U.S. Seen Surpassing Australia as Japan's Top Beef Supplier

  • U.S. beef more competitive as low grain prices cut costs
  • Exporters want bilateral trade agreement to grow sales

The U.S. is expected to regain its status as the largest beef supplier to Japan as early as this year, surpassing Australia for the first time since mad-cow disease halted shipments of American beef in 2003, according to the U.S. Meat Export Federation.

Even though Australia enjoys the advantage of lower tariffs on beef than the U.S. under a bilateral trade agreement with Japan, low U.S. grains and soybeans prices have made American beef producers more competitive, Chief Executive Officer Philip Seng said on Tuesday.

“We will still be quite competitive with Australia even though they have the duty situation,” Seng said in an interview in Tokyo.

Japanese restaurants and convenience stores are seeking more affordable meat after prices of local Wagyu climbed to a record due to declining production. The taste of U.S. beef is similar to Japanese meat as cattle in both countries are fed with grain, while Australian beef is produced from grass-fed cattle, according to Seng.

In the first two months of 2017, beef imports from Australia represented 47 percent of total purchases and the U.S. accounted for 44 percent, according to data from Japan’s Agriculture Ministry.

Tight Supply

Australian beef supplies will be tight this year as producers rebuild herds, keeping meat prices high, Seng said. Exporters may also put their focus on boosting beef sales to China, taking advantage of a trade agreement between the two countries, he said. “They are focused on China, Korea” and other markets in Asia, as well as the U.S., he said.

Australia’s beef cattle herd will expand 3 percent to 24 million by June 30 and the country’s slaughter will slump 15 percent, the Australian Bureau of Agricultural & Resource Economics & Sciences said in March. Shipments to Japan will decline in 2016-17, while exports to South Korea will increase 4.5 percent, the bureau said.

The group expects U.S. beef exports to Japan to increase 12 percent to 267,439 metric tons in 2017, the highest level since Japan lifted a ban on the meat in 2006. In 2007, purchases from the U.S. were 39,634 tons. Imports from the U.S. jumped 16 percent last year, while purchases of Australian beef fell 5.5 percent, according to Japan’s Agriculture Ministry.

The U.S. is seeking to expand sales to Japan even though there’s a 38.5 percent tariff on the country’s frozen and chilled beef. Japan cut tariffs on Australian chilled beef to 29.9 percent, and duties on Australian frozen beef to 27.2 percent this month, the fourth reduction since a bilateral trade agreement took effect in 2015.

Trade Agreement

The U.S. should seek its own trade agreement with Japan after President Donald Trump withdrew the country from the Trans-Pacific Partnership, Seng said. “This is urgent, it’s very important,” he said.

U.S. exporters risk losing market share in Japan, the top destination for American beef and pork, if Japan and 10 other countries agree to go ahead with their trade-promotion plan without the U.S., Seng said. TPP countries minus the U.S. reiterated their commitment to free trade on March 15. Among the members, Canada is the largest pork supplier to Japan after the U.S., while New Zealand is the third-largest beef supplier.

Japan’s imports of pork from the U.S. may rise 3 percent to 365,031 tons in 2017, according to Seng. Japan’s pork imports in the first two months of this year increased 5.3 percent to 144,350 tons, of which 43,605 tons were from the U.S. and 30,730 tons were from Canada.

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