U.S. Meat Exports

The importance of Japan to the U.S. red meat industry

Erin BorrorEconomist, USMEF

USDA Ag Outlook ForumFebruary 22, 2019 Washington D.C.

Japan is a top global importer of pork & beef

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Japan China HongKong

S.Korea Mexico

U.S.

Billi

ons

Pork & Variety Meat Imports

2016 2017 2018

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U.S. China Japan HongKong

S. Korea EU28

Beef & Variety Meat Imports

2016 2017 2018

Source: GTA and USMEF estimates

And top value market for U.S. =$3.7 Billion

$0$200$400$600$800

$1,000$1,200$1,400$1,600$1,800

Mill

ions

U.S. Pork & Variety Meat Exports2016 2017 2018

$0$200$400$600$800

$1,000$1,200$1,400$1,600$1,800$2,000$2,200

U.S. Beef & Variety Meat Exports


Accounting for more than a quarter of export value

Japan , $82.75 , 25%

Korea, $68.50 , 21%

Mexico, $41.38 , 13%

China/HK, $39.40 , 12%

Canada, $29.57 , 9%

Taiwan, $21.22 , 7%

Others, $43.88 , 13%

Jan - Nov 2018 beef export value per head of fed cattle slaughtered = $320.72, +14%

Source: USDA/FAS & USMEF, fed slaughter

Japan , $13.18 , 26%

Mexico, $10.67 , 21%

China/HK, $6.93 , 13%

Canada, $6.09 , 12%

Korea, $5.30 , 10%

Others, $9.28 , 18%

Jan – Nov 2018 pork export value per hog slaughtered = $51.46, -3%

Red meat is key in U.S. ag market access

$4.05$4.90

$3.49$3.71

$3.01 $3.25 $3.70$3.92

$2.21

$1.25

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$2

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2013 2014 2015 2016 2017 2018e

Billi

on U

SD

U.S. Ag Exports to Japan

OthersPoultry & ProductsSugar & Tropical ProductsDairy & ProductsOilseeds & ProductsHorticultural ProductsRed meat & productsGrains & Feeds

A U.S.-Japan trade agreement is urgently needed• All is not yet lost, but we are now way behind• Japanese market is booming / in transition • Companies looking to invest for future – noting decrease in Japanese

production expected, high labor costs, etc. • Expect continued growth in Japanese red meat consumption and

imports accounting for a larger share of the market • Need assurance that U.S. will be FTA/TAG partner soon • Industry priorities have been conveyed to USTR =

• level playing field ASAP • Near-term loss estimates: $600 million pork and $550 million beef …

lost opportunities exceed $1 billion each in 10 years

“Niku Boom” Japan’s meat & poultry imports reach a record 3 million mt

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500,000

1,000,000

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2013 2014 2015 2016 2017 2018

Met

ric to

nsJapan’s meat & poultry imports

sheep meatsausagespork fatoffalprepared porkchilled beeffrozen beefchilled porkprepared poultryfrozen porkchilled/frozen poultry


Opportunities: Japanese consumption

• Seafood continues to decline • Poultry, pork and beef continue to grow • Convenience drives demand for value-added and favors red

meat vs. seafood • Demographics- older generation eating more red meat• Income/economic growth continues to underpin meat

consumption • U.S. beef and pork seen as high-quality and healthy • Imports to account for a larger share of consumption

The Japanese Beef Market

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700,000

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900,000

1,000,000

2011 2012 2013 2014 2015 2016 2017 2018

Japan’s Beef Situation, calendar year, mt

Production Imports Marketing quantity

Per capita: 6.88 in 2011 to 7.1 kg in 2017 and 7.4 kg in 2018 Source: ALIC, GTA and USMEF estimates

U.S. and Australia

49%

34%

56%46%

56%

26%

0%10%20%30%40%50%60%

Chilledbeef

Frozenbeef

Varietymeats

Market Share of Japan’s 2018 Beef Import Volume

U.S.Australia

U.S Aus.

U.S. beef exports to Japan…adding value to each animal

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brisket/plate chuck/clod/round tongues chilled skirts loin tripe, intestines

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Japan’s imports of U.S. beef

2016 2017 2018

$220 mil $154 mil $30 mil

$733 mil

$590 mil

$300 mil

Japanese imports of U.S. beef tongue averaged $11.60 per head of fed slaughter in 2018 and imports of short plate averaged $28.50 per head.


Of the major markets for U.S. beef, Japan has the highest tariffsCompetitors now have the tariff advantage

38.50%

12.80%

27.50%

6.40%

26.60%

5.70%9%

0%0%

5%

10%

15%

20%

25%

30%

35%

40%

Chilled/Frozen Beef Beef Tongues/Skirts

Ad v

alor

em d

uty

Japan’s Tariffs on Key Beef Products

U.S. CPTPP & EU Implementation CPTPP & EU April 1, 2019 CPTPP & EU final

Source: USMEF and agreement text

Zero by 2028-2030

by 2033

Initial tariff reductions on implementation (Dec 30 for CPTPP and Feb 1 for EU) and again at start of JFY, April 1, 2019

U.S. beef now the only one subject to Japan’s quarterly SG mechanism: risk of 50% duty again

U.S. beef export losses without FTA

• Per head losses: -$18.70 by 2023 -$42 by 2028

• These are lost opportunities

• Will impact across the chain

Opportunities: Over Thirty Month Beef Access• U.S. beef exports to Japan could increase by $150 to >$200 million

annually or +7 to 10% • Export demand expected for high-demand Japan cuts

Short Plate, Outside Skirt, Hanging Tender• Strong potential for cuts from white cow or other quality assured

programs, meeting Japanese cut specifications and with competitive pricing

Chuckeye Roll, Short Rib, Loins (strips, tenders), Clod, Brisket• Offal/Variety Meat, high demand

Mountain Chain Tripe, Tongue, Abomasum, Liver, Large Intestine & Small Intestine • Processed/cooked beef

Assume U.S. exports could double as being able to produce value-added beef products from OTM significantly reduces costs.

• But U.S. not likely to fully realize potential without an FTA as tariffs on some processed beef items are high (and are phased to zero through CPTPP) and generally OTM beef needs to be price-competitive

The Japanese Pork Market

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2011 2012 2013 2014 2015 2016 2017 2018f

Japan’s Pork Situation, calendar year, mt

Production Imports Marketing quantity

Per capita: 13.16 in 2011 to 14.4 kg in 2017 and 14.9 kg in 2018 Source: ALIC, GTA and USMEF estimates

Japan imports record volumes of pork (>$5 billion)

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2013 2014 2015 2016 2017 2018

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Japan’s Pork & Variety Meat Imports

Others

Chile

Mexico

Total imports: 1.16 mil mtU.S.: 407,000 mt, steady U.S. market share held at 35%


Chilled pork driving the growth in Japan’s imports…and GSP

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chilled frozen gsp other processed

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Japan’s pork imports by category

2010 2011 2012 2013 2014 2015 2016 2017 2018

Lots of potential in the value-added categories as Japan’s tariffs are phased out through CPTPP and Japan-EU


Japan’s imports of U.S. pork

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chilled frozen gsp other processed

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Japan’s U.S. pork imports by category

2010 2011 2012 2013 2014 2015 2016 2017 2018

Tariffs on competitor’s

processed pork phasing to zero


Elimination of tariffs on processed pork and changes to the chilled/ frozen gate price could significantly change Japan’s pork market

4.30%

20.00%

10.00%9%

2.20%

16.60%

8.30%

4.30%

1.96%

13.30%

6.60%

4.30%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

Chilled/frozen pork Prepared pork Sausages Ham & Bacon

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uty

Japan’s Tariffs on Pork Imports

U.S. CPTPP & EU Implementation CPTPP & EU April 1, 2019

Zero by 2023

Zero by 2028

Source: USMEF and agreement text

Tariffs are eliminated by 2023 for prepared pork & sausages; and by 2027-2028 for chilled/frozen pork and ham & bacon

Zero by 2027

Zero by 2023

Canadian pork gaining chilled market share

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Japan’s Chilled Pork Imports

TTL Imports Canada U.S.Source: MAFF


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Japan’s imports of ground seasoned pork

Others

Chile

Mexico

Canada

EU-28

UnitedStates

Record-large GSP imports, driven by EU, Mexico, Chile, Canada …FTA partners

Source: MAFF

EU market share has increased to 18%

The loss of U.S. market share, from 45% to 34%

72%

52%

78%

65%

26%

10%

45%

34%

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60%

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90%

2011 2012 2013 2014 2015 2016 2017 2018

U.S. Share of Japan’s Pork Imports, by category

Chilled pork Ground seasoned pork Frozen pork Total pork

GSP

Chilled

Total

Frozen


With TPP-11 & Japan-EU EPA• Expect continued growth in chilled pork, led

by Canada • Potential to import single cuts priced below

the gate• For processing and retail

• Continued growth in ground seasoned pork, • with investment in Europe (Ireland and Spain as

relatively new suppliers as well as Germany and Netherlands)

• and in Canada, Mexico, Chile • Looking to produce more value-added and

processed products outside Japan • labor advantages favor Mexico • but potential in Europe and Canada as well

U.S. pork export losses without FTA

• On a per head basis, this would equate to $4.55 per head loss by 2023

• and -$7.06 per head by 2028

• Again these are lost opportunities or market potential

• Chain-wide impact

Besides lost export sales of >$2.2 billion annually, Impact back to feed grains & downstream employment

Projected value of between $1.5 Bil to $2 Bil to corn and soybean farmers

10 year impact on feed-grain utilization Feedstuff Pork Beef TOTAL

Corn 172.8 mil bu

64.2 mil bu 237 mil bu

DDGS 282,867 tons

724,000 tons

1.006 mil tons

• Exports to Japan estimated to directly support more than 4% of the jobs in the meat packing and processing industry

• An annual cost of more than $5.2 billion in direct economic losses to other businesses and industries in the top 15 states where the meat packing and processing industry is located

• Also, based on the RIMS II data, about 23,600 jobs outside the meat industry would be lost in year 10 in those states

Thank you• Erin Borror• [email protected]• 303-623-6328

• Loss summaries: • http://www.usmef.org/usmef-technical-services/recent-

export-trends/

mailto:[email protected]

http://www.usmef.org/usmef-technical-services/recent-export-trends/

extras

Main EU suppliers: Spain and Denmark are top suppliers of frozen; Germany & Netherlands for GSP

Frozen Pork Jan-Nov '17 Jan-Nov '18 YOYSpain 97,860 104,598 7%Denmark 105,564 100,325 -5%Netherlands 23,359 26,708 14%Germany 18,352 20,467 12%France 13,199 13,030 -1%Italy 12,153 12,791 5%Hungary* 18,480 7,875 -57%Austria 7,788 7,008 -10%Ireland 6,572 6,928 5%

Ground Seasoned PorkGermany 6,826 10,878 59%Netherlands 7,194 7,774 8%Ireland 1,404 5,753 310%Spain 677 1,557 130%

Prepared/canned hams 160249Denmark 3,657 3,861 6%

Source: GTA, metric tons, *Hungary banned following ASF finding

Chilled/frozen beef tariffs and safeguardsChilled Beef Frozen Beef Tongues & Skirts

MFN Applied Tariff

(U.S. & Other Non-EPA Countries)

38.5%

SG: 50%

38.5%

SG: 50%12.8%

Australia EPA

April 1, 2018 and 2019 Tariff Rates, 2019 SG volume

29.3% 28.75%SG: 38.5% (137,500)

26.9% 26.6%SG: 38.5% (202,500)

7.6% TRQ (19,000)

Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP) Tariff Rates Upon Implementation & Reduction

27.5%, 26.6% on April 1 to 9% by year 16 (2033)

With annual SGs during implementation*

601,800 mt on April 1, 2019, 38.5% snapback *quarterly SGs for years 11-15

6.4%, 5.7% to 0% by year 11 for

tongues, by year 13 for skirts

April 1, 2019 tariff rate

Chilled beef accounts for more than half of Japan’s imports

• Total beef imports, excluding variety meats 600,000 mt • 2018 market share: Australia 51% U.S. 40% Canada 3.6% NZ 2.5% Mexico 2%

• Chilled beef 280,000 mt, 53% of total • U.S. 49.8% market share (short plate 47%, chuck/clod/round 46%, loin 7%)• Australia 45% (chuck/clod/round 58%, brisket/plate 24%, loin 17%) • NZ 2% • Canada 1.5% and Mexico 1%

• Frozen beef 310,000 mt, 45.5% of total • Australia 56.5% market share (trimmings/manufacturing beef = 71%)• U.S. 32.5% (short plate = 85%) • Canada 5.4%• Mexico 2.9%• NZ 2.55%

• Prepared/cooked beef 1% of total• Australia 56% market share• U.S. 30%

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chill/fznpoultry

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preparedpork

offal pork fat sausages sheepmeat

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Japan’s Meat & Poultry Imports

2013 2017 2018e

+12%

“Niku boom”Japan’s robust meat demand

-1%-1% +7%

+3%

+7% +5%

+8%


+4%+29%

-4%

2018 year/year estimated percent change is noted

The duty cost of importing U.S. beef limits sales of higher-value cuts

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Chuck, clod, round Short plate, brisket Loin

Japan’s Chilled Beef Imports by Category, 2017

U.S. Australia Others

$3.57/lb * 38.5% = $1.38/lb

$3.57/lb * 26.6% = $0.95/lb

$2.70/lb * 38.5% = $1.04/lb

$2.70/lb * 26.6% = $0.72/lb

$6.70/lb * 38.5% = $2.57/lb

$6.70/lb * 26.6% = $1.78/lb

Lower value frozen imports aren’t hit as hard but also more price sensitive

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Chuck, clod, round Short plate, brisket Loin Trimmings

Japan’s Frozen Beef Imports by Category, 2017

U.S. Australia Others

$1.76/lb * 38.5% = $0.68/lb

$1.76/lb * 26.6% = $0.47/lb

$2.53/lb * 38.5% = $0.97/lb

$2.53/lb * 26.6% = $0.67/lb

$1.69/lb * 26.6% = $0.45/lb

U.S. as the top supplier of chilled beef tongues and skirts, but tariff on U.S. will be double that of competitors

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chilled skirts chilled tongues frozen tongues frozen skirts

Japan’s imports of beef variety meats, 2017

U.S. Others

$5.53/lb * 12.8% = $0.71/lb

Vs. 5.8% = $0.32/lb

$7.73/lb * 12.8% = $0.99/lb

Vs. 5.7% = $0.44/lb

Japan’s pork imports by category, 2018 estimates and market share

Total pork imports, excluding variety meats & sausages: 1.16 million mt • Chilled pork 412,000 mt

• U.S. 52%, Canada 45%, Mexico 2.8% • Frozen pork 530,000 mt

• U.S. 10%, EU 64%, Mexico 14%, Canada 7%, Chile 4.6% • Ground seasoned pork 158,000 mt

• U.S. 65%, EU 17%, Canada 10%, Mexico 4.4%, Chile 2.4% • Canned, other processed pork 58,000 mt

• U.S. 48%, followed by China, EU and Thailand • Ham and bacon 4,400 mt

• U.S. 9% and EU is primary supplier • Sausages 31,000 mt

• U.S. 31%, followed by China, EU and Thailand

The competitors to benefit fromChilled/Frozen Pork

Tariff Type Ad ValoremBelow Gate Price of 524 yen/kg:

specific duty rate

MFN

(U.S. & Other Non-EPA Countries)4.3% Max 482 yen/kg

CPTPP & Japan-EU EPA Tariff Rates 2.2% to 1.96% on April 1, 2019

phased to 0% by year 10

Max 125 yen/kg years 1-4,

70 yen/kg in year 5,

phased to 50 yen by year 10

Duties on Processed Pork Products

Tariff Elimination under CPTPP & Japan-EU EPA

MFNJan-Mar

2019Year 1

April 1 2019

Year 2

2020Year 3

2021Year 4

2022Year 5

2023Year 6

GSP, canned pork, etc.

20% 16.6% 13.3% 10% 6.6% 3.3% zero

Sausages 10% 8.3% 6.6% 5% 3.3% 1.6% zero

Ham & bacon8.5%

897.59 GP

4.3% 4.3% 4.3% 4.3% 2.2%To zero by

year 11

Documents

U.S. Meat Exports