Global market outlook
Despite looming production challenges, global demand for U.S. beef remains stellar
By Erin Borror
The COVID-19 pandemic brought tremendous shifts in consumer preferences and buying patterns, but through it all demand for U.S. beef – both domestically and internationally – climbed to new heights.
Foodservice typically accounts for a significant share of U.S. beef consumption internationally, raising concerns about a possible downturn in exports. But the retail performance has been incredible, which speaks to the versatility and unmatched quality of U.S. beef.
Across the world, consumers recognize the nutritional benefits, the convenience of cooking and the deliciousness of U.S. beef. These demand factors will help sustain momentum for exports even as U.S. beef production decreases over the next few years.
The United States is blessed with natural resource advantages that make it uniquely positioned to produce high-quality beef, as well as a strong ranching and cattle feeding heritage and a very robust domestic beef market. Our vast production base allows the U.S. industry to supply international customers with the cuts they most desire week in and week out, often as chilled – rather than frozen – product. The USDA Choice and Prime grades, offered only by the U.S., are also major selling points.
Thus, the retail penetration for U.S. beef deepened over the past three years and will now pair with a foodservice comeback in key Asian markets like Japan, where restaurant traffic is rebounding and international tourism has returned, and China, where COVID restrictions are finally being lifted and costly cold chain testing procedures are being eliminated.
Following a record performance in 2021, global demand for U.S. beef grew even stronger last year, with export value through November 2022 running 14% ahead of the prior year’s record pace and already reaching $10.9 billion. Export volume through November was 1.36 million metric tons (mt), up 3% year-over-year. The outlook for 2023 remains bright, though exports will likely see a modest decline due mainly to tighter beef supplies resulting from drought-driven contraction of the U.S. cattle herd.
Japan’s foodservice rebound becoming more evident While Japan began easing social distancing restrictions several months ago, the bounce in restaurant traffic and foodservice performance was fairly subdued until recently, as explained by USMEF President and CEO Dan Halstrom.
“My first post-COVID visit to Japan was in early September 2022 as we marked the 45th anniversary of USMEF’s Tokyo operation,” Halstrom said. “The airport was nearly a ghost town with very little activity, and once-busy train stations were quiet as well. Restaurants weren’t empty, but they definitely lacked the traffic and energy I was expecting. When I returned in December, the difference was like night and day. Consumer activity was still not all the way back to pre-COVID levels, but getting much closer.”
China lifts restrictions, but emergence from zero-COVID will take timeChina finally departed from its zero-COVID policy in early December, dropping many of its quarantine and testing requirements and curtailing local officials’ ability to impose neighborhood lockdowns.
In other welcome news, Chinese authorities announced that effective Jan. 8, measures such as nucleic acid monitoring and detection for novel coronavirus in the port link of imported cold chain food would be canceled.
This is also the date on which China stopped conducting nucleic acid tests and centralized quarantine for inbound travelers and China’s border with Hong Kong reopened for the first time in nearly three years.
All of these changes are likely to provide a boost for China’s beleaguered foodservice and hospitality sectors, but only after China works through its first major COVID wave.
“It’s interesting that the dismantling of China’s zero-COVID policies is taking place during a time of a huge surge in COVID cases,” explained Joel Haggard, USMEF senior vice president for the Asia Pacific. “So while the overall direction is positive, it's going to be a bumpy ride over the next couple of months. But there's still a lot of optimism heading into 2023, simply because so many restrictions are finally being lifted. Just think of China’s massive hotel business, which has really been cratered by COVID. The vision of this sector coming back is now on the horizon, which speaks well for beef demand in the medium and long term.”
While centered in Asia, demand growth is broad-basedSouth Korea remains the leading value market for U.S. beef, likely approaching $2.75 billion in 2022, bolstered in part by tariff reductions secured in the Korea-U.S. Free Trade Agreement. In 2023, U.S. beef entering Korea will be tariffed at just 8%, down from the pre-FTA rate of 40%. Lower tariffs have been especially critical at a time when Korean consumers are dealing with high inflation and a weakened currency.
Beef exports to Taiwan also set a new value record in 2022, easily surpassing the $668 million in exports posted in 2021.
It is important to note, however, that the surge in demand for U.S. meat is not limited to our major Asian markets. Regions such as the Caribbean, Middle East and Southeast Asia also achieved impressive growth in 2022, and exports expanded significantly to Colombia.
"Broad-based growth – that’s what I really find exciting about U.S. beef’s position in the world today,” Halstrom said. “Since gaining meaningful access to China in 2020, it has been a terrific addition but not at the expense of our other markets. And while our mainstay markets in Asia continue to perform, new destinations for U.S. beef are emerging and developing throughout the world.”
Competition from down under to accelerate, but labor a major obstacleBrazil, the U.S., Australia and India (mainly buffalo meat) are consistently the top four global beef exporters, but Australia is the primary competitor for U.S. beef, especially in the Asian markets. Australia’s exports were supposed to rebound in 2022, but through November were down 4% from the previous year when exports were the lowest in 36 years. Herd rebuilding has been strongly underway since 2020, so additional Australian cattle will be harvested in 2023 and exports will increase.
However, labor remains a major constraint for the Australian industry. Cattle feeders and packers have been losing money, and Australia’s cattle prices declined in late 2022, reflecting the challenging economic conditions and the expectation that additional numbers must work through the system in 2023.
While U.S. beef will face more competition from Australia this year, it is important to keep in mind that Australia’s grain-fed production and exports remained mostly steady-to-higher throughout the herd rebuild. Grain-fed exports were down just 3% from January through October 2022, totaling 238,000 mt and accounting for 34% of Australia’s total exports.
Australia’s top three markets – Japan, China and Korea – are the same as ours, and the increase in U.S. beef exports has come with continued Australian grain-fed exports – meaning that total demand has grown. Canada is the other major grain-fed exporter, and its production is expected to be lower in 2023. Overall beef production for the top exporters is expected to decline by 1% in 2023, following a 2% increase in 2022, based on October estimates from the USDA Foreign Agricultural Service.
Challenges persist in 2023, but so do opportunities for growth As we look ahead to 2023, many of the same challenges will remain but the economic headwinds are likely to be steady-to-easing, rather than accelerating. The U.S. dollar is off its recent highs and economic growth in many export destinations is expected to exceed that of the United States.
The coming decrease in U.S. beef production will limit further export growth, but our international customers have already seen and paid sharply higher prices for U.S. beef. They have also dealt with shipping delays and logistical headaches and lived through many uncertainties related to the pandemic. Through it all, restaurant operators, retailers and e-commerce purveyors have stuck with and profited from U.S. beef, and demand has been amazingly resilient.
USMEF is forecasting a relatively mild pullback in U.S. beef exports in 2023, to just under 1.5 million mt, valued at close to $12 billion. However, there is further downside risk, especially if global economic conditions should deteriorate more than expected.
Borror is vice president of economic analysis for the U.S. Meat Export Federation.