“That’s a record, and only the second time in history we’ve been over $7 billion in sales, so we’re excited about that,” said Dan Halstrom, president and chief executive officer of the U.S. Meat Export Federation (USMEF), headquartered in Denver, Colorado.

He said most of the world saw increases in volumes of beef in the last year, with Japan coming in first at $1.9 billion in sales and a volume increase of 19 percent going into Japan.

“We saw a lot of different gains in a lot of different sectors (in Japan) — retail, food service, etc,” Halstrom said. “We’re really hitting on all cylinders in Japan. That’s the good news.”

The bad news, he said, is that Australia, the U.S.’s largest competitor, will be even more formidable in 2018, and for several reasons.

-File photo
US beef exports had a record year last year, with a value of $7.27 billion exported globally. Most of the world saw increases in volumes of beef in the last year, with Japan coming in first at $1.9 billion in sales and a volume increase of 19 percent going into Japan.

“They have increased production expected in 2018, and they have an 11 or 12 percent duty advantage going into Japan,” he said, adding that U.S. beef goes into Japan at 38.5 percent, and Australian beef goes in at 27 percent, a bilateral trade deal between the two countries.

While the 2017 U.S. beef export results to Japan were good in the face of 11 or 12 percent duty, Halstrom imagines what the results could have been with equal duties. He said the Trans Pacific Partnership (TPP) would have addressed that, because at the time of implementation, part of that agreement was that U.S. beef and Australian beef would enter at the same duty level, so wherever Australia was, that’s where U.S. beef exports would have started.

“That really hurt us, especially going forward, because that duty differential will increase each fiscal year,” he said. “The new Japan fiscal year is April 1, so we will see (instead of 11 or 12 percent), it will be more like 13 percent difference each year that the spread will widen.”

Halstrom said one of USMEF’s priorities going forward is to try to work on a more equal playing field as far as the duties go, either by re-engaging in the TPP or working on a bilateral agreement.

While no one knows what the end fallout will be from the U.S.’s departure from the TPP, Halstrom said the U.S. is going to have to work soon on something to gain that equal playing field status with Japan because it will be a time-consuming process, and the duty differential is going to become more of an issue over time.

He added U.S. beef exports to Mexico were steady on a value basis, with nearly $1 billion in sales, and Mexico is the U.S.’s second largest market, next to Japan.

“Things are going very well with Mexico, but, once again, we are in the process of renegotiating NAFTA,” he said. “I would say this is also a very large focus of the industry to make sure we not only preserve NAFTA but embrace it, because from agriculture’s standpoint (beef, pork, etc. in the export world) we’re at zero duty going into Mexico. You can’t do better than zero duty.”

Halstrom said many of the reasons for renegotiating NAFTA are not agriculture-related, but he said USMEF’s job is to help protect U.S. agriculture in relation to that policy.

“We already have a pretty good deal in terms of U.S. beef and pork exports into Mexico and Canada,” Halstrom said.

In other parts of the world, in connection with U.S. beef exports, Hong Kong and China continued to see dramatic growth all of last year.

“The big news that happened last June is that we were able to gain direct access back into mainland China for the first time in 14 years,” he said, going back to the days of BSE (also known as Mad Cow Disease) in 2003. “There are some restrictions in terms of cattle availability and traceability that are required, so the number of cattle that qualify today are small, but nevertheless, it’s started, and that is exciting.”

There have been 3,000 tons of U.S. beef exported to those areas in the last five months of 2017, which, according to Halstrom, is relatively small.

“But the good news is that it’s one of the highest values on a per-pound basis markets that we have, and the reception of U.S. beef in mainland China has been phenomenal,” he said. “That market has missed U.S. beef for a long time. It will just take time for the market to grow.”

He added Central and South America are fairly small market regions, but growth there has been brisk. South America’s imports of U.S. beef were up 24 percent, and beef exports to Peru are steady for their beef variety meat market, as well as Chile for its muscle cut retail market.

“We’re excited about some of these newer markets,” said Halstrom. “In Africa, we’re starting to see a new market emerge. Three or four years ago, Africa wasn’t even on the map in terms of target for U.S. beef, but we have access now.”

The main areas of interest are west Africa and south Africa, which has a higher percentage of wealthier citizens who can afford to purchase better protein, as they did in 2017, according to Halstrom, who added Africa offers a larger market for beef variety meats, including livers.

“With increased production in beef and pork — all the proteins — some new markets like those, along with Angola (and other countries) are emerging,” he said. “And even though they are small markets right now, it’s still exciting for U.S. protein.”

There are 1 billion people living in Africa, according to Halstrom, a nation with the youngest demographic in the world.

“A lot of these 15- to 25-year-olds are going to enter the work force, and the middle class is starting to expand,” he said. “We’re going to see a lot of demand coming out of Africa for better food over time, so they may start with beef livers and end up with chuck rolls and other things down the road. We’re excited about the potential there.”

So what does this mean to Iowa cattle producers?

“It’s really about the value opportunity,” said Halstrom. “If you look at total export revenue and divide it by commercial fed cattle slaughtered, it comes out to $286 per head. That’s what exports contributed in 2017.”

Going on to explain what that means, Halstrom used the example of beef lips, which have little to no value in the U.S.

“Eighty to 90 percent of the beef lips harvested end up in Mexico, and a lot of them go into tacos,” he said. “The value of beef lips today to Mexico is over $2 per pound, which is $4 per head back to the producer, just on beef lips. That’s the value of these international markets because it’s all about matching up the right cut to the right cuisine in a culture.”

Every day, Halstrom said someone from the USMEF is out promoting U.S. beef, pork and lamb, the latter of which is experiencing some access issues.

“We don’t have access into Japan with lamb, but we’re getting close,” he said. “The big lamb market for us is Mexico and the Caribbean region, along with Canada and the Middle East.”

Lamb access was granted to Taiwan just a year ago.

“The issue for exporting lamb has been lack of access in some of the key Asian countries, which is high on the priority list to get solved,” said Halstrom, adding that the issue goes back to a BSE scare many years ago that they are “still digging out from.”

“People aren’t even talking about it anymore.”

Overall, he thinks the beef and pork industries have done a good job of stressing the importance of agriculture to a culture that is mostly urban.

“Within that realm, I think those groups are doing a better job of educating people in the importance of the export side of agriculture because it adds value,” Halstrom said. “There is always a risk of getting caught in some political crossfire (such as the NAFTA negotiations that involve more manufacturing industries that just agriculture) but our job is to make sure we tell our story and equip the policy people with the information they need to tell our story.”

He added the reputation the U.S. has as a high-quality, safe supplier of beef and pork is second to none in the world.

“If we continue to produce the same high-quality, safe products we’re used to producing … and if you compare that to countries like India or China where there have been a lot of scares … we don’t really have that at all,” Halstrom said. “It helps us market the product because when we’re out talking meat specifications. We’re talking about taste and tenderness, not safety, because that’s assumed. We have to maintain it, but out biggest thing is that we need to continue that.”