Exports and imports of beef both add value

Friday, May 12, 2017

Beef imports are often viewed as partially offsetting beef exports thus reducing the net value of beef trade; in reality both beef exports and imports add value to the U.S. beef industry.

“Exports and imports help sort out the complex set of beef products in domestic and international markets to maximize the value to U.S. beef producers,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist.

The United States is the fourth-largest beef exporting country and the largest beef importing country. Occasionally, beef exports exceed the quantity of beef imports. Most often, however, the value of beef exports exceeds imports making the United States a net exporter of beef in value terms.

“Beef exports add value by increasing the quantity of total beef sales, allowing the United States to sell more beef to more places,” Peel said. “Also, beef exports add value by selling beef at higher prices.”

In some cases this is because high-value products in the United States have even more value in global markets. Often, however, it is because products that have a relatively low value in the United States have a higher value in some global marketplace.

“Beef offals are a long time example of this but it is true for numerous other products as well,” Peel said. “The beef industry produces a vast array of products from different parts of the carcass and of varying quality; meat that grades Choice or Select, as an example.”

In addition, beef exports add value by optimizing the diverse set of beef products in the domestic market. Beef demand is often characterized with pork and poultry as the primary substitutes for beef. In reality, the biggest substitute for any particular beef product is usually another beef product.

As beef is perishable, the entire set of beef products will be consumed on average each year, including products less preferred in the U.S. market. Lower valued products will be priced to ensure consumption, even at the expense of stronger underlying demand for higher valued products.

“Anyone who has ever put a side of beef in the freezer knows the steaks are gone long before other parts of the carcass are consumed,” Peel said. “However, people then typically prepare and consume those other products before adding more steaks to the freezer.”

Similarly in the nation’s domestic marketplace, export markets provide a way to ship out some of those lower valued cuts thereby focusing domestic demand on higher value beef. Every pound of lower-valued beef product exported is one less pound that competes with increased total demand and value for beef in the domestic market.

“This role of beef exports improving the domestic product mix and optimizing beef demand is often overlooked but is arguably the most important component of total beef export value,” Peel said.

Beef imports are largely driven by the enormous market for ground beef in the United States. Approximately 72 percent of beef imports are lean trimmings used primarily to make hamburger. In 2016, ground beef consumption was estimated at 25 pounds per capita, making up 45 percent of total U.S. retail beef consumption.

Imported beef is used to supplement domestic supplies of lean trimmings which are mixed with the fatty trimmings from fed cattle to make ground beef. “Without additional lean, some of those fed trimmings would have, at best, value as tallow rather than as ground beef,” Peel said.

Without imported beef trimmings, one of several outcomes would impact the U.S. beef industry:
● Less ground beef would be produced, reducing the value of the nearly 150 pounds of fed trim from each carcass;
● Approximately 10 to 15 percent of steers and heifers would need to be raised and slaughtered as non-fed beef for lean – similar to Australian range beef – and would be valued roughly the same as cow carcasses; or
● Additional lean from fed carcasses could be ground for hamburger rather than being used for whatever higher value it currently might possess.

“In each case the value of U.S. beef production is lower than it is when supplemented with imported beef,” Peel said. “Imported beef compliments domestic production to improve product utilization in the domestic market and increase the total value of production.”