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

THE global protein business had more than its fair share of twists and turns last year, and 2020 will see more of the same, notably in China and Japan.

China’s ongoing efforts to fill its gaping protein hole due to the impact of African Swine Fever mean even greater demand for pork and beef globally. Meanwhile, US beef and pork on January 1 finally saw Japanese import tariffs reduced to those of its competitors, including Australia. This will boost US red meat exports to Japan this year and well beyond.

These scenarios mean that another solid year awaits most segments of the US cattle/beef industry. Last year was something of a mixed bag. Cow-calf returns and cattle feeding margins were compressed most of the year, with the former causing a likely reduction in total herd numbers for the first time since 2013. Early forecasts are for most cattle prices in 2020 to be about the same as last year.

In contrast, beef processors of grainfed cattle enjoyed their second consecutive year of record operating margins, far beyond what anyone could have imagined ten years ago.

One year ago, after a record 2018, the question was: Can it get any better than this? Well, it did. Now the same question applies to 2020 and the answer is probably, “yes”.

Assuming that US domestic demand for all three major proteins remains at least as strong this year as in 2019, increased exports will largely offset a nearly 2pc increase in total red meat and poultry production in the US this year.

USDA forecasts that total will be a record 108.144 billion pounds (49 million tonnes), versus 105.298 billion pounds (47.8 million tonnes) in 2019. Broiler production will remain by far the largest of the three proteins at 45.250 billion pounds (up 3.2pc on 2019), while pork will be second at 28.680 billion pounds (up 3.8pc). Beef will be third at 27.515 billion pounds (up 1.4pc).

USDA also forecasts that US red meat and poultry exports will be up in volume and value this year versus 2019. Pork will see the biggest increase as demand from China boosts volumes, says USDA’s Economic Research Service. Pork will be the No.1 protein exported at 7.1 billion pounds, versus 6.296 billion pounds in 2019.

Pork exports will be worth an estimated US $6.7 billion (up from US $5.518b in 2019). Broilers will be the No.2 protein exported at 7.425 billion pounds, versus 7.040 billion pounds in 2019. Exports will be worth an estimated US $5.2b.

Beef will be the No. 3 protein exported at 3.305 billion pounds, versus 3.l04 billion pounds in 2019. Beef exports though will have the largest value at an estimated US $7.6 billion (up from US $7.281b in 2019). Beef and pork variety meat exports will be worth an estimated US $1.7b, versus US$1.562b in 21019, while hide, skin and fur exports will total an estimated US$0.9b versus US$1.1108b. All these estimates are for USDA’s fiscal year ended September 30.

The demand for beef from China will continue in 2020, which will support global prices through the upcoming year, according to Rabobank’s Beef Quarterly Q4 2019 report. Thanks to ASF causing pork prices to triple from October 2018 to October 2019, Chinese beef demand is expected to be extremely strong in the upcoming year.

The shortage of pork has pushed consumers toward other proteins and the increase in pork prices has made beef a more relatively affordable option. In October 2018, the retail price of beef was 2.8 times higher than pork. One year later, it was only 0.6 times higher, says Rabobank.

US faces barriers to entry into China

US beef however still faces severe barriers to entry into China, as China prohibits beef produced with the use of growth promotants. Australia, Brazil, New Zealand and Canada are all expected to increase their beef exports to China. But this means demand for US beef will likely increase in other markets to make up shortfalls from those four countries.

This will be especially true in Japan, thanks to the US-Japan trade agreement, which will greatly improve access for US red meat in Japan. The agreement is one of the biggest developments in the history of the red meat trade, says the US Meat Export Federation. No international market delivers greater benefits to US farmers and ranchers and to the entire US supply chain than Japan, it says.

The US beef and pork industries look forward to expanded opportunities in Japan, which is already the largest value destination for US pork and beef exports (combined export value in 2018 was US $3.7b), says USMEF. With tariff rates mirroring those imposed on major competitors, USMEF’s forecast for 2020 is for US beef and pork exports to Japan to reach US $2.3b and US $1.7b, respectively.

USMEF also projects that by 2025, US red meat exports to Japan will approach US$5b, roughly US $2.8b for beef and more than US$2b for pork, as consumption of US red meat increases due to greater access for Japanese consumers and the US gaining market share.

The agreement also opens new opportunities for value-added and processed red meat products, with tariffs on these products phasing to zero. This will contribute to the overall growth in US exports to the high-value Japanese market, says USMEF.