January 27, 2006

US focuses on domestic market as beef prices fall
 

As Japan closes its doors on US beef exports and there are no indications whether South Korea will do the same, US analysts are highlighting the importance of the domestic market where 90 percent of American beef is consumed.

The Food and Agricultural Policy Research Institute (FAPRI) projects the United States will produce nearly 37.6 million tonnes of beef, pork and chicken in 2006, up from 35.8 million tonnes in 2004.

That could mean 1.36 million tonnes of additional beef whereas exports are projected to grow only by 270,000 tonnes this year, Scott Brown, a University of Missouri livestock analyst said in a press release.

As more cattle are added in the current phase of the growing cycle, the increased  supplies will put downward pressure on prices for the next eight years, Brown said.

While prices will soften, the outlook for the year ahead remains bright. Based on current FAPRI figures, cattle will not match the record setting prices of 2005, but it will still fetch decent prices this year, he added.

However, in addition to declining cattle prices, producers will face rising costs from interest rates, fuel, fertilisers and other expenses.

As for exports, Brown pointed out that Japan imported 470,000 tonnes of beef a year from 1995 to 2001. Those imports have now dropped to zero. Still, the fact that the Korean market remains open and the Mexican market is expanding is reason for cheer. Another reason for optimism is the increasing US population of 360 million who are largely beef consumers.

While export markets continue to be important to US producers, they must not lose sight of the domestic market, Brown said, adding that any reduction in domestic consumption would have serious consequences for the cattle industry.