International trade a market driver
Casper — Over a five-week period, according to Livestock Marketing Information Center (LMIC) Director Jim Robb, the global recession took $6 per counterweight off the price of fed cattle.
Robb was among the speakers at the Range Beef Cow Symposium held early December in Casper. “That came right back to what was bid for your calves,” said Robb to ranchers attending the conference. He noted that the two largest drivers in the feeder cattle market are corn prices and the fed cattle market. The link between the international marketplace and fed cattle prices is becoming increasingly strong.
“The international credit crisis immediately hit this industry last year,” said Robb.
Exports in 2010, according to Robb, are going to be slightly below 2009. It’s not a factor of demand, but of supplies. “Our cowherd is shrinking and we’re not going to have the base to export on a tonnage basis,” he said. The United States isn’t alone when it comes to declining cow numbers. Robb said a similar situation is taking place in the world’s other top beef producing nations.
Looking back just a few years, Robb said three million head of feeder cattle were entering the U.S. from Mexico. That number is now half its historic high with an anticipated 1.5 million head in 2009. Mexico, currently amidst economic turmoil, is the United State’s biggest market followed by Canada, Japan and Korea.
The U.S. beef industry, along with agriculture in general, is a bright spot in the American economy. Agricultural exports have a positive net value to the U.S. economy. Robb said the U.S. exported a billion more dollars in beef than was imported in 2009. Importing more than the country is exporting, he explained, causes a decline in the value of the U.S. dollar.
A lower value dollar can enhance the ability to export agricultural products. On the flip side, Robb pointed out that it can also drive input costs such as fertilizer.
Of the seven million metric tons of beef traded in the world annually, Robb said one million of it is U.S. beef. “There certainly is room for the U.S. to grow.” Of all the beef raised in the United States, seven percent is exported.
Robb stressed the importance of non-meat items to the U.S. beef industry. Hides, tallow, greases and more add value to the industry. Of the $6 billion in U.S. beef exports last year, he said nearly half was non-meat items.
“As the world income improves, our foreign markets are going to become more like the U.S.” Much like the U.S., Robb said, “Convenience will become a major issue for our foreign products.” The product transition we’ve seen at home, said Robb, will be expected at the international level as well. “Just because we do a good job producing, it doesn’t mean they’re going to buy it. Supply doesn’t create demand. You have to work to create demand in foreign marketplaces. It’s a long, slow process.”
“It’s important to remember that the world population growth is slowing, but by 2050 we’ll have to have 33 percent more people. India will surpass China as the world’s largest country and there will be 100 million more people in the United States.”
If the growing population seeks a normal nutritional level, Robb said the demand for animal protein will double in the years ahead.
Jennifer Womack is staff writer for the Wyoming Livestock Roundup and can be reached at Jennifer@wylr.net.