Global Beef Competition is Getting Fierce. How is the US Fairing?

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Past posts have focused on the importance of international trade for Montana agriculture in both wheat and beef markets (for example, see here).  In 2016, the US exported 2.5 Trillion Pounds of beef all over the world, while our major trading partners (Japan, South Korea, Canada, and Mexico) accounted for 71% of those exports.

In order to assess the competitive position for the U.S. in the global beef market, we use the table below, which shows the U.S. market share (in terms of pounds) for the beef trade within each of our major trading partners.

Importing Country
 Exporting Country South Korea Japan Canada Mexico China USA
Australia 49.2% 51.1% 15.0% 0.7% 19.5% 25.4%
USA 41.8% 39.8% 61.1% 84.6% 0.0%
New Zealand 6.8% 3.8% 11.2% 0.3% 12.5% 20.3%
Canada 1.3% 3.1% 8.9% 2.3% 23.8%
Uruguay 0.5% 0.0% 8.3% 0.1% 27.7% 4.0%
Brazil 0.0% 0.0% 1.8% 0.0% 28.5% 5.1%
Mexico 0.2% 1.6% 1.3% 0.0% 16.4%
Others 0.2% 0.6% 1.4% 5.3% 9.6% 4.9%

Table 1.  Percentage of Beef and Beef Products Imports, by Volume and Exporting Country.
Source: Global Agricultural Trade System Online (FAS, USDA).

Let’s start by talking about Korea.  With the passing of KORUS (US-Korea Free Trade Agreement) in 2012, tariffs on U.S. beef into South Korea are expected to be eliminated by 2026.  This trade deal was largely hailed as a win for beef, however, we are not alone in these kinds of trade deals.  While Australia has remained the main provider of foreign beef to South Korea (49.2% market share in 2016), Australia also has a similar trade deal with South Korea.  As part of the 2014 Korea-Australia Free Trade Agreement, tariffs on Australian beef exported to South Korea would be without any tariff in 2028.  Thus, KORUS is one way for the US to maintain its competitive position in the South Korean market and essentially play on a level playing field with Australia.

However, Japan is another story.  Australia recently made an agreement with Japan, as part of the Japan-Australia Economic Partnership, which will reduce tariffs (though not to zero) over the next 15 years.  Given the recent withdraw from the Trans Pacific Partnership by the U.S. and no clear indication of a bilateral trade agreement with Japan, this clearly puts US beef producers at a disadvantage, as they now have to contend with a 38.5% tariff.  Further, this tariff was temporarily increased to 50% by Japan for frozen beef, last summer.  As a comparison, Australia had a similar tariff rate of 38.5%, which will fall to 18% over the next 15 years (Source: MLA).  The TPP would have lowered tariffs on US Beef into Japan to 9% over the next 16 years.  These types of agreements are critical to maintain a competitive position for US Beef across the globe.

While Canada and Mexico accounted for only 28% of US Beef Exports in 2016, the US holds a competitive advantage selling into those markets with the duty-free access into Canada and Mexico as part of the North American Free Trade Agreement (NAFTA).  While the renegotiation of NAFTA has started under the Trump administration, the current agreement on beef seems to provide the US with a leg up on other competitors, including Australia and New Zealand.  For example, the US accounts for the majority of beef imports into Canada (61.1%) and Mexico (84.6%).

And now for a new trading partner: China.  Recent meetings between U.S. Senator Daines (R-MT) and the Chinese Ambassador are promising indicators of developing that market.  In 2016, China split its imports between Brazil (28.5%), Uruguay (27.7%), Australia (19.5%), and New Zealand (12.5%).  Behind the U.S., China is the largest importer of beef, followed by Japan and South Korea.

Future posts will focus more specifically on each of these markets.  What are your thoughts on the global beef market?

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About Author

Eric Belasco

Eric Belasco is an Associate Professor in the Department of Agricultural Economics and Economics at Montana State University. He received both his M.S. and Ph.D. in Economics from North Carolina State University in 2005 and 2007, respectively. He conducts research in the areas of agricultural marketing, risk management, farm policy, and financial engineering. Examples of this research include evaluations into grid pricing risk, the use of forward contracts in mitigating profit risk, modeling revenue risk in cattle production, and characterizing the link between weather and production indicators.

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