Export strength helps market for beef cattle
By Steve Adler
Beef producer Luke Reimers of Orland stands among a herd of steers that are being raised for a future beef shipment to Japan.
“The Japanese particularly look for black, naturally bred cattle.”— Luke Reimers, Orland beef producer
For cattle ranchers including Luke Reimers of Orland, beef exports play an important role in their marketing strategy.
Reimers, who ranches with his father Del Reimers at Black Butte Ranch, is raising a large group of steers that in a few months will be processed for beef to be shipped to Japan.
"The Japanese particularly look for black, naturally bred cattle. They will be fed out here in California, processed and shipped to Japan. They will be processed at about 15 to 16 months of age when they weigh about 840 pounds," he said.
Reimers said there are more challenges involved in raising cattle for the Japanese market because the buyers want only black cows that are raised naturally.
For a number of California beef producers, exports are very important, says Kevin Kester, a Monterey County cattle rancher and president of the California Cattlemen's Association.
"For 2011, exports equal about 13 to 15 percent of U.S. beef production, so they are really helping prop up our beef markets right now," he said. "California producers do source and age verification on their cows, which makes them eligible to go overseas to countries like Japan and South Korea, which are two of our best markets."
Kester said U.S. beef exports this year will probably exceed $5 billion for the first time ever, after setting a value record of about $4.2 billion in 2010.
While prices being received by beef producers are strong for both domestic and export markets, input costs are taking their toll, both Reimers and Kester acknowledged.
"We are self-contained and our entire operation is run on private ground that we own. We raise our own hay. Our biggest cost is diesel fuel. There are other things that also go up," Reimers said.
While Reimers held back some of his heifers in order to increase the size of his herd, many cattle ranchers are taking advantage of the current market and sending most of their steers and heifers to processors.
"Because of a host of factors, we haven't seen any evidence yet across the industry in California and the U.S. that cow-calf producers are starting to expand very much at all," Kester said. "Because of high input costs, the economy and the uncertainty of Mother Nature across the country—especially in Texas and Oklahoma—ranchers just aren't ready to hold back their heifers. They would rather sell at these record prices and get the cash."
Beef numbers in California are actually on the decline.
"We are under 600,000 head in the state now and that is due to all of the other factors that are inherent to California, such as development pressures and the average age of the rancher approaching 60 years old. We have people going out of business," he said.
Policies like the federal estate tax have a huge effect on keeping a ranch intact from one generation to the next, Kester said, citing it as one of the main reasons younger generations may not be able to keep ranches economically viable.
The production-cost challenges facing cattle ranchers make the successs of export markets even more important to them, according to Philip Seng, president and CEO of the U.S. Meat Export Federation.
"Those producers are dealing with high operating costs, adverse weather and many other significant challenges, and the export markets are clearly the best thing they have going in terms of profitability," he said.
In its most recent report on foreign markets, the USMEF said July exports of U.S. beef equated to 16.3 percent of total production, compared to 12 percent in July 2010. Beef exports set a new value record in July of $513.1 million, on a volume of 120,424 metric tons.
For the first seven months of the year, exports totaled 741,275 metric tons valued at nearly $3.1 billion, an increase of 26 percent in volume and 40 percent in value over last year's pace.
"July was another outstanding month for red meat exports, as we continued to expand the presence of U.S. beef and pork throughout the world," Seng said. "This is a testament to the commitment U.S. producers and exporters have made to the international markets. Despite market access restrictions, high tariffs and other trade barriers, the investments we are making in foreign markets are paying tremendous dividends."
Beef exports to Canada had set a new value record in June of nearly $97 million, but that record was quickly eclipsed by a July total of $131.3 million, the federation reported. This performance pushed Canada into the No. 1 position for 2011 U.S. beef exports in terms of value at $595.2 million—an increase of 54 percent over last year—on a volume of 110,712 metric tons, up 32 percent.
Despite losing its top ranking, Mexico continued its strong performance with imports valued at $78.4 million in July and a year-over-year total that is 23 percent higher at $552.7 million, according to USMEF. Mexico remains the top volume market for U.S. beef at 147,386 metric tons, an increase of 6 percent over last year.
Japan ranks third in beef export value for the year at $502.9 million, a 50 percent increase over the first seven months of 2010. In terms of volume, exports to Japan through July increased 45 percent over last year.
July exports to South Korea slowed from the rapid increases seen earlier in the year, but year-to-date exports to Korea were still 55 percent higher in volume and 48 percent higher in value than a year ago, making Korea the third-largest market in terms of volume and fourth-largest in value.
(Steve Adler is associate editor of Ag Alert. He may be contacted at firstname.lastname@example.org.)
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