Kay’s Cuts: High quality transcends inflation

Guest Author, 15/06/2022

A monthly column written for Beef Central by US meat and livestock industry commentator, Steve Kay, publisher of US Cattle Buyers Weekly







CONSUMERS all over the world continue to face food costs that keep getting higher. But like other luxury items such as jewelry and brand-name leather bags, it seems that high quality beef sales in most countries have remained little impacted by inflation*.

That is good news for both the US and Australian beef industries. The US continues to take advantage of the fact that it is by far the largest producer of top-quality grainfed beef in the world.

Meanwhile, Australia in recent years has steadily increased the amount of grain-fed beef it produces to 50pc or more of total production (link).

As I wrote in my February column for Beef Central, US beef exports in 2021 surpassed US$10 billion in value for the first time. This meant they almost doubled in value in ten years.

Volume also set a new record at 1.44 million tonnes. This was up 15 percent from 2020. Value though, was up 38pc, proving that consumers all around the world were prepared to pay more for some of the best beef in the world.

Despite continuing food inflation, the US beef export juggernaut has continued. April exports topped US$1 billion for the third month this year. Beef exports totaled 124,408 mt in April, up 3pc from a year ago and the fifth largest on record, while export value soared 33pc to US$1.05b, second only to the record $1.07b posted in March.

For January through April, US beef exports increased 5pc from a year ago to 478,260 mt and were valued at US$4.05b (up 38pc), more proof of consumers paying more.

Demand for US beef overcomes obstacles

Global demand for US beef continues to overcome enormous obstacles, from inflationary pressure to logistical challenges to the recent lockdowns in some of China’s major metropolitan areas, noted US Meat Export Federation President and CEO Dan Halstrom.

Most encouraging is that even as US beef exports climb to unprecedented levels in the US’s largest Asian markets, demand is strengthening in other regions as well, fuelled by a strong rebound in the food service sector.

He cautioned however that April results did not capture the full impact of recent COVID lockdowns in China, some of which continued through May and into early June.

The pressure that inflation imposes on consumers’ discretionary income and the rising strength of the US dollar versus some key trading partner currencies are also building headwinds for US red meat exports, he said.

Beef demand in China/Hong Kong continues to expand, although at a more moderate rate than in 2021, says USMEF.

Despite COVID lockdowns having a massive effect on China’s foodservice sector, April US exports still increased 11pc from a year ago to 23,137t, valued at US$212.7 million (up 27pc). Through April, exports to China/Hong Kong increased 28pc in volume (85,374t) and 49pc in value (US $795.1m), it says.

China insights

Valuable insights into the Chinese market came at USMEF’s annual spring conference.

Chinese consumers remain committed to US food products because they value their quality and safety. This is what former Iowa governor and US ambassador to China Terry Branstad told the meeting.

The first day’s general session focused on agricultural trade relations between the US and China, including a deep dive into the market access gains achieved for US beef and pork through the 2020 Phase One Trade and Economic Agreement. Branstad was guest panelist for the session and was joined on the panel by Joel Haggard, USMEF senior vp for the Asia Pacific, who is based in Hong Kong.

Following adoption of the Phase One pact, Chinese purchases of US agricultural products reached record levels, albeit still short of the targets outlined in the agreement, noted Branstad.

But Haggard said US producers should not be overly concerned that the Phase One purchase targets were not reached. With improved market access, private entities in China made strong increases in their imports of US agricultural goods according to their needs, which Haggard sees as the preferred path to increased trade.

“Would we in the meat sector have wanted Chinese state purchasers to go out and buy products just for the purpose of buying them, and disrupt the market?” he asked. “That does not serve orderly development of the market.”

The name, Phase One, implies there is unfinished business to be resolved in a second round of US-China trade talks, but Branstad noted there are significant obstacles to striking up Phase Two negotiations.

That is going to be the hardest part because the Chinese government loves to subsidise its state-owned enterprises, he said. That is market-distorting, and it is something the US wanted to address, and frankly that is what did not get done in the Phase One agreement.

It will be difficult to do and the Biden administration has not really shown any appetite for going after it, he said.

Whatever happens with China going forward, the US beef industry is well-positioned to expand sales to top markets South Korea and Japan and continue to accelerate through the ASEAN region.

The only issue for the next few years, given the current effects of drought sweeping parts of the US, is that the US might not be able to produce enough beef to meet demand for it.


* In its quarterly statement on monetary policy, the Reserve Bank of Australia (RBA) warned that Australia’s core inflation could now hit 4.6pc by December, a startling two percentage points higher than its previous forecast made in February.





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