Mad cow case seen as no bar to record beef exports

Food costs

Farm exports in the U.S., the world’s largest agricultural shipper, in the year that began Oct. 1 will reach $131 billion, surpassed only by record shipments a year earlier, Joe Glauber, the USDA’s chief economist, said in February. Net farm income will reach $91.7 billion this year, second only to last year’s $98.1 billion, the USDA said on Feb. 13.

Food prices are rising, threatening food security for millions of people, with the cost increasing 8% from December to March, the World Bank reported yesterday. Overseas markets have raised U.S. beef imports to control their own costs and supplement shrinking domestic supplies, said John Nalivka, the president of livestock- and meat-industry consultant Sterling Marketing Inc., an agricultural economic research and advisory company based in Vale, Oregon.

More Dependent

Importers are more dependent on U.S. beef than they were in 2003, said Nalivka, a former USDA economist. Natural disasters including the tsunami in Japan or disease outbreaks like foot- and-mouth diseases in South Korea have sent buyers overseas, benefiting U.S. producers.

Japanese imports of U.S. beef reached 456.2 million pounds last year, up from 11.6 million pounds in 2004 and the highest since buying 918 million pounds in 2003, USDA data show. Shipments to South Korea totaled 379.7 million pounds, or 585 times the total in 2004, when they plunged to 648,000 pounds from 586.6 million in 2003.

Japan restricts U.S. beef imports to cattle 20-months-old or younger as older animals are at higher risk of having the disease. The regulation was put in place when the Asian country resumed purchases in 2005 of American beef, which had been banned after the first case was discovered in the U.S.

Demand Risk

There remains a risk that demand for U.S. beef may slow. While Brett Stuart, the co-founder of Global AgriTrends and former economist at the U.S. Meat Export Federation, predicts U.S. shipments will rise this year, the latest government forecast before the latest case of BSE was for a drop of 2.3% to 2.725 billion pounds.

“We have just begun getting traction in Asian markets with very protectionist bents,” Peter Sorrentino, a fund manager who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati, said in an e-mail. “This will give them renewed firepower to push back on recent inroads.”

Japan, the third-biggest buyer of U.S. beef last year, has said it may ease its policy on limiting U.S. beef imports to cattle age 20 months or younger.

The discovery of mad cow “could be an issue in the outlook for trade with Japan,” said Altin Kalo, a commodity analyst for Steiner Consulting Group in Manchester, New Hampshire. “The hope was that we would see a relaxation of the 21-month rule. This might delay that. Obviously, we’re speculating. We don’t know how the Japanese government will react.”

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