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World beef production expected to decline

For a third consecutive year, world beef production is expected to decline. USDA’s Foreign Ag Service has forecast a 0.7 percent decline in world beef production for 2010, as compared to 2009.

Four of the five largest beef producing nations are expected to produce less beef. U.S. beef production is forecast to be down 0.8 percent.

USDA’s FAS forecast a 14 percent increase in exports by Brazil, the world’s largest beef exporter. The U.S. (No. 3 in world beef exports) is forecast to increase beef exports by 10 percent due to the stronger than expected economic recovery in Asia. The U.S. is the largest importer of beef in the world and our 2010 imports are forecast lower, despite tighter domestic supplies, as Asian markets will likely bid aggressively for Oceania and Uruguayan product.

One question that I often get asked is “why does the U.S. continue to import beef?” The simple answer to this question is that not all beef is the same. One set of animals can produce a vast array of different products of different qualities. These products may not match the preferences of the domestic consumer. U.S. beef demand is largely for ground beef and steaks. Steak demand is oriented toward high-quality middle meat cuts, but ground beef can be made from a wide variety of lean meat.

Ground beef production requires additional lean meat to mix with the trimmings from steer and heifer slaughter. The U.S. industry utilizes the cull cow and bull markets to supply some of this lean meat, but we do not produce enough cull cow meat and additional lean must be added to the mix. This is where imports are important. We do occasionally use other low demand meats such as chucks and rounds to grind into hamburger. However, this is a relatively expensive product since it has been finished on grains. A more efficient plan would be to sell the chucks and rounds on the export market, and import the lean meat needed to grind into hamburger.

Even at a relatively low value as muscle cut, chucks and rounds have higher value for export than for grinding. Thus, the export of Select Chucks and Rounds to Mexico is important to the U.S. market.

It is at the hamburger market level where the beef industry competes most intensively with pork and poultry and even a fraction of a cent per pound change in cost for ground beef affects competitiveness of the industry. Lean beef imports sourced from Australian range beef, New Zealand dairy beef or Canadian cull cows are mixed with steer and heifer trim, thereby providing competitively priced ground beef and a way to utilize trim product that would have almost no value otherwise.

TAGS: Outlook
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