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Foreign demand drives meat exports in 2018

Annual growth rate of U.S. beef exports has exceeded 10% since 2015.

Strong exports for U.S. beef, pork, and broiler exports in 2018 were driven by domestic production increases and favorable foreign demand, economists with the U.S. Department of Agriculture's Economic Research Service (ERS) noted in the latest edition of Amber Waves.

Compared to the previous year, the economists said beef exports increased 10.3%, pork exports increased 4.2% and broiler exports increased 4.1% from 2017. Lamb and mutton exports were 1.5% lower despite stronger domestic production. Turkey exports declined 1.8%, with reduced turkey production likely a contributing factor. Egg exports were 6.1% lower in 2018, while production increased 2.1% year over year.

An analysis of ERS trade data helps explain the stories behind the numbers that drove up exports in 2018 for most major meat commodities, the economists noted.

Record U.S. beef exports driven by South Korea

According to the ERS economists, U.S. beef exports to world markets have grown sharply for three consecutive years. Since 2015, exports of beef have grown at more than 10% per year. In 2018, 3.2 billion lb. of beef were exported, marking a 10.3% increase from 2017.

“All major beef export destinations increased their imports of U.S. beef except for Hong Kong and Canada. Most notable of these increases was South Korea, which has significantly increased its U.S. beef imports every year since 2013,” the economists noted.

U.S. beef was banned in South Korea after the discovery of bovine spongiform encephalopathy (BSE) in the U.S. in 2003. Although the U.S. gradually re-entered the market after the ban was partially lifted in 2006, U.S. beef exports have accelerated markedly in recent years since implementation in 2012 of the Korea-U.S. Free Trade Agreement (KORUS), which reduced tariffs and non-tariff barriers.

Exports to Korea contributed more than half of the increase in the volume of U.S. exports in 2018, with year-over-year growth of 35%. Further, more than 20% of total U.S. beef exports were shipped to Korea in 2018.

“Likely drivers of this growth included strong consumer demand; lower tariffs than the next largest competitor, Australia; greater exportable supplies in the United States, and a relatively weaker U.S. dollar in the first half of the year,” the economists noted. “As a result, exports exceeded the pre-BSE peak level of 597 million lb. in 2002 to reach 638 million lb. in 2018, becoming the largest supplier of beef to South Korea.”

Declining values support U.S. broiler exports

According to the ERS article, 2018 U.S. broiler exports (on an annual basis) increased 4% compared to 2017, but growth was much higher in the second half (up 6%) of 2018 than in the first half (up 2%).

The economists noted that the increase in the second half of the year was encouraged by the competitive prices of U.S. broiler meat.

“Beginning in May 2018, the average value per unit of U.S. broiler meat exports began to fall and continued downward through the remainder of the year, reflecting low domestic prices. As prices fell, monthly export volumes began increasing, reaching a peak of nearly 670 million lb. in October 2018 before falling at the end of the year,” they reported.

Pork exports grew overall, but exports to Mexico faltered

U.S. pork exports rose in 2018, up 4% compared to 2017, but exports to the largest pork trading partner, Mexico, decreased over the same period, the economist said.

Mexico imposed tariffs on most U.S. pork products in June 2018, which caused monthly pork exports to the country to fall below 2017 levels; exports remained below those year-earlier levels for the remainder of 2018.

While the tariff was expected to cause further declines, the average U.S. pork export unit cost fell, which the ERS economists said compensated for the increased cost to importers from the tariffs.

Prior to the imposition of tariffs, however, pork exports jumped relative to a year earlier. “It is possible that demand from Mexican importers increased in anticipation of the impending cost increases that tariffs produce,” they said.

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