January exports of U.S. beef were down sharply from a year ago, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF), contractor to the beef checkoff program. Shipping delays caused by the West Coast labor dispute combined with a number of economic factors to drive export volumes for beef to 4-year lows.
“We expected January to be a difficult month, so these results are not especially surprising,” USMEF President and CEO Philip Seng said, “but I see the January slowdown as a wakeup call for the U.S. industry in terms of the fiercely competitive situation we face in key markets. Conditions are now improving in the West Coast ports, but the damage caused by that impasse is still not finished, and it is clear that competitors capitalized on our inability to move product in a timely fashion. We need to win back the confidence of the valuable Asian customer base we spent many years building.”
While port congestion was certainly a major factor in the sluggish January results, Seng noted that a number of other headwinds also had an impact.
“The currencies of several of our major destinations have weakened substantially against the U.S. dollar – not only in Asia, but also in the Western Hemisphere,” he said. “And unfortunately the currencies of our major competitors – Australia, the European Union, Brazil and Canada, to name a few – are also in a weakened state. We saw this building throughout the latter half of 2014, and the price disadvantage is increasingly difficult to overcome.”
January was the first month in which beef tariff reductions were in effect under the Japan-Australia Economic Partnership Agreement (JAEPA), with further reductions coming in April. South Korea’s new trade agreements with Australia and Canada have also narrowed the tariff rate advantage the United States holds over imports from these two countries.
Bright spots for U.S. beef include Mexico, Taiwan, Caribbean
January beef exports of 176 million pounds were down 18 percent with value of $503.57 million, down 2 percent. Exports to leading market Mexico were not impacted by the port congestion, and smaller muscle cut volumes were offset by growth in variety meats, putting total volume (44.5 million pounds) even with last year while value increased 12 percent to $105.1 million. But exports to Japan totaled 30.4 million pounds, down 12 percent and the smallest since the eligible cattle age limit was increased from 21 months to 30 months in February 2013.
Export value to Japan was $91.5 million, down 1 percent. Chilled exports to Japan (9.5 million pounds, -39 percent) were hit particularly hard by the West Coast port congestion, as shelf-life concerns made buyers reluctant to place chilled orders. But U.S. beef also faces a tariff disadvantage under the JAEPA of 6 percentage points on chilled beef and 8 percentage points on frozen. This will widen to 7 and 10 percentage points respectively in April, and the gap will continue to grow as long as U.S. beef is subject to Japan’s full 38.5 percent duty. Australia’s exports to Japan increased 6 percent in the first 2 months of the year.
Exports to South Korea and Hong Kong, which were coming off big performances in 2014, were also the lowest in nearly 2 years. Export volume to Korea was down 28 percent to 15.5 million pounds, while value declined 17 percent to $57.5 million. For Hong Kong, value fell by one-third to 19 million pounds and volume was down 14 percent to $69.8 million. Taiwan was the only major Asian destination to hold up well through the port crisis, as January export volume to Taiwan was slightly higher year-over-year (4.7 million pounds, +1 percent) and value increased 37 percent to $23.4 million.
Exports to the Dominican Republic tripled in volume to 1 million pounds and increased 130 percent in value to $3.2 million, while results for the whole Caribbean region were up 13 percent in volume (3.8 million pounds) and 23 percent in value ($12.1 million). Led by strong variety meat volumes, exports to Peru increased 50 percent (2.4 million pounds) with value up 19 percent ($2.17 million).
Beef export value averaged $271 per head of fed slaughter, up $20.26 from last year, reflecting the decrease in slaughter numbers and high U.S. prices. January exports equaled 9 percent of total beef muscle cut production and just under 12 percent when including variety meats (down from 10 percent and 13 percent, respectively, in January 2014.)
Complete January 2015 export results are available here.