October 24, 2011
Japan's sluggish consumption affects US, Australian beef markets
Japan's US beef imports are likely to double if Tokyo eases import limitations but with its sluggish beef consumption, Australian producers could lose sales in their biggest export market.
Media reported this week that Tokyo was considering relaxing as soon as next year regarding import rules on US beef, allowing imports of cattle that were 30 months or younger, rather than 20 months now.
The Japanese government said no decision had been made, but it was assessing samples accumulated in the past five years.
"We now have enough samples," said a source at the Health and Welfare Ministry. "And it has been almost 10 years now since the BSE was found."
Japan banned US beef in 2003 after the first case of mad-cow disease (BSE) was detected in the US. It has only allowed US beef from cattle aged 20 months or younger since 2005, causing US imports to plunge and Australian beef to replace most of the market share in Japan's slowly declining, 500,000 tonnes a-year imported beef market.
Australian producers exported 351,118 tonnes beef to Japan in 2010, according to customs data, nearly four times more than the figure of 91,618 tonnes for the US, while their exports in 2002 were almost level, at around 230,000 tonnes.
"With the relaxation, the level of competition will obviously go back to what we saw prior to the BSE scare," said Brett Cooper, senior manager at markets at FCStone Australia.
"But hopefully, an increase in consumption and a rise in consumer confidence in foreign beef in Japan will offset some of the market share that we'll lose."
As grain-fed US beef tastes more similar to Japanese beef, some analysts and trading houses expect US imports to recover to the pre-BSE level of 200,000-250,000 tonnes within two to three years after the restriction is eased, helped also by a weak dollar.
US beef imports of 91,618 tonnes in 2010 were worth JPY42.7 billion (US$555 million), the Finance Ministry said.
In the first eight months of this year, US imports jumped 48% to 76,892 tonnes from the same period a year ago, as a weak dollar made the products more competitive on price.
Australian producers, struggling with the strong Australian dollar, saw exports slump 5% to 218,526 tonnes, despite moves by Japanese consumers to switch to Australian beef from Japanese beef after the radiation contamination scare.
The Agriculture Ministry said US beef was priced at JPY455 (US$5.96) per kilogramme CIF in the period from April-July, compared to JPY412 (US$5.40) for Australian beef, narrowing the price gap of nearly JPY80 (US$1.05) in the 2010/11 year.
A key issue is whether potential price competition between the two rivals will reverse Japan's sluggish beef consumption.
"There should be a lot of room for cheaper-priced foreign beef to expand sales in deflation-hit Japan," said Nobuyuki Chino, president of Tokyo-based grain trader Continental Rice Corp.
Consumption of Japanese beef stays relatively stable at 360,000 tonnes a year, despite its cost being double the wholesale price of imported beef.
Japan's current beef consumption, at 5.9 kilogrammes per consumer a year, is more than 20% lower than in 2000, as a decade-long recession and the financial crisis prompted consumers to tighten their belts.
Fast-food restaurant chains, which rely heavily on imported beef, are closely watching the government move.
Matsuya Foods Co , a beef bowl chain engaged in a cut-throat price war with Yoshinoya Holdings Co , was sceptical that the market would expand. "It is unlikely that we see a sudden increase in the number of our customers after the relaxation," a company official said.