Market relaxation for US beef in Japan looks closer than expected

Jon Condon, 21/01/2013


The much-anticipated re-entry of US beef to Japan from animals older than 20 months of age could happen as soon as March 1, recent signals out of the Japanese market indicate.

Important regulatory meetings being held in Japan today and tomorrow are being tipped as a possible catalyst for an official Japanese Government announcement sometime this week.

US beef exporters have suffered a decade-long trade access block into Japan since the discovery of BSE in the US in 2003.

Japan was the biggest international customer for US beef before that. The market remained closed until a partial re-opening in July 2006, accessible only by US beef from animals less than 20 months of age, based on Japanese concerns that older animals might carry higher BSE risk.

The trade restriction caused about $1 billion a year in lost US sales, the US National Cattlemen’s Beef Association claimed last year, as the large majority of US cattle are older than 20 months of age at slaughter.

Over the past five years, US trade and political representatives have applied considerable pressure on their Japanese equivalents, based on global standards for BSE risk and age of animals at slaughter, set by the OIE.

US beef shipments to Japan have increased steadily in recent years but remain only a fraction of what they were prior to the BSE-related ban. In 2011, US exports were about 160,000t, compared to 400,000t of muscle meat and offals in 2003. At that time, the US and Australia had similar share of imported beef trade into Japan, each at around 48pc.

Meat & Livestock Australia’s regional manager Melanie Brock said beef industry stakeholders in attendance at a major national yakiniku trade show in Japan last week were talking widely about a March 1 market relaxation for US beef.

A member of Japan’s Liberal Democratic Party Livestock and Dairy Measures sub-committee last week also pointed to a likely relaxation on beef from US, suggesting an opening in late February or early March.

Ms Brock told Beef Central on Friday that recent comments appeared to be linked to the final meeting of the Japan’s Food Safety Commission and Ministry of Health, Labour and Welfare, scheduled for today.

A formal announcement in coming days would provide opportunity for US supply channels to activate in time for first deliveries of beef under the new protocol allowance in February or early March, she said.

The Japanese imported beef market has been unsettled over the past six months or more, as Japanese meat traders became increasingly cautious about being caught with stocks of imported beef (either Australian or US) on hand, should an unexpected announcement over US beef limitations be made.

“The conjecture over if and when the US beef limitation might be lifted has confused and unsettled the market for all beef in Japan,” Ms Brock said. “It’s kept traders in a holding pattern, for far too long, waiting to see how things might develop.”

The broader Japanese economic malaise had not helped, but the speculation about imported beef trading conditions had left people that little bit more reticent to ‘vigorously engage’ in the market, she said.

It was hoped that attitude might ease once more liberal US market access was established.

“There’s a lot of talk circulating about how economically, things are starting to look up in Japan,” Ms Brock said.

“The new Japanese Government has set a very clear target to limit inflation to 2 percent, which for a country that has been in an inflationary spiral for some years, is good news. That is resulting in the Nikkei Index (Japanese Stock exchange) increasing in value, so there are some positive signs just beginning to emerge.”

“That trend will obviously be influenced by economic developments in the US and Europe, but it is encouraging. There certainly is a little more hope and optimism out there in the Japanese economy,” Ms Brock said.

She said it was too early to say yet that the Japanese citizens generally had formed a positive opinion about their new Prime Minister, but they could see the Japanese business sector supporting him, and viewed that as a positive.  

In recent statements, the US Meat Export Federation has portrayed 2013 as a year for increased opportunity for all beef suppliers to Japan, not just US exports.

Ms Brock said there were reasons to suggest there may be some truth behind such comments. Recently the head of the country’s yakiniku restaurant association had made similar comments, suggesting the entry of larger quantities of grainfed US beef might lead to increases in overall beef demand – at least in his food service segment.

“But it will take some time to gauge the impact of the re-entry of larger volumes of US beef under a 30-month rule, after the change takes place,” she said.

“That will probably happen around the time that Japanese people start to think about Spring beef promotions, and leading up to a strong consumption period when the Japanese are going out more and eating items like yakiniku.”

Ms Brock said the period immediately after the Japan market relaxation for US beef could prove to be quite unsettled in terms of pricing signals and demand.

“The US re-entry to market issue, alone, would be enough to create some instability in the Japanese market in coming months for the consumer and exporters, with new choices, new discussions and new pricing levels being established.”

“But throw into that an economy that looks like it just might be turning the corner, talk of constitutional reform and other issues that might appear slightly once-removed from the beef market outlook, and it is difficult to forecast how 2013 might unfold,” she said.

“Japan has been flat for such a long time that it might in fact be necessary to re-educate people about how to spend again.”

Another questionmark hangs over the ability of the US to supply greater beef volumes into Japan this year.

Some analysts, including Rabobank’s US-based global strategist for food and agribusiness, Dave Nelson, have recently suggested that the US may struggle to fill any expanded Japan export opportunity in Japan because of the sheer impact on US beef production caused by two successive years of drought.

Recent forecasts out of Oklahoma State University have pencilled in US domestic beef production as likely to be down 4.8pc this year, the second largest decline on record. That is likely to be followed by a further drop of 4.5pc or more in 2014, after exposure to consecutive brutal drought years across the southern US that have led to heavy breeder cow liquidation.

Also working against US prospects this year is currency, with a big shift in rates between the US$ and the Japanese Yen over the past few months, making US exports less competitive.

“It appears the US does not want to build unrealistic expectations on supply or price this year,” Ms Brock said.

“There’s a lot to be considered, and it will all happen at a time when relations between Japan and the US are at an interesting time. The first bilateral summit will take place soon, and the Japanese Prime Minister may be looking to mend some fences with the US. Japan also some ongoing territorial issues in play with China and Korea.”     

But a little consumer confidence in the market generally would go a long way in rebuilding beef demand, Ms Brock said.

A market relaxation announcement would inevitably place imported US beef in the spotlight for a period, but the view across the trade was that the market would soon get down to fundamentals of price, quality and consumer preference.

The Australian industry’s Japan taskforce will consider its 2013 marketing strategies during meetings in Sydney in March.

Australia has been reinforcing its ‘clean, green’ messages associated with about safety and wholesomeness for a long time, and it would continue as a key part of Australian beef promotion in the market this year, Ms Brock said.      



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