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September 27, 2017

Will that be a US, Argentine or Brazilian steak on your plate?
How the Americas became an important world beef supplier and why their influence will grow in the future

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Powered by rising protein consumption in China and East Asia, world beef demand is growing strongly for the first time in decades. World beef exports only rose at a meager 0.5% annual rate in the twenty years up to 2007 inclusive, from 6.88 million tonnes to 7.59 million tonnes. This jumped to an annual beef export increase of 1.3% annually from 2007 through 2012 inclusive -rising further to a 3.4% annual increase in beef exports in the five years since 2012.
Much of this increased beef supply comes from the Americas, which contain three of the world's top five beef exporting nations. From 20% in the late 1980s, North and South America have consistently accounted for roughly 45% to 55% of world beef exports in the years since 2000. Despite suffering many setbacks, the Americas' share of world beef has grown and will continue doing so.
Historically, Argentina defined North and South America's contribution to global beef markets, supplying 25% to 30% of world exports prior to 1970. Before the 1980s, Argentina exported more beef than the rest of North and South America put together. America and Canada were net beef importers, with their exports greatly outweighing imports. This situation however, changed in the 1980s.
On one hand, thirty years of ham-fisted Argentine government policies reduced its beef exports by 80% from peak 1970s levels by the start of the 2010s. Fortunately, from the early 1990s onwards, Argentina's decline was more than counterbalanced by rising beef export volumes from Brazil, the United States and Canada, though for different reasons.
In America, Canada and Argentina, beef production was no higher in the 2000s and 2010s than it was in the 1970s. North America's white meat consumption rose at the expense of falling per capita beef and pork consumption. From above 40kg in the late 1970s, Canadian and American per capita beef consumption fell below 25kg by the late 2000s.
Four decades of declining per capita North American consumption coincided with slowing population growth, and near flat, incrementally rising beef production. That created large, steadily growing surpluses of Canadian and American beef -particularly pricier cuts- available for export. It was the opposite of what occurred in Argentina, where consumption stayed high and exports tightly controlled, forcing more of the latter's faltering output into domestic consumption. It also helped counterbalance large North American imports of ground beef, which initially outweighed exports of higher end US and Canadian cuts.
Thus, from 110,000 tonnes in 1990, Canadian beef exports jumped 419% to 563,000 tonnes by 2000. Imports totaled 185,000 at the start of the 1990s and 290,000 tonnes by 2000, leaving Canada with a large net beef export surplus.
The US started the 1990s by exporting 313,000 tonnes of beef and importing 1.09 million tonnes. By 2000, it was closed to achieving balanced trade with export volumes approaching those of imports. America's tripling of exports to 1.12 million tonnes by 2000 made it the second largest world beef supplier after Australia, but it still imported 1.38 million tonnes.
Whereas North America boosted beef shipments to relieve an accumulating surplus of unsellable prime cuts, Latin America saw large increases in both production and exports everywhere except Argentina. From 5 million tonnes in the 1990s, Brazilian beef production reached 6.5 million tonnes by 2000 and 9.5 million tonnes by the end of 2016. Brazil's own large, fast-growing market initially absorbed its entire production increase but this started changing in the late 1990s.
By 2000, Brazil's 488,000 tonnes of beef exports were lower than the half million tonnes it exported in the late 1980s. Even so, it was now out-exporting Argentina. Brazil's beef production started overtaking domestic consumption growth, but luck proved to be on its side In 2003 the US was on the verge of having beef exports overtake imports when Mad Cow disease devastated the industry. American beef was subsequently banned from major markets such as South Korea and Japan.
From 2003 to 2004, US beef exports fell by 933,000 tonnes -and it would take America eight years to achieve its 2003 record volume. Australia, then the top beef exporter, was at the beginning of a decade-spanning drought. Its exports in 2010 were only 52,000 tonnes or 4% higher than in 2000 -and only 168,000 tonnes more than what it sold to the world in 1978.
Constrained by poor cattle rearing returns, too much dependence on a slow-growing US market and a rising currency, Canadian beef exports also flattened out. They never again touched the 600,000-tonne peak volume achieved in the early 2000s.
This left Brazil, Paraguay and Uruguay in a good position to fill the market vacuum created by the loss of nearly a million tonnes of US beef exports: After 2000, half of Brazilian beef production increases went into exports, which rose from 488,000 tonnes that year to 1.64 million tonnes in 2004, the year after Mad Cow disease wiped out America's beef exporting plans. 
By 2007 Brazil exported a 2.19 million tonnes. Thereafter a combination of world recession, an EU ban (following the discovery of tainted beef) and competition from low-cost Indian beef in Asia have kept Brazil's beef shipments in the 1.3 to 1.8 million tonne range, where it fluctuates to this day. Moreover, this decline in Brazilian shipments was so great that the record 2007 beef export volume from the Americas will only be exceeded this year.
Whereas Brazil is a commodity beef producer, neighboring Paraguay and Uruguay produce a higher quality, upmarket product. They took advantage of the same unique market circumstances as Brazil to boost their own trade position. Paraguayan beef exports multiplied from a mere 52,000 tonnes in 2000 to 283,000 tonnes in 2010 and a USDA estimated 380,000 tonnes this year. Uruguayan beef shipments also grew from 236,000 tonnes in 2000 to 347,000 tonnes by 2010 and a USDA projected 430,000 tonnes this year. From exporting a fraction of Canadian shipments fifteen years ago, Paraguay and Uruguay now export roughly as much as their northern neighbor.
Around the same time Brazilian beef shipments declined, America enjoyed a brief reign as the world's top exporter. In the late 2000s, large importers including South Korea and Japan lifted their bans just in time for the US dollar to fall strongly in value. A recession dented US consumer demand faster than production could fall. America's supply of exportable beef expanded just in time for China and East Asia to boost imports.
From a post-Mad Cow disease low of 209,000 tonnes in 2004, America exported a record 1.263 million tonnes of beef in 2011. Thereafter, a nasty multi-year drought and high feed costs reduced US cattle numbers to sixty-year lows and pulled exports down to barely a million tonnes by 2015.
Since then, a combination of faltering Australian exports, improving pastureland, booming cattle prices and low feed costs have revived US beef exports, which are expected to total a record 1.3 million tonnes this year -with at least five more years of export growth in the pipeline before cattle numbers undergo a cyclical downturn.
Going forward, powerful trends are poised to boost North and South America's share of the world beef market to 60% by the early 2020s. Never mind that beef is the most feed-intensive meat line and that the Americas enjoy the world's lowest feed costs.
Argentina's late 2015 election of Maurizio Macri resulted in an immediate uncapping of Argentine beef exports, a removal of domestic beef price controls and the abolition of export taxes. Moreover, low feed crop prices mean it is no longer profitable to convert Argentine cattle ranch land into soybean farms.
All this has profoundly brightened the earnings forecast for Argentine beef -and raised the prospect of mighty cattle herds once again dominating its pampas grasslands. Argentina's tentative recovery coincides with an ongoing upturn in American and Brazilian cattle inventories, which point to sustained export growth from both these nations over the next five years.
Rising New World beef production will coincide with a leveling out of India's export surge, and China becoming the world's top beef importer. Whether from US Midwestern feedlots, Brazil's Cerrado region or the Argentine pampas, it all implies that a rising proportion of the world's steaks and burgers will hail from the Americas in years to come.

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