Looking back at the first quarter of 2014, Philip Seng, president and CEO of the U.S. Meat Export Federation, says, "We've done very well in the export picture." Beef exports are up 8% in volume and 15% in value for the first quarter – after a record-setting year in 2013, while pork exports are up 11% in volume and value.
"I think this is a very strong accomplishment," he says, but adds that two of the biggest concerns are paucity and price. "We have to remember one of the reasons exports are up is a lot of these markets are import dependent," Seng explains. "They depend on that product."
However, competition is becoming much more intense, he says. "In my career, especially in Asia, in the past we have not seen near as much European encroachment," Seng says. "The Europeans would not get too involved in Asia, and that's all changed now. What we're seeing is a very aggressive approach by the Europeans, especially in north Asia – an area we've really been involved in."
Strong export markets in Asia Pacific
One country with rising export competition is China, although pork exports have been somewhat positive, says Senior Vice President for the Asian Pacific region for USMEF, Joel Haggard.
After recovering from the PEDV outbreak in 2011, China's pork production increased 2.8% for the first quarter of 2014. Still, U.S. pork exports to China were up 9% in volume and 19% in value for the first quarter of 2014.
"We're up to that region in quarter one despite very strong European competition and despite [China's] increased production," Haggard says.
Japan has also been hit with PEDV. Since the disease broke in its swine herd in fall 2013, Japan's mortality rates from PEDV have been less than 1% of its annual harvest. However, Japan's domestic carcass prices have skyrocketed, and market tightness is expected to result in a 1% increase in U.S. pork exports to Japan for 2014.
South Korea is also seeing an increase in domestic prices due to the disease. "(South Korea's) carcass price since January is up over 60%, we think they're going to import a lot of pork this year in total," says Haggard. "Because of overall growth and PEDV, we're looking at our pork exports to South Korea perhaps being up one-third to 32% this year."
China is importing more beef, but from other countries. In the first quarter, China saw a 44% increase in beef imports. China has been closed to U.S. beef since 2003, and although there have been discussions of resuming U.S. beef exports to China, it's not clear when it will happen.
On the other hand, U.S. beef export volume to Japan was up 21% for the first quarter of 2014 over 2013. Market access has improved since February 2013, when Japan started accepting U.S. beef from cattle under 30 months old. Even before that, the U.S. was seeing rising exports demand from Japan, Haggard notes.
"In two years, because of this increased market access, we'll have grown by half a billion dollars," he says. "It's an indicator of how important market access is."
Trade barriers in Europe and Russia
In February 2013, Russia banned U.S. beef and pork following a no-tolerance policy on beta agonists and ractopamine. Russia has recently re-listed three U.S. packing plants to accept pork exports from, notes John Brook, USMEF regional director for Europe, Russia and the Middle East. Since then, those plants have exported 25,000 tons of pork to Russia.
Discussions were put on the back burner this spring, following Russia's military intervention in Ukraine and the U.S.'s proposed sanctions against Russian officials.
"I think there is no question this is impacting the willingness to move forward on the technical questions," Brook says. "It is clear today no one is in any rush to relist any more plants for the United States."
However, there is a huge market for U.S. beef in the European Union, where there is a shortage of non-hormone treated cattle, although NHTC premiums have reached record highs Brook says. With the decreased supply of beef cattle in the U.S., many producers choose to cash in on already high beef prices. "The NHTC premium has been very healthy, well above $280 a head for over two years now," he says. "I would expect that would send a strong signal to American farmers to benefit from that premium."
Meanwhile, Brook says, the E.U. hasn't been as inclusive in discussing topics like growth-promoting hormones and GMOs in Transatlantic Trade and Investment Partnership, or TTIP discussions.
"We see European leaders taking every opportunity to say, 'Of course we're not going to change the fundamental guarantees and safety that is assured to the European consumer,' i.e. they don't want to change their policy concerning authorization of GMOs or the use of growth promoters."
Although the E.U. requested these negotiations, Brook adds the request was made when the E.U. was in a deep financial crisis, and European officials have stated the situation is improving.
"In some respects the pressure to conclude a TTIP, which was initiated with the objective of creating growth and jobs on both sides of the Atlantic, seems to be taken off on the European side."
Mexico continues to be a strong market
After the financial crisis of 2008, beef exports to Mexico declined sharply. However, Chad Russell, USMEF regional director for Mexico, Central America, and the Dominican Republic, notes they are picking back up. For the first quarter, U.S. beef exports to Mexico were up 40% in volume and 54% in value.
One factor is the 2011 to 2012 drought. Mexico exported record numbers of feeder cattle to the U.S., which exported beef cuts back to Mexico.
"Their choice was to export feeder cattle to the states, which they did in record numbers in 2011 and 2012, or to slaughter cattle," Russell says. "Because there wasn't any grass or pasture, they couldn't support the herd at that time."
"Pork has been quite a success story for us in Mexico," Russell adds. Pork exports to Mexico were up 22% in volume and 36% in value for the first quarter. Like many countries, Mexico has been hit with PEDV, causing rising domestic prices and increased imports of U.S. pork.
This doesn't mean there aren't concerns. The World Trade Organization is currently reviewing a dispute between the U.S. and other North American Free Trade Agreement countries, including Canada and Mexico, on certain Country of Origin Labeling requirements, which Canada alleges are inconsistent with the U.S.'s international trade obligations.
If the final ruling is against the U.S., Mexico's government has stated it would exercise its trade rights under the NAFTA and the WTO. According to Russell, this most likely means Mexico would retaliate by applying duties on U.S. products.
Overall, Russell says it's a very good picture.
"There is still a lot of growth in the Mexican market. There are production restraints in Mexico that in the longer term will make it difficult to meet their protein demands," he says. "There is no other supplier that has the geographic proximity, the supply, and products that they need than the United States."