090107 Opening Export Doors Offers Beef Profit Opportunities

January 5, 2009

By Andy Groseta, National Cattlemen's Beef Association

U.S. beef exports have had a strong year, again demonstrating the tremendous market potential that lies outside the United States. Sales through September had been roaring before the worldwide financial crisis cooled all industries in all markets.

Despite the ups and downs of global markets, increasing foreign trade remains a key to the profitability of U.S. cattlemen. Exports are critical to cattlemen because today, they add about $180 per head to the price we receive for our cattle. Some part of virtually every animal harvested in the United States ends up in a foreign market where consumers pay more for cuts that aren't too popular in American homes, like livers, intestines and tongues. The profit equation is pretty simple: $5 a pound overseas vs. 38 cents a pound domestically.

Profitability through exports hasn't happened by accident. When U.S. export markets closed on Dec. 23, 2003, NCBA made reopening them a top priority. Since then, NCBA has worked tirelessly with government officials, helping prepare them to strongly advocate for market access, benefiting all cattlemen.

Through August, sales to Japan measured in carcass weight were up 50 percent over a year ago. Despite that progress, there's still a billion dollars in sales we can recapture to be at 2003 levels.

South Korea's market for U.S. beef, after sputtering through the summer, had just begun to hum before the financial crisis hit. The price of short ribs, a favorite in the Korean market, had increased 35 percent from a year ago, according to the U.S. Meat Export Federation. The chuck cut-out, the price of which is driven largely by export demand, was up 25 percent from a year ago; and August beef exports, valued at $416 million, set an all-time record for monthly sales in any month, led by an all-time monthly high of $150 million to Mexico. This was 50 percent more than the monthly average for 2007.

As all wealth in the cattle industry comes from the consumer, this shows that the global consumer is a part of the demand equation U.S. cattlemen can't afford to ignore. The ability to significantly grow our business lies in the developing economies around the world.

Today, the majority of this business is at our borders. Canada and Mexico account for 60 percent of all U.S. beef exports so far this year. Our relationship with Canada and Mexico on beef and cattle trade plays to the strengths of the U.S. industry. Yes, this trade relationship involves imports of Mexican and Canadian live cattle, but the current market structure allows the value to be added on the U.S. side of the border. That is of enormous benefit to our domestic production. Restricting this trade unquestionably would instigate a trade war with our No. 1 and No. 2 export markets.

Our North American neighbors have proved how valuable their markets are to our continued profitability. How can we not take advantage of the tremendous growth opportunity expanded trade presents? Throughout our long history, NCBA member have fought passionately against any effort to impugn the quality of the beef produced in the United States, question the safety of the U.S. beef system, or place personal opinions above the scientific consensus of every respected body in the world. To do otherwise just doesn't make horse sense.

Andy Groseta is president of the National Cattlemen's Beef Association