Trade remains strong: International trade and market access provides opportunity for U.S. cattle producers
Trade early in 2020 was strong, taking full advantage of expanded market access into Japan, the European Union (EU) and China with the beginning of the Phase One Trade Agreement kicking in.
Although the COVID-19 pandemic took a toll on the overall trade scenario, National Cattlemen’s Beef Association (NCBA) Senior Director of International Trade and Market Access Kent Bacus shares the beef industry fared better than other protein industries.
Bacus noted during NCBA’s March 5 Beltway Beef episode demand for beef has remained strong following the onset of the pandemic, though working with the government and foreign countries to keep supply chains open was a challenge.
“For six to seven months there were disruptions and a yo-yo effect in supply chains,” he says. “Towards the end of 2020 the beef industry came out strong. Supermarkets continue as the bulk of beef sales, and as we start to see restaurants reopen, beef demand will take off.”
With this optimism in mind for 2021, Bacus adds trade deals and opportunities for trade will make this year a promising one.
Trade deal recap
On Jan. 1, 2020, the U.S.-Japan Trade Agreement became active and lowered the tariff rate on U.S. beef exports into Japan, putting the industry on a level playing field with Australia and Canada, Bacus explains. The U.S. beef industry also experienced a specific quota in the EU, helping Non-Hormone Treated Cattle (NHTC) producers.
Bacus shares, “We are looking to open this entire market, but this is a great first start with exports into the EU.”
The U.S.-China Phase One Trade Agreement didn’t take off until March 2020 – the same time as pandemic-related shutdowns.
“In this trade agreement, we saw the removal of the hormone ban as well as other requirements, including the bovine spongiform encephalopathy (BSE) restriction which prevented the U.S. from entering the market,” says Bacus. “Because of this, the U.S. was able to make up a lot of sales with China towards the end of the year.”
He continues, noting the opportunity provides the beef industry with strong markets for U.S. beef globally, “This sets us up to develop the market well. In the next five years, China could easily be one of the top three export markets.”
Future trade possibilities
Trade agreements with Asian countries have been a major focus for beef exports in the last few years, though Bacus shares development in the United Kingdom has been creating opportunities.
“In a post-Brexit environment, there are a lot of opportunities to set trade terms based on science rather than the free market and help the United Kingdom get out of the EU mindset which was very protectionist and subjective,” says Bacus, explaining this change allows the United Kingdom, as well as the U.S., to be competitive in the market.
This opportunity, though, is dependent on the reauthorization of the Trade Promotions Authority (TPA) under the Biden administration. The TPA, according to Bacus, is the authority allowing the executive branch to negotiate trade agreements on behalf of Congress with the purpose of expediting deals and ensuring trade agreements are made in good faith for the American people.
Additionally Bacus shares, progress with the United Kingdom, as well as some African countries may be present in the near future.
“There are a lot of emerging markets in Africa which are very important to American agriculture,” he says. “Africa has a booming economy, and there is a lot of growth – not just in terms of population, but in the middle class population and we are seeing very stable economies.”
Bacus continues, “It is important for the U.S. to play an active role in helping them set terms of trade. They want science-based trade and access to production technologies allowing them to be efficient and competitive, and the U.S. stands ready to help them with this.”
There are many opportunities for the U.S. to engage in trade, says Bacus.
“NCBA is going to do everything we can to assist the Biden administration in opening markets because we have seen the benefits of trade impact the overall livelihoods of our producers,” he adds.
Importance of trade
“Trade helps us be more competitive and strengthen out bottom lines,” Bacus continues. “At times, exports contribute $325 to $350 per head.”
On a volume basis, Bacus explains the U.S. exports roughly 10 percent of the beef produced, while on a value basis, the number increases to 20 percent.
“We are going to see this number grow with 95 percent of the world’s population living outside of U.S. borders. Trade is going to be the vehicle allowing access into markets and allowing the industry to grow,” he adds.
The U.S. beef industry produces a very high-quality product, he explains, and around 85 percent of the beef produced is consumed domestically.
“American consumers are still the number one target, and this is the best market in the world to sell beef,” Bacus states. “But, Americans don’t want to buy everything produced from an animal. We can sell ribeyes and tenderloins, but tongues aren’t flying off the shelf here.”
He continues, “Some unpopular cuts in America are considered popular cuisine all around the world. Trade agreements allow us to provide customers with those cuts and on the export side, we see value added per head.”
This explains, Bacus adds, why the U.S. no longer grinds beef chuck for hamburger, but rather sells the cut as a flat iron steak for five to six dollars more per pound. Additionally, there is still a major demand for ground beef, but there is a lot of fatty trimming from U.S. grown beef.
“We have figured out how to take lean meat products from Canada, Mexico, Australia and New Zealand, and other countries meeting our safety standards, to add to fatty trimmings and make lean ground beef,” he says. “We can’t get lean beef and fat beef from the same animal, but if we are unable to meet the ground beef demand, beef will lose the market to chicken and pork.”
Bacus adds it is important to recognize only 11 percent of the beef consumed in the U.S. is imported, and 75 percent of this is in burger.
“I think it is important for people to realize trade maximizes the value of every cut,” he says. “With trade, there are more market opportunities open.”
Trade and administration
“In March, the Trade Representative’s Office issued a report explaining everything the government has done to advance trade, ongoing issues and new opportunities,” Bacus explains.
He continues, “With a new administration, this is a good time to set the stage. The Biden administration has been very clear they want to help open more markets and they want to help agriculture open those markets.”
Bacus states the climate has been front and center in most policies of this administration, and as climate takes a greater role in trade policy, it is important for the U.S. beef industry to show cattle producers are part of the solution.
“What we do not only enables rural communities to thrive, but it allows us to provide healthy, nutritions products with a lower carbon footprint than a lot of other production practices,” Bacus shares. “We also set a great example for the rest of the world to follow, so I think this gives us a great opportunity for us for the beef industry to engage with the administration on climate.”
He concludes, “We have a great story to tell, and I think this administration sees value in cattle production. We stand ready to assist the Biden administration in opening these markets and creating more opportunities for U.S. cattle producers.”
Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to email@example.com.