An early November announcement by the Japanese government could be good news for a lot of U.S. cattle producers… but bad news for a few.
When Japan reentered the U.S. beef market in 2006, three years after they’d closed the door over the first U.S. case of bovine spongiform encephalopathy (BSE), it was with the requirement that all American beef come from cattle aged 20 months and younger. Japanese scientists believed they had found the disease in cattle aged 21 and 23 months; however, most animal health officials say it takes several years for BSE to become detectable, and other Asian nations set the threshold at 30 months. Japan’s Health Ministry now says it will move to a 30 month limit some time in the first half of 2012. The Ministry cites the sharp drop in known worldwide BSE cases, from over 2,200 in 2001 to just 12 through September of this year, and also says it hopes the move will convince other countries to drop import restrictions they’ve placed on Japanese food in the wake of the March nuclear mishap.
The news has the potential to give another significant boost to already surging U.S. beef exports. According to USDA’s Foreign Agriculture Service, through September Japan had bought 105,860 tons of U.S. beef, more than in all of 2010 and the highest total since 2003, when they bought 295,811 tons. Total U.S. worldwide sales through September were 666,092 tons, and are expected to exceed those of 2003 for the full calendar year. By value, 2011 sales through September, at $3.41 billion, had already exceeded all of 2003 at $3.03 billion.
Dr. Ron Plain, University of Missouri professor of agricultural economics, said it’s a “real possibility” Japan could again become a 300,000 ton annual U.S. beef market – or even bigger, for several reasons. “One is the U.S. is in a very strong position in supplying beef,” Plain told Ozark’s Farm & Neighbor. “Another is exchange rates. The value of the Japanese yen is at record highs against the U.S. dollar, which means for the Japanese buying U.S. beef it’s going to look inexpensive. So even with very strong cattle and beef prices here in the United States, from the Japanese standpoint our beef will look very, very price competitive.”
But the change could also reduce the value of age and source verification. Ranchers across the country have been participating in such programs since 2005, where the producer buys inexpensive, standardized ear tags, keeps records on the birth date and originating farm of the animal, and is certified by a state inspector. Most states have used Japan’s 20 month limit as their standard; CattleFax says premiums for those cattle have ranged from $12 to $45 a head, but declined this past spring and are expected to decline even more in 2012.
The premium is likely to decline because meat inspectors also use carcass characteristics to assess the age of the animal at slaughter, and 30 months is simply an easier standard to meet; most feedlot cattle in the U.S. are under 24 months of age. Plain said there will still be some value to the program. “What that age and source verification can do is get that 28 to 30 month animal into those export markets,” he said. Without that there’s a good chance meat inspectors, just by looking at the carcass, wouldn’t be able to certify it as being 30 months or under.”
He also believes producers who are already participating will continue. “I think we’re going to see enough benefit to continue it,” he said. “One of the things to realize is Japan is a very high quality meat country as far as what their consumers want, and so having detailed information and knowing more about the beef that’s being shipped there just makes it more competitive against some other countries.” But he said it’s a size issue; the premium doesn’t mean much to a rancher who’s only selling a few head a year. In addition, “You’ve got to have several customers who are interested in the documentation bidding against each other; otherwise, it’s not as great a benefit,” he said, adding it’s a little more attractive to those producers who retain ownership of their cattle all the way through the feedlot.
Richard Jackson, district supervisor for the Arkansas Livestock & Poultry Commission, told OFN in his state there are 69 producers representing 18,000 cattle enrolled, but only about 20 actively participate by ordering and using the tags every year. Buyers, he said, “usually want to buy about 70 head at a time to fill a truck.”
Jackson said in 2011, the program was fairly quiet due to the record cattle prices and the drought. “Most folks had to go ahead and sell their cattle earlier, and it’s just been kind of on a standstill this year,” he said. Arkansas has used the 20-month standard, but if Japan moves to 30 months, he said, “we’ll just make the adjustment and go back to the 30 months on everybody.”
