080110 Rising Cow Slaughter Reducing Foreign Beef Demand

Increased U.S. cow slaughter rates, relatively low domestic beef and cow cutout prices, and a weak U.S. dollar have impacted beef imports into the United States. Import forecasts were lowered to 3.16 billion pounds in 2007 and 3.34 billion pounds in 2008. According to U.S. Customs, imports from Canada and New Zealand have shown significant declines in the last quarter compared with last year’s fourth quarter. Higher rates of cow slaughter increase the supply of processing beef, which makes up the majority of imported beef. Combined with a weak U.S. dollar, the demand for imported meat overall has fallen.

Commerce and Customs data also indicate that imports from Uruguay slowed in the last quarter. However, imports of Uruguayan beef in the second and third quarters of this year were well above last year, leaving imports in the fourth quarter to be squeezed by the Tariff Rate Quota schedule. Additional imports in the fourth quarter would have been assessed a higher tariff rate. The higher cost of selling additional beef in the U.S. market, combined with a depreciating dollar relative to the Uruguayan Peso, most likely discouraged imports in the fourth quarter. The TRQ’s entry levels reset with the new year, and Uruguayan imports could improve despite the weak dollar and a decrease in demand for processing beef.

November Commerce data and weekly AMS reports in December show Canadian cattle entering the United States well above last year’s levels. High feed costs in Canada, a tight labor market for Canadian packing plants, and a relatively strong Canadian dollar continue to give the United States a comparative advantage in feeding and producing beef, affecting the imports of both feeder and slaughter cattle. Three-and-a-half times as many feeder cattle crossed the Canadian border in the last 12 full weeks of 2007 compared with the previous year, according to the weekly reports. Total cattle entering the United States are forecast at 2.475 million head for 2007.

The weak U.S. dollar has facilitated beef exports to Canada and small quantities going to nontraditional trading partners, such as Moldova and Vietnam. The exports to smaller countries have offset some of the trade lost due to the inability to sell U.S. beef products in Korea at the end of 2007. Forecasts for 2007 are 1.404 billion pounds, while forecasts for 2008 remained unchanged at 1.71 billion pounds.

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