Blach: Global markets are key
Fort Collins, Colo. – “The global population is growing by 78 million people a year,” stated CattleFax CEO Randy Blach during the 2015 International Livestock Forum, held in Fort Collins, Colo. at Colorado State University on Jan. 13.
Although the income in the U.S. is currently growing at a rate of about one percent a year, incomes in other parts of the world are growing much faster, he continued.
“The correlation is about 89 percent. As incomes rise, so will the consumption of meat protein in diets,” he said.
Export market statistics indicate tremendous opportunities for the U.S. as a player in the global market, Blach noted.
“Dairy exports this year are estimated be about $7.5 billion. Beef is estimated at $7 billion, pork and pork variety meats at $6.5 billion and poultry a little above $5 billion,” he commented.
These estimates, all together, predict nearly $26 billion of revenue coming back to the U.S. meat and poultry industries as a result of trade.
“Of all the pork and poultry that trade on the global market, one-third of it originates from the U.S.,” noted Blach.
He added that pork and poultry are capitalizing on the global market by contributing almost a quarter of U.S. production to exports.
Beef, on the other hand, is still focused on domestic consumption, Blach said.
“We export 10 to 12 percent of all of the beef that we produce,” he says.
India exports 50 percent of their beef production. Australia exports 68 percent, and 85 percent of New Zealand’s beef production is sold in the global market. These countries are highly reliant on exports.
Slaughter of the Brahman breed is banned in India, but water buffalo are legal to process.
“That’s a growing market, and it’s one that we expect is going to continue to grow as we go down the road. India is a major player,” Blach explained.
Ten years ago, India wasn’t even on the radar in export markets, he added.
“Australia was a major exporter through 2014 of lean beef,” he states.
Their exports have been going into China and Hong Kong, as well as into the U.S.
“Australia and New Zealand help supplement our lack of supply of lean beef here in the U.S.,” he explains. “That’s been a positive situation.”
Brazil is another major player to be aware of. Their economy is growing, and they have a relatively young workforce.
“They will likely move into being the number one beef exporter in the next five years, I would guess,” predicted Blach.
Although the U.S. is beginning to grow its cowherds again, Brazil has been expanding now for a number of years. Their top export markets currently include Russia, Hong Kong, Venezuela, Egypt and Iran.
“We do expect exports are going to continue to grow out of Brazil,” he said.
China, Blach noted, is one of the biggest protein market opportunities. They are trending toward less self-sufficiency and will rely more on the global market.
“The U.S. and Brazil supply the lion’s share of their soybeans for soybean meal to supply Chinese pork production,” he stated.
Forty percent of U.S. soybean production is exported, and a majority of that goes to China.
“They gave up trying to grow enough soybeans over there years ago,” he said.
But exported soybeans don’t hinder U.S. pork markets for China. In the last 18 months, their sow stock numbers have decreased, leaving an opportunity in the market.
“Over 60 percent of the Chinese are willing to pay more for products that are made in the USA,” states Blach.
In the year 2000, the U.S. exported 2 billion pounds of meat and poultry to China and Hong Kong. In 2014, that number was 7 billion pounds.
“There is a huge opportunity for U.S. agriculture as we look down the road,” he commented.
Chinese middle class is expected to double by 2022.
“That is a lot of people with more jingle in their pocket,” he said.
Over the next decade, the global middle class is expected to increase by 300 million to 400 million people.
Again, Blach highlighted the market opportunity that exists in these statistics.
“U.S. poultry is first or second in production, year in and year out,” he commented.
U.S. pork production is typically third or fourth on a global scale.
“The U.S. is the number one beef producer in the world,” noted Blach.
He encouraged the meat and poultry industries to be ready for the impacts from the rest of the world.
“I think we need to seize and make sure that we, as an industry, are prepared to take on some of these opportunities and growth that we have ahead of us, whether it’s in beef, pork, poultry, dairy, seafood or whatever the case may be,” he said.
He pointed out that the U.S. has production systems, safety systems and quality standards in place.
We also have product differentiation. Grass-fed beef is the most expensive to produce but “natural” products bring in a premium.
“If there is a market signal, somebody will produce it. I think that is one of the best growth opportunities we have seen coming through these markets,” he added.
For now, the U.S. niche market is high-quality beef.
“We can see the price differential for what the market will pay for U.S. high-quality fed beef,” commented Blach.
He noted that the volatility of protein markets will continue but the long-term trends show opportunity and growth.
“I don’t know how we couldn’t be excited to be involved in these businesses,” he said.
Economies are improving domestically and around the world. Populations are growing and middle-class budgets are increasing.
“The U.S. is a major player when it comes to global protein production,” Blach said.
Natasha Wheeler is editor of the Wyoming Livestock Roundup and can be contacted at firstname.lastname@example.org.