November beef exports remain on record pace; headwinds weigh on pork exports

U.S. beef exports continued on a record pace in November while pork exports trended lower year-over-year, according to statistics released by USDA and compiled by the U.S. Meat Export Federation.

Beef exports totaled 112,842 metric tons in November, up 1 percent from a year ago, while value climbed 6 percent to $709.2 million. For January through November, exports reached 1.24 million metric tons, up 8 percent year-over-year and 6 percent above the record pace of 2011. At $7.63 billion, beef export value was up 16 percent and has already broken the full-year record set in 2017 ($7.27 billion).

Beef export value per head of fed slaughter is also on a record pace, averaging $322.97 in November (up 5 percent from a year ago) and $320.72 during the first 11 months of 2018 (up 14 percent). Exports accounted for 13.1 percent of total November beef production and 10.9 percent for muscle cuts, both steady with November 2017. For January through November, exports equated to 13.4 percent of total production and 11.1 percent for muscle cuts—up from 12.8 percent and 10.3 percent, respectively, in 2017. These numbers highlight the strong international demand for U.S. beef as exports are accounting for a larger share of growing U.S. production and are fetching higher prices, with some U.S. cuts trading at record prices in Asia.

November pork exports totaled 206,852 metric tons, down 8 percent year-over-year, while value fell 12 percent to $538.7 million as retaliatory duties in key markets continue to generate headwinds for U.S. pork. For January through November, exports were steady with 2017’s record pace at 2.23 million metric tons and value was down 1 percent to $5.86 billion.

Trade barriers are also pressuring pork export value on a per-head basis. In November, export value per head slaughtered was $48.80, down 16 percent from November 2017. Through the first 11 months of 2018, per-head export value averaged $51.46, down 3 percent. Exports accounted for 24.5 percent of total November pork production and 22 percent for muscle cuts, down from 27.7 percent and 24.1 percent, respectively, in November 2017. For January through November, exports equated to 25.7 percent of total pork production (down from 26.5 percent in 2017) and 22.4 percent for muscle cuts (up slightly).

“2018 was truly a remarkable year for U.S. beef exports, which shattered previous records in both volume and value and reached new heights in several of our top markets,” said USMEF President and CEO Dan Halstrom. “In the first half of the year, pork exports were also on a very positive trajectory but unfortunately U.S. pork has been heavily targeted for retaliation. We remain hopeful that these disputes can be resolved soon, so that U.S. pork can get back on a level playing field with its competitors.”

Asian markets set pace, but beef export growth widespread

November was another strong month for U.S. beef exports to the key Asian markets of Japan, South Korea and Taiwan, while exports to the ASEAN region also increased sharply. For January through November, beef export highlights include:

Exports to leading market Japan were up 7 percent year-over-year in volume (306,603 metric tons) and 10 percent in value ($1.93 billion). But market access to Japan is a major concern for the U.S. beef industry, as key competitors recently joined Australia in benefiting from an 11 percentage point tariff advantage through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). U.S. beef remains subject to the 38.5 percent tariff rate and to Japan’s quarterly safeguard mechanisms. Competitors’ tariffs will decline again on April 1, the start of the Japanese fiscal year. The Trump administration has announced its intention to negotiate a trade agreement with Japan, but formal negotiations have not yet begun.

U.S. beef has already shattered the previous yearly value record in Korea, with export value soaring 45 percent to $1.6 billion, while volume was up 32 percent to 220,770 metric tons. Although Korea’s imports from Australia and New Zealand also edged higher in 2018, U.S. market share increased significantly – reaching nearly 50 percent in volume and 56 percent in value. Through the Korea-U.S. Free Trade Agreement (KORUS), the duty rate on U.S. beef to Korea is 18.7 percent this year, down from 40 percent prior to implementation.

Exports to Taiwan were up one-third from the record totals posted in 2017, reaching 53,626 metric tons valued at $495.7 million (a record for the sixth consecutive year). The U.S. holds more than 75 percent of Taiwan’s chilled beef market, the highest of any Asian destination.

Beef exports to Hong Kong were lower year-over-year in volume (109,082 metric tons, down 4 percent), but export value still climbed 13 percent to $865.3 million. Exports to China totaled 6,567 metric tons valued at $55.1 million. U.S. beef regained access to China in mid-2017, making year-over-year comparisons difficult. But in the second half of 2018, export volumes to China were higher year-over-year in every month except September, and November exports reached a new monthly high of 890 metric tons, despite an additional 25 percent retaliatory duty.

Led by strong increases in the Philippines and Vietnam and slightly higher shipments to Indonesia, beef exports to the ASEAN region climbed 19 percent year-over-year in volume (45,255 metric tons) and 31 percent in value ($252.4 million).

Although beef exports to Mexico were up just 1 percent year-over-year in volume (218,281 metric tons), export value to Mexico climbed 8 percent (to $966.7 million) and will exceed $1 billion for the first time since 2015. The hike in value reflects a strong year for beef muscle cut exports to Mexico, which increased 7 percent in volume (130,330 metric tons) and 11 percent in value ($759.2 million).

Bright spots for U.S. pork include Korea, ASEAN, Latin America and Oceania

After a very solid start to 2018, November pork exports to leading volume market Mexico were lower year-over-year for the sixth consecutive month (61,344 metric tons, down 14 percent) while value fell 30 percent to $97.1 million. This pushed January to November export volume slightly below the record pace of 2017 at 717,618 metric tons (down 1 percent) while value was down 11 percent to $1.22 billion.

“The good news is that the U.S. continues to export strong quantities of hams, picnics and other pork cuts to Mexico,” Halstrom said. “The bad news is that instead of generating positive returns for the U.S. industry, 20 percent of these sales go directly into the Mexican Treasury in the form of tariffs. This is why it is critical that the dispute over steel and aluminum tariffs be resolved as soon as possible.”

January-November pork exports to China/Hong Kong were down 29 percent year-over-year in volume (324,623 metric tons) and fell 19 percent in value ($790.2 million). This region is by far the largest destination for U.S. pork variety meat, and these exports also declined by 29 percent in volume (209,090 metric tons) and dropped 17 percent in value ($555.5 million) as the 62 percent tariff rate makes it very difficult for U.S. pork to compete in China.

The combination of retaliatory tariffs in China and Mexico contributed to sharp decreases in ham and picnic primal values (down 19 percent and 22 percent, respectively, from June through December, compared to the same period in 2017). The decrease in values for these two primals averaged $9.95 per head for those seven months. China’s retaliatory tariffs have also heavily impacted prices for pork offals and have forced some products into rendering due to the lack of alternative markets. Lost value for feet and picnic hocks was at least $1.80 per head and losses are even worse when products that have been rendered are included. The cost of these retaliatory tariffs has been lost value of at least $11.75 per head on just hams, picnics and feet, or roughly $860 million in industry losses from June through December 2018.

Other key details from the January to November pork export results include:

Although November results trended significantly lower, pork exports to leading value market Japan were up 1 percent year-over-year in both volume (364,114 metric tons) and value ($1.5 billion). Similar to beef, market access disadvantages in Japan are a major concern for the U.S. pork industry due to Japan’s implementation of CPTPP and its economic partnership agreement with the European Union. The most immediate impact of these agreements is expected in Japan’s imports of ground seasoned pork and processed pork products as duties on those products are phased quickly to zero, while the U.S. pays 20 percent.

Korea stands out as the largest driver of growth for U.S. pork exports in 2018, with volume up 41 percent to 216,899 metric tons while value climbed 44 percent to $603.8 million – already shattering previous full-year records set in 2011. Unlike the situation at that time, when Korea was struggling with a widespread outbreak of foot-and-mouth disease, Korea’s domestic production was up 4 percent in 2018. So the surge in exports to Korea is being driven by exceptional consumer demand and growing consumption. Most U.S. pork entering Korea also benefits from duty-free treatment under KORUS.

Led by strong growth in Colombia and Peru and a second-half rebound in Chile, pork exports to South America have already topped the records set in 2017, increasing 24 percent year-over-year in volume (120,059 metric tons) and 17 percent in value ($292.3 million). Colombia is an especially important destination for hams and picnics at a time when Mexico and China are imposing higher duties.

In Central America, pork exports were higher year-over-year in mainstay markets Honduras and Guatemala and posted very strong growth in Panama, El Salvador, Nicaragua and Costa Rica. Export volume to the region was up 15 percent to 74,980 metric tons, breaking the 2017 record. Export value was 12 percent higher at $176.8 million, and will set a new record when December results are included.

Pork exports to the Dominican Republic have also exceeded previous yearly highs, with volume up 37 percent year-over-year to 39,453 metric tons and value jumping 29 percent to $85.7 million.

With solid growth in both Australia and New Zealand, pork exports to Oceania were up 12 percent in volume (77,336 metric tons) and 10 percent in value ($224.3 million). This region is also a key destination for U.S. hams when retaliatory duties are in place in Mexico and China.

Strong performances in the Philippines and Vietnam drove pork exports to the ASEAN region 46 percent higher in volume (63,978 metric tons) and 33 percent higher in value ($158.6 million). Pork variety meat exports to the ASEAN were especially strong, more than doubling year-over-year in both volume (26,626 metric tons, up 138 percent) and value ($42.7 million, up 115 percent).

Variety meat demand bolsters November lamb exports

Driven by a sharp increase in variety meat shipments to Mexico, November exports of U.S. lamb were the largest of 2018 in both volume (1,387 metric tons, up 167 percent year-over-year) and value ($2.4 million, up 39 percent). Lamb muscle cut exports trended lower in November at 232 metric tons (down 18 percent) valued at $1.46 million (down 3 percent).

For January through November, lamb exports reached 11,758 metric tons valued at $21.4 million—up 77 percent and 21 percent, respectively, from a year ago. While most of this increase was due to strong variety meat demand in Mexico, muscle cut exports posted solid gains in the Caribbean, the United Arab Emirates, Taiwan and the Philippines.

Editor’s note: November export data was released about one month later than usual due to the recent government shutdown. Year-end 2018 data is expected to be available in early-to-mid March.