Given the importance of exports to the beef industry, questions about potential retaliation and subsequent impact on beef trade will need to be very closely monitored as we transition to 2025.
December 14, 2024
Market Story: This year’s market continues to surge to the upside even in the face of some major headwinds on both the domestic and international fronts. Most notably, beef spending continues to grow despite consumers being cranky about inflation. Meanwhile, despite the dollar’s strength, 2024 is proving to be another stellar year in terms of international trade.
Accordingly, the market’s remarkable performance will be the focus of the next several columns (there’s just too much to cover in any single column). However, given the backdrop of potential tariffs looming in the second Trump Administration, and the possibility of retaliatory tariffs from Canada, Mexico and China, some review of exports and their significance to the market seems the right place to start.
Solid Trend: Final data for the year won’t be available until February, but through October beef exports have totaled $8.7B (4% ahead of last year’s pace). Those dollars translate to $411/head for every fed steer and heifer slaughtered in the U.S. And given the absence of any disruptions during the past several months, the industry will likely hit somewhere around that mark for the year.
How does that compare to other years? The graph below details that data since the low-water mark of 2004 (following BSE). What’s most important is the trend! During the past twenty years, the annual growth rate in export dollars is nearly 14%. That growth has made the export market an increasingly important contributor to total dollars coming into the industry.
Producer Dividends: Let’s turn those dollars back into a market perspective. Assuming an average slaughter weight of 1,500 lb, the $411/head export premium is equivalent to adding roughly $27/cwt to the fed market. In other words, if the export dollars weren’t flowing into the business, the fed market would be closer to averaging $159 through October, instead of $186 (all other things equal).
Moreover, those same dollars ultimately make their way back upstream to the backgrounder and cow/calf producer. The math is straightforward: a $400 export premium on an 800-lb steer is the equivalent of $50/cwt. And now we’re talking about a feeder cattle index closer to $200 versus $250+.
It’s precisely for all those reasons the Cattlemen’s Beef Board remains solidly committed to providing funding for the U.S. Meat Export Federation. Checkoff dollars invested towards growing export opportunities represents real dividends back to producers.
China, Mexico, Canada: Now let’s turn to the three tariff targets - China, Mexico and Canada. The three countries ranked #3, #4, and #5, respectively, in terms of total trade dollars in 2023 (behind Korea and Japan). Canada and Mexico combined for nearly $2.1B of that total (20.7%) while exports to China accounted for $1.6B of beef’s trade dollars (16.1%). In other words, the three markets represent nearly 37% of beef’s total international market.
Trade AND Border Security: The potential of retaliatory tariffs are an especially important consideration for the beef industry! I noted previously in Feedstuffs that:
Trade is hugely important to agriculture! IF the tariffs go into effect, it will definitively create a cross section of winners and losers. That’s not intended to suggest the United States should sacrifice border security for trade’s sake (the tyranny of the OR). Rather, it’s intended to illustrate just how important trade – especially with Canada and Mexico – is for rural America. And in the end, the goal should be to have BOTH border security AND free trade.
Of course, all of this has yet to play out, and there remain lots of unknowns about how it might look six months from now. But whatever happens, the rhetoric is hard to ignore and any disruption would be an unwelcome development. Given the importance of exports to the beef industry, questions about potential retaliation and subsequent impact on beef trade will need to be very closely monitored as we transition to 2025.
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