25 April 2008

5 minute read

2009

Annual and Semi

2008

Annual

Semi-Annual

2007

Annual

Semi-Annual

Report Highlights:

Japan’s 2008 beef imports are projected down by 5% from last year to 650,000 MT, mainly due to a reduction in Australian supplies of grain fed beef. Sales of U.S. beef are forecast moderately higher but remain hamstrung by import restrictions. Japan’s total pork imports in 2008 are projected up by 2% to 1.24 million MT. The United States is likely to remain Japan’s largest foreign supplier of pork. Sales of U.S. pork are forecast up 3% to 475,000 MT.

2008 Revised Beef Market Outlook

Total Beef Consumption to Fall due to Reduced Imports, Economic Slow Down, and High Market Prices in 2008

Total beef imports in 2008 are projected down by 5% from last year, to 650,000 MT, due mainly to a reduction in the supply of Australian beef. As domestic beef production is also projected to fall slightly this year, to 500,000 MT, the anticipated supply shortfall is expected to lower Japanese total beef consumption by 2% to 1.157 million MT.

Amid modest economic growth and the first widespread food price increases in over a decade, the demand for beef is expected to slacken. Beef remains relatively high-priced compared to pork or chicken. Japanese beef consumers began to be more price conscious in 2007 and this is expected to become somewhat more pronounced in 2008.

Drought to Substantially Lower Australian Beef Supply in 2008

Drought in Australia continues to affect supplies of beef to the Japanese market. Because Australia placed fewer cattle on feed in recent months, this year’s exports of grain fed beef to Japan will decline further. Recent rains in Australia are beneficial but any increases in grain fed beef exports to Japan would not occur until later this year or early next year.

Meat Livestock Australia’s (MLA) latest forecast shows an 11% drop in CY 2008 beef exports to Japan. Post’s projection for Japanese imports of Australian beef in 2008 is also down by a projected 11% from last year to 490,000 MT (PWE 350,000 MT). Post’s estimate for prepared/processed products is unchanged from last year at about 11,000 MT. Continued high feed prices, high export offer prices, and strong a Australian dollar compared to the Japanese yen are other factors contributing to an overall decline in Australian beef exports to Japan.

On the other hand, industry sources predict that imports of grass fed beef, which is mainly used as an ingredient for ground beef products, may reach last year’s level, depending demand from other importing countries such as Korea.

In 2007, Australian grain fed beef to Japan accounted 45% of Australia’s total beef exports, but the volume shipment was down 10%, a consequence of drought-induced high prices (See supplemental table IV).

Trade Restrictions Limit U.S. Beef Sales

Japanese imports of U.S. beef in 2008 are projected higher at around 70,000 MT (PWE 50,000 MT). This would be a 22,400 MT increase over last year. U.S. beef brought into the market readily sells and consumer acceptance is good. Improved availability of beef cuts from age verified animals under the USDA Export Verification Program for Japan (commonly called the EV agreement) has allowed export volumes to increase over the past year. However, under the EV restrictions, the United States will not be able to cover the anticipated shortfall in Australian beef sales to Japan. The United States has urged Japan to adopt international standards in the trade in beef, which would allow beef from animals of all ages to be freely traded.

Not reflected in the PS&D, Japan also used to be the most important market for U.S. offals such as tongue, skirt meat and diaphragms. Japanese imports of U.S. offals averaged at $585 million from 1999 – 2001. Trade restrictions on offals would also presumably be lifted if Japan accepted international standards.

Japanese Retail Consumer Price Expectations

Industry sources also indicate that U.S. beef at the retail level is being priced too high for average consumers. CIF prices for U.S. beef in 2007 were 30% higher than the 1999-2001 average, which supports the idea that the price expectations held by retail consumers may not yet be current with the market.

No Safeguard Triggering Anticipated in JFY 2008

Given the projected level of imports, it is unlikely that the beef safeguard will be triggered during Japanese Fiscal Year (April/March) 2008. Japan will maintain the same trigger level calculation that has been used for the past two years.

2007 Situation Summary

Recovery Remained Sluggish in 2007

Japanese total beef consumption rose a modest 2% in 2007 to an estimated 1.18 million MT. The high price of beef relative to pork and chicken, limited supplies of U.S. beef under the EV agreement, and stagnant household income all contribute to sluggish demand and a slow recovery of Japanese beef consumption to historic highs.

Total beef imports in 2007 were 687,000 MT, up 1% from last year although, owing to their slightly lower price, frozen cuts were up 8% to 335,000 MT (See tables 2, 3, 4, and 5).

2007 imports of U.S. beef were 47,600 MT (PWE 34,000 MT), accounting for only 7% of the total imports of generic beef cuts. Average monthly import volumes of U.S. beef throughout 2007 remained limited at around 3,900 – 4,000 MT. This is approximately one tenths of U.S. beef’s peak in the market (1999 – 2001).

Australian Beef Supply Affected by Drought

Due to drought, 2007 Japanese imports of Australian beef slipped 3% to 562,000 MT [Generic beef cuts; down 3% at 551,000 MT (chilled cuts; down 10% at 263,000 MT, frozen cuts; up 4% at 288,000 MT), prepared/processed products; down 25% to 11,000 MT). Other factors, such as high prices and a strong currency against Japanese yen, also attributed the decline.

Sales of Domestic Beef Stall

Japanese domestic production in 2007 rose slightly to 504,000 MT (or 1.206 million head for slaughter). However, due to high prices, sales of domestic beef, particularly at the retail level, were lower (see supplemental table I-a and I-b). Compared to the 2003 average, retail prices for domestic beef were 30 % - 80% higher, depending on the cut.

Further Reading

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April 2008