.
Brazilian beef import demand is increasing, and the United States is benefiting. U.S. beef exports to Brazil jumped from 84 tons (product-weight basis) from January to July 1995 to 495 tons (product-weight basis) for the same period in 1996.
Despite better beef demand, producer prices have declined in 1996, as producers have increased cow slaughter and average carcass weights. Brazilian beef production in 1996 is estimated at 4.96 million tons, up 4 percent from 1995. Production in 1997 is projected to increase another 4 percent, as output reaches 5.15 million tons.
Brazilian beef exporters have experienced major losses in European Union this year, as a result of the incidence of Bovine Spongiform Encephalopathy (BSE) in the European Union and its reported possible link to a newly identified variant of Creuzfeldt-Jakob disease. The European Union is the largest beef export market for Brazil. Thermally processed beef exports to the European Union have been most affected, declining nearly 36 percent in 1996, compared to 1995.
Despite market losses in the European Union, expanded exports to other markets have resulted in an overall increase in Brazilian beef exports this year. In 1996, Brazilian beef exports are estimated at 315,000 tons, up from 269,000 tons in 1995. With shipments to the European Union and other markets expected to improve, exports are projected up again in 1997, reaching 360,000 tons.
International demand for Argentine beef is expected to rise next year. Argentine beef exports are expected to increase from 450,000 tons in 1996 to 480,000 tons in 1997.
The January 1, 1997 Argentine cattle inventory is projected at 51.7 million head, the lowest herd size since 1971. A two-year drought and better production returns from dairying and cropping alternatives have caused producers to shift operations and reduce herd numbers. The five-year outlook is for an expanded inventory as Argentine producers respond to expected improved export prospects.
Russian beef imports are expected to increase in 1997. New customs duties on meat imports, introduced on May 15, 1996, however, are expected to slow the pace of Russian beef imports into 1997. Beef imports have grown from 541,000 tons in 1994 to an estimated 612,000 tons in 1995 and 610,000 tons in 1996. A 15 ,000 ton import increase is forecast for 1997. Reduced domestic meat supplies have been an important factor contributing to growing beef import demand in recent years, but expanded import demand for competing meats is expected to temper 1997 beef import growth.
The top suppliers to the Russian market are Ukraine, Ireland, and Germany. In 1995, Russian frozen beef imports from Ukraine, Ireland, and Germany totaled 155,868 tons, 86,126 tons, and 51,326 tons (product-weight basis), up 21 percent, 38 percent, and 69 percent from 1994, respectively. Meanwhile, Russian frozen beef imports from the United States nearly quadrupled from 1994 to 1995, reaching almost 4,500 tons (product-weight basis).
Despite the collapse of the former centralized state procurement system, beef marketing in Russia remains highly concentrated. Official statistics indicate that vestiges of this system were involved with roughly 60 percent of the beef marketed in 1995.
As in recent years, the Russian cattle inventory continues to decline. The January 1, 1997 Russian cattle herd is estimated at 36.5 million head, down 3.2 million head and 22.3 million head from the beginning of 1996 and 1990, respectively. A decline in state production subsidies are one reason cattle numbers have fallen. The herd reductions of large-size livestock enterprises account for a large portion of the total decrease in Russian cattle numbers. Increases in the number of cattle on private plots is not expected to lead to significant Russian meat production increases in the next several years.
Parts of the Russian cattle sector remains relatively stable. In certain parts of the Ural region, where 15-20 percent of the Russian cattle herd is raised, inventories have declined less drastically the past several years. In Bashkortostan, a republic in the Urals, the local herd has declined less drastically than in other parts of Russia, about 5 percent since 1993 because of intervention measures introduced by local authorities.
Russian beef production is forecast at 2.4 million tons in 1997, down 9 percent from this year. Along with cattle supplies, beef production has declined sharply in the past several years. Next year's beef production estimate is only about 65 percent of the 1992 level.
Increased domestic beef consumption appears to be the reason that cattle exports in 1996--previously estimated at 130,000 head--are estimated to reach only 100,000 head. Beef consumption is rising rapidly in China. For 1996, per capita beef consumption is estimated at 3.6 kilograms per capita, up sharply from only 1.0 kilogram in 1990. Total beef consumption in 1997 is projected to increase another 7 percent to 4.6 million tons as per capita consumption increases to 3.8 kilograms. Conversely, cattle exports in 1997 are expected to show no increase from 1996 levels. Rising disposable incomes and the government's efforts to encourage more consumption of beef and chicken and less pork are the primary reasons for the strong beef demand.
China's 1996 beef exports are expected to increase 3 percent to 105,000 tons and then decline 5 percent in 1997 to 100,000 tons due to rising local demand, while beef imports continue to grow. According to Chinese official statistics for 1997, China's beef imports are projected to increase 25 percent to 5,000 tons. However, it is generally assumed that China's actual beef imports are much higher because much of the beef is smuggled into China through Hong Kong. Currently, the hotel-restaurant sector buys most of the imported beef. But with the frenzied growth occurring in China's fast-food chains and large supermarkets, demand for U.S. beef should continue to rise.
China imports no livestock or livestock genetic material because of restrictive trade and sanitary policies. It's relatively high import duties of 12 percent for MFN countries and 30 percent general rate discourage trade. The protocol signed in June 1995 between the United States and China on live cattle exports to China has yet to produce any results. Yet, despite these trade restrictions, China's livestock industry is very interested in U.S. products, particularly U.S. livestock breeds and management practices.
The beginning 1996 herd inventory was adjusted downward by 3 million head from the January estimate to 127 million head. However, this is still a 4-millionhead increase from 1995. Herd expansion is expected to continue in 1997 as rising consumer meat demand continues to foster herd expansion. The beginning 1997 inventory is forecast at 131 million head, up 4 million head from 1996.
Despite the dramatic effects the BSE scare and the E. coli epidemic have had on consumer beef purchases, total beef consumption for 1996 is still projected to be strong. For CY96, total beef consumption was lowered only slightly from an earlier estimate of 1.56 million tons to 1.54 million. According to Japanese household consumption statistics, beef consumption for April and May (immediately after the BSE scare began) declined about 15 percent each month, while consumption of other meats declined only slightly. And according to MAFF meat marketing statistics for June, consumption dropped again by about 17 percent due to the E. coli scare. However, strong sales in the beginning of the year continues to support the 1.54-million metric ton estimate for 1996. Demand for high quality beef is expected to bolster consumption slightly higher in 1997 to 1.57 million tons
The Japanese are fond of eating raw meats, such as raw beef liver, raw horse meat, and raw fish. The recent E. coli epidemic now has consumers on alert about the potential risks of eating uncooked meat as one case of E. coli was attributed to raw beef liver in a restaurant. The Ministry of Health and Welfare has also issued a public statement warning Japanese consumers to refrain from eating raw meats, including liver. Supermarkets and restaurants responded to the warning by refusing to sell meats for sashimi (sliced raw meat and fish). Some U.S. raw liver suppliers also reported canceled sales.
To alleviate the fears of BSE, the GOJ issued new guidance requiring country of origin labeling for imported red meat and poultry. Previously, retailers were required to label meat as only "imported". The new labeling, effective August 1, now shows country of origin. The U.S. meat industry has welcomed the new labeling requirements as Japanese consumers recognize U.S. beef for its quality and value.
Trade data through July 1996 would suggest that beef imports will exceed the
previously established 1995 record, giving false signals on the impacts of the
BSE scare. Frozen beef imports were particularly high during April - June,the beginning of the
JFY. The reason for the increased volumes was due to
Japan's tariff structure. Japan is allowed to raise the tariff when frozen
beef imports in any quarter of the JFY increase by more than 117 percent
compared with the same period a year earlier. The Japanese import tariff on
frozen imported beef rose from 46.2 percent to 50 percent on August 1 when
total frozen beef imports of 122,142 tons exceeded the trigger level of
97,244 tons. However, BSE concerns were paramount in people's buying
decisions, and much of the frozen imported beef remained unconsumed, causing
stock levels to soar in June to 180,000 tons, 39 percent higher than in June
1995.
Graph: Japanese Beef Imports
Beef imports are expected to level off in the second half of the fiscal year, but still show a modest increase of 3 percent from 1995 to reach 670,000 tons. The United States is expected to be the primary beneficiary of this strong demand, and will for the first time, beat out Australia as the number one supplier to Japan. Exports from the United States are projected to reach 325,000 tons compared with 305,000 for Australia. Lower U.S. beef prices, and a Japanese preference for high-quality U.S. chilled beef contributed to the U.S. position. Japanese beef imports in 1997 are expected to remain strong, and are projected to rise by 3 percent to 689,000 tons. A gradual decline in domestic dairy steer beef is providing ample opportunity for imports to fill the gap in demand.
The BSE scare has meant big business for the domestic Wagyu beef industry. The Japanese found renewed interest in domestically produced beef because of fears of BSE infected imported beef. This resurgence of interest also propelled domestic Wagyu beef prices higher in the wholesale carcass market which have sustained extremely low prices for some time now. Reportedly, for JFY95, no deficiency payments were paid out for Wagyu cattle , since average prices for Wagyu feeder calves remained above the floor price of 304,000 yen for black Wagyu and 280,000 yen for brown Wagyu. Supermarket chains are helping to support these strong prices by displaying Wagyu beef as safer.
Beginning cattle inventory for 1996 was reduced by 88,000 head to 4.8 million head, and is projected to contract again slightly in 1997. The reduction comes as no surprise, as Japan's production cycle, which peaked in 1995, is expected to show declines over the next few years. Likewise, beef production also continues to decline: 1995, 601,000 tons; 1996, 585,000 tons; and 1997, 570,000 tons.
Hong Kong, with only 35 square kilometers of farmed land, does not have a significant livestock industry. China supplies 99 percent of its live cattle, the total of which amounted to 109,000 head in 1995. However, imports of live cattle is declining, while beef consumption continues to increase. Hong Kong consumers prefer pork nearly 4 to 1, but beef consumption in 1996 increased 13 percent from 1995 to 96,000 tons, and is projected to increase another 8 percent in 1997 to 104,000 tons.
Hong Kong is primarily a frozen beef market. In 1995, Hong Kong consumed 39,000 tons of frozen beef, representing 46 percent of total beef consumption. Increased storage facilities at supermarkets, and an increase in working females who no longer have the time to purchase fresh meat daily, are the reasons for the growing popularity of frozen beef. In addition, the Hong Kong food service industry consumes a significant portion of frozen beef. The most popular beef consumed in Hong Kong is frozen boneless beef, followed by frozen bone-in, and fresh or chilled boneless.
Hong Kong is one of the few markets where free access is granted to all overseas food suppliers. There are no import tariffs on beef, but import licenses are required for frozen and chilled meats and poultry, as well as supported with valid health certificates. The BSE scare also prompted the Hong Kong Department of Health to ask for additional certification that imported beef was BSE free. The United States complied with this request and has added the statement to its health certificate "The United States is Free of BSE".
Hong Kong relies heavily on beef imports, the largest volume supplier being China, followed by the United States and New Zealand. In value terms, the United States is the largest supplier. In 1995, the value of U.S. imports reached $43 million, compared with $27 million for Chinese beef. Already, for 1996 (Jan-Jul), U.S. beef exports to Hong Kong totaled 5,282 tons, valued at $23.3 million. Total U.S. beef exports to Hong Kong in 1996 are projected at 8,124 tons. U.S. beef has captured a high quality-niche market in Hong Kong and is sold at a premium to Chinese beef. Total imports for 1996 and 1997 are projected at 175,000 tons and 189,000 tons, respectively. Not to be overlooked however, is the successful penetration of New Zealand and Australia into this market. Very competitive prices in 1995 enabled New Zealand to increase its share by 64 percent, and Australia by 76 percent. Both countries are expected to increase share again in 1996.
Taiwanese cattle inventory in 1996 remains steady at 165,000 head. The beef livestock industry in Taiwan accounts for less than 10 percent (6,000 tons) of Taiwan's beef demand. Of the 165,000 head in inventory in 1996, only 26,000 were beef cows, the rest being for dairy production. No change in stocks or in beef production is expected for 1997.
The primary meat in Taiwan is pork, where consumption surpasses beef by 13 fold. Whereas pork demand is increasing, beef appears to be holding steady at around 73,000 tons. Therefore, imports, which provide over 90 percent of Taiwan beef , remain locked-in at around 67,000 tons. The key then to the sustained growth of U.S. market share in Taiwan is its recognition as the predominant supplier of Special Quality Beef (SQB). Taiwan grants preferential tariff rates to SQB, and USDA grades Prime and Choice rate this status. U.S. beef in Taiwan is sold chiefly to hotels and expensive restaurants.
U.S. total share of Taiwan's beef market--at 18.3 percent in 1995--is relatively small compared with Australia's 55 percent. However U.S. share improved last year while Australia's declined. This indicates a gradual increase in demand for SQB, which is virtually all supplied by the United States. Australia dominates in the shin, shank and intercostal (S/S/I) cuts, while New Zealand leads in supplying non-SQB steak cuts.
Economic growth in Korea continues unabated, and is expected to exceed 7 percent annually through the year 2000. The effect on beef demand has been near double digit growth, which is expected to continue in 1996, in 1997 and beyond. The consumption estimate for 1996, was lowered from its earlier estimate of 465,000 tons to 458,000, but still represents an increase of over 9 percent from 1995. The reduction was due mainly to the BSE scare. Despite this setback, the forecast for 1997 is similar to 1996's trend; consumption should increase nearly 10 percent to 495,000 metric tons.
Strong demand and market liberalization are fueling the beef import surge in Korea. Imports are allowed under a yearly import quota announced by Korea'sMinistry of Forestry and Fisheries. And every year, imports exceed this figure because high domestic cattle prices force the government to import well above the annual quota level. Imports in 1996 are expected to exceed the quota level by 11,000 tons and reach 158,000. Imports for 1997 are currently projected at 174,000 tons, or 7,000 above the quota level. However, this forecast can change depending on the government's evaluation of the domestic livestock sector.
U.S. beef has been the primary beneficiary of market liberalization in Korea. According to Korean import data for CY1994 and CY1995, the U.S. share in quantity amounted to 48 and 50 percent, respectively.January - May 1996 indicate a 51-percent share for the United States, indicating a continuing gradual increase in market share. Beef is currently imported frozen, but the recently concluded shelf-life agreement, extending the shelf-life for chilled beef and pork, is expected to result in a gradual shift to chilled beef imports over the next few years. The prospects for increased U.S. beef exports to Korea are good once chilled beef imports become an accepted practice.
The most notable change in Korea's livestock sector is the record calving rate expected for 1996, estimated at 1.1 million head. Strong demand for beef in the beginning of the year caused domestic cattle and calf prices to rise. Consequently, farmers held back more breeding heifers--as they have for the last two years--leading to the record calf numbers estimated for 1996. Likewise, record beginning inventory numbers--currently estimated at 3.5 million head--are expected in 1997. However, in 1997, it is anticipated that farmers will begin to liquidate their herds, allowing calf production to drop to 782,000 head, and inventories to 3.3 million. Total slaughter for 1997 is projected to rise by 10 percent to 933,000 head. If farmers liquidate their herds dramatically in 1997, allowing prices to drop appreciably, the level of beef imports may be affected. The government has a stated policy to maintain the Hanwoo cattle population at around 2.5 million head. In June 1996, the Hanwoo inventory was estimated at 2.8 million head, giving credence to expected herd liquidation in 1997.
The government intends to maintain its Hanwoo cattle population at the 2.5 million-head level even after liberalization. However, the structure of the industry; i.e., lack of cow/calf operations, small size of farms, lack of available land, and high production costs, means that the government must support its cattle farmers if the industry is to remain competitive with imported beef. Government support includes low-interest loans, free forage seed, improved infrastructure in rural areas, improved livestock genetics, andconstruction of livestock pollution facilities. The government also can intervene in the market and purchase domestic beef to stabilize prices. On the marketing side, the government has attempted to maintain/generate a market for Hanwoo beef by building Hanwoo-only retail outlets for chilled beef, by developing a labeling system on specific cuts, and by initiating a new grading system at the retail level. If current policy is to maintain a niche market for Hanwoo cattle at the 2.5 million head level, this means that the expected double-digit growth in beef consumption will need to be satisfied by increased imports.
The New Zealand beef herd finally reached its peak in 1996. After gradually increasing about 3 percent annually over the past five years, the beef cow inventory is projected to decrease by 6 percent in 1996 to 1.5 million head. Depressed world beef prices, an appreciating N.Z. dollar, and reduced demand from the United States--New Zealand's largest export market for beef--have cut deeply into New Zealand's cattle producer returns. Conversely, the dairy herd continues to increase, offsetting any decrease in the beef sector, so that total cattle inventory will increase by 211,000 head to 9.0 million by January 1997.
Despite reduced demand from the United States, 1996 is expected to be a record beef export year for New Zealand while a slight decline is projected for 1997. Exports in 1996 and 1997 are estimated at 505,000 tons and 490,000 tons, respectively. To buffer the reduction in beef exports to the United States, which declined from 76 percent of exports in 1992 to only 55 percent in 1995, New Zealand increased its exports to Japan, South Korea, Taiwan, Hong Kong and Singapore. Exports to Canada, New Zealands second largest market, have been slowing, from a high of 50,265 tons in 1993 to 43,638 tons in 1995. New Zealand beef exports to the United States thus far in 1996, at 123,200 tons, are down 12 percent.
Improved weather conditions and a return to more normal crop conditions were beneficial to the cattle sector in 1995; better pasture conditions allowed producers to increase their herd size by 764,00 head to 26.5 million head. However, feed grain prices also increased because world grain stock levels were at historically low levels, and this led to reduced numbers of cattle onfeed in Australia. The actual number of cattle on feed in March 1996 was 434,693 head, six percent lower than in December 1995. Not only were grain prices high, but demand for grainfed beef in Japan declined in the face of stiff competition from the United States. Also an appreciated Australian dollar exacerbated the problem for the feedlot sector. Fortunately, demand increased domestically for grainfed beef, which helped to slow the decline in feedlot numbers. Herd size is also projected to increase to 26.6 million head in 1997 due to good seasonal conditions.
The number of cattle slaughtered in 1996 is estimated to be up 2 percent to 8.0 million head due to poor seasonal conditions last year which led to heavy slaughterings early in the year. Slaughter in 1997 is projected at 8.3 million head in conjunction with a larger projected herd size. Likewise, beef production in 1996 and 1997 is expected to increase to 1.8 million tons and 1.9 million, respectively. Australian beef production will also reflect a higher proportion of manufacturing and frozen grass fed beef, while grainfed beef production contracts in response to less cattle on feed.
Strong export demand for feeder and slaughter cattle continues in Australia, particularly from Indonesia and the Philippines. The increase in demand for cattle reflects east Asian preference for fresh killed meat, the relatively high import tariffs on beef, the inadequate infrastructure to handle imported beef, and the government policies in importing countries which are designed to develop local livestock production. Australia has also gained markets in Egypt and North Africa, traditionally EU markets, because of recent cuts in the EU's live cattle export subsidies. For 1996 total cattle exports are estimated at 630,000 head, and are projected to increase again in 1997 to 660,000 head.
Exports of Australian beef for 1996 and 1997 are estimated at 1.1 million tons and 1.2 million, respectively. However, Australia will export less grainfed beef due to a contraction in grainfed production. Likewise, exports to Japan--estimated at 320,000 tons in 1996--will comprise less than 35 percent of grainfed beef. According to Australian import projections, sales to the United States in 1996 are expected to drop 14 percent to 180,000 tons, and no increase in sales is expected for 1997. However, sales to the United States for January-July 1996 are only 98,191 tons, 29 percent below last year's level. This means that Australia will need to export 81,809 tons in the remaining 5 months of 1996 to reach its projection. However, this level ofexports to the United States is not expected. Korea has emerged as Australia's third largest export market in recent years with exports of 65,000 tons expected for 1996.
Hong Kong Beef and Veal Imports (in 000 metric tons and product weight) 1994 % Share 1995 % Share 1996 % Share U.S. 4 7.4 5 10.9 8 15.1 China 13 24.1 15 32.6 17 32.1 New Zealand 4 7.4 7 15.2 8 15.1 Australia 2 3.7 4 8.7 5 9.4 Argentina 1 1.9 4 8.7 5 9.4 Brazil 9 16.7 5 10.9 5 9.4 Others 21 38.9 6 13.0 5 9.4 Total 54 100.0 46 100.0 53 100.0 Taiwan Beef and Veal Imports (in 000 metric tons and product weight) 1994 % Share 1995 % Share 1996 % Share Australia 30 65.2 26 53.1 28 57.1 New Zealand 10 21.7 10 20.4 10 20.4 U.S. 5 10.9 8 16.3 11 22.4 Canada 1 2.2 5 10.2 0 0.0 Total 46 100.0 49 100.0 49 100.0 Korea Beef and Veal Imports (in metric tons and product weight) 1994 % Share 1995 % Share 1996 % Share U.S. 60 49.6 91 63.6 93 58.1 Australia 40 33.1 26 18.2 50 31.3 New Zealand 19 15.7 24 16.8 15 9.4 Canada 2 1.7 2 1.4 2 1.3 Total 121 100.0 143 100.0 160 100.0 New Zealand Beef and Veal Exports (in 000 metric tons & product weight) 1993 % Share 1994 % Share 1995 % Share U.S. 187 56.8 176 51.3 193 52.0 Canada 50 15.2 49 14.3 44 11.9 Japan 17 5.2 22 6.4 28 7.5 South Korea 19 5.8 19 5.5 24 6.5 Taiwan 10 3.0 10 2.9 10 2.7 Mexico 9 2.7 6 1.7 1 0.3 Hong Kong 4 1.2 4 1.2 7 1.9 Singapore 3 0.9 3 0.9 5 1.3 Australia 3 0.9 3 0.9 3 0.8 Fr. Polynesia 2 0.6 2 0.6 3 0.8 Malaysia 2 0.6 3 0.9 4 1.1 Other 23 7.0 46 13.4 49 13.2 Total 329 100.0 343 100.0 371 100.0 Australia Beef and Veal Exports ( in 000 metric tons & product weight) 1994 % Share 1995 % Share 1996 % Share U.S. 292 34.0 224 27.9 180 22.3 Japan 313 36.4 315 39.2 320 39.7 Canada 60 7.0 64 8.0 30 3.7 Korea 40 4.7 26 3.2 50 6.2 Taiwan 30 3.5 26 3.2 29 3.6 Philippines 6 0.7 15 1.9 NA NA Indonesia 5 0.6 10 1.2 NA NA Others 113 13.2 123 15.3 198 24.5 Total 859 100.0 803 100.0 807 100.0 NA - Not Available Source: ABARE
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Last modified:Friday, 22-Nov-1996
