Beef exports to Japan fighting an uphill battle

raw meat and flag of Japan Fevziie Ryman/Getty ImagesMEAT MOVEMENT: American farmers are trying to flag their beef for the Japanese consumer, but the latest trade agreement may trigger tariffs that price their products out of the market.
Beef exports to Japan fighting an uphill battle
New trade agreement in place can trigger swing in tariffs on beef shipments.
Scott Brown | Feb 05, 2019

The challenge for U.S. beef exporters to continue to grow market share in Japan recently stiffened.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership entered into force Dec. 30. This trade agreement is comprised of 11 nations, including Japan and major beef exporters such as Australia, Canada and New Zealand.

Under the agreement, Japan’s beef tariffs were lowered from the 38.5% most-favored nation rate (this is the tariff on U.S. beef shipments) to 27.5%, with further decreases occurring for the next 15 years until the tariff drops to 9% in 2033.

Nations that are a part of the CPTPP also will receive preferential treatment regarding the triggering of Japan’s beef safeguard tariff, which raises tariffs when beef import volumes sharply increase relative to recent history. This policy caused the tariff on U.S. exports of frozen beef to Japan to increase to 50% as recently as from Aug. 1, 2017, to March 31, 2018.

Beef Outlook chart

Critical access
The importance of the Japan beef market to U.S. beef and cattle prices was detailed in this column a few months ago. Japan imports more than a billion pounds of beef each year, with the total growing to eclipse 1.2 billion pounds in both 2017 and 2018.

The U.S. market share of Japan’s beef imports recently has risen to about 40%, fighting the long uphill battle after the discovery of bovine spongiform encephalopathy, or BSE, in December 2003, which lowered market share from more than 45% at the time to less than 10% for more than four years.

Australia supplies just more than half of Japan’s imported beef, with Canada and New Zealand combining for about 6%. Beef imports from other nations only account for about 2% of the total.

Time for talk
Although the CPTPP is a recent development, the U.S. has been at a tariff disadvantage relative to Australia for some time now, after the Japan-Australia Economic Partnership Agreement, which began in 2015. This initially dropped tariffs on Australian beef from the 38.5% level to 32.5% on fresh beef and 30.5% for frozen product, with additional decreases over time, which now will be superseded by the lower CPTPP rates beginning April 1.

So far, the lower tariffs on Australian product have not resulted in a sharp downturn in U.S. market share, as beef production in Australia has been constrained because of dry weather and herd rebuilding.

While trade issues affecting U.S. pork have dominated the headlines in recent months, the lack of headlines regarding improved access into Japan’s beef market may continue to be a hindrance to the beef industry.

With negotiations for a potential U.S.–Japan trade agreement continuing since last September, there is hope that the tariff disadvantages to this most important beef market may be a short-term issue to navigate, rather than a long-term drag on exports. Only time will tell.

Brown is a livestock economist with the University of Missouri. He grew up on a diversified farm in northwest Missouri.

Soybeans and corn still move slightly higher in pre-WASDE positioning

A 95-million-bushel soybean sale is normally nothing to sneeze at, but grain markets pretty much did just that today, handing out only small gains in some pre-report positioning ahead of USDA’s next supply and demand data dump, out Friday morning. Corn also moved slightly higher amid some technical buying, with wheat coming in narrowly mixed.

Some seasonally cool weather has returned to portions of the Midwest and Plains, although areas further east can still expect to see above-average temperatures for the next several days. Most of the central U.S. will see additional rain or snow fall over the next three days, according to the latest 72-hour precipitation map from NOAA, with the greatest amounts probable in the eastern Corn Belt.

Some better-than-expected corporate earnings reports gave stocks a lift on Wall St., with the Dow up nearly 150 points in afternoon trading to reach 25,387. Energy prices reversed lower, meantime, with crude oil down almost 1.4% this afternoon to fall back under $54 per barrel. Gas and diesel took more modest losses. The U.S. Dollar firmed slightly.

Corn prices earned a modest lift on some technical buying Tuesday as traders continue to square positions ahead of Friday’s USDA supply and demand report. March and May futures each picked up 1.5 cents to close at $3.8075 and $3.89, respectively.

Corn basis bids were mixed Tuesday, rising 2 cents across multiple river terminals but falling 2 to 5 cents at several Midwestern ethanol plants today.

Basis has seen an overall firming trend over the past week or more. Click here for the latest analysis from Farm Futures senior grain market analyst Bryce Knorr.

Ahead of Friday’s World Agricultural Supply and Demand Estimates (WASDE) report from USDA, analysts are anticipating the agency will report total corn production of 14.532 billion bushels last year across 81.680 acres, for an average yield of 177.9 bushels per acre. All those numbers are down slightly from USDA’s prior assessments from November.

Preliminary volume estimates were for 120,926 contracts, which was less than half of Friday’s final count of 248,708.

Soybean prices appear to have already factored in large Chinese purchase announcements yesterday and today, but still trended slightly higher on some technical maneuvering. March and May futures each added 1.75 cents to reach $9.2025 and $9.3425, respectively.

Soybean basis bids were mixed but mostly steady Tuesday, gaining as much as 3 cents at an Ohio elevator and dropping as much as 5 cents at an Iowa processor today.

Private exporters reported to USDA the sale of 95.7 million bushels of soybeans for delivery to China for delivery during the 2018/19 marketing year, which began September 1. Exporters reported a separate sale totaling 10 million bushels for delivery to unknown destinations in 2018/19.

Meantime, the agriculture industry has unsteady opinions of the progress (or lack thereof) of U.S.-China trade negotiations. Click here to catch up on the latest developments.

Analysts expect USDA to slightly downgrade U.S. soybean production estimates in its WASDE report this Friday, with an average guess of 4.569 billion bushels produced across 88.187 million acres, for average yields of 51.8 million bushels. USDA’s November estimates were for 4.600 billion bushels with average yields of 52.1 bpa.

Brazilian state research group Deral reports that the soybean harvest in Paraná is now 25% complete, with most of the crop in average or good condition. The country’s second-largest soybean producing state is expected to harvest about 617 million bushels this season.

Statistics Canada reports that the country’s 2018 canola stocks are up 4.9% from a year ago after reaching 643.7 million bushels by the end of December.

Preliminary volume estimates were for 117,855 contracts, sliding moderately below Monday’s final count of 148,446.

Wheat prices were mostly steady today after dialing in some inconsistent (but small) changes. Some May contracts moved fractionally lower while most March contracts firmed slightly amid some light technical maneuvering. March Chicago SRW futures added 1.5 cents to $5.2725, March Kansas City HRW futures gained a penny to $5.1150, and March MGEX spring wheat futures inched ahead 0.25 cents to $5.75.

Analysts expect USDA to show U.S. winter wheat acreage for 2018/19 to reach 32.128 million acres, which is moderately lower than a Reuters poll average a month ago, which was for 32.279 million acres. USDA will provide its latest estimates for winter wheat acres in Friday’s WASDE report.

Statistics Canada reports the country’s ending wheat stocks for 2018 reached 852 million bushels by the end of December, trending slightly lower (-0.2%) year-over-year. Canadian barley stocks of 225 million bushels dropped 18.2% year-over-year.

Japan made offers to buy 4.8 million bushels of food-quality wheat from the U.S., Canada and Australia in a regular tender that closes Thursday. Nearly half of that total is expected to be sourced from the U.S.

Jordan purchased 2.2 million bushels of hard milling wheat from optional origins in a tender that closed earlier today. The grain is for shipment in August.

Preliminary volume estimates were for 66,606 CBOT contracts, falling significantly below Monday’s final count of 142,681.

grains table

MEAT MOVEMENT: American farmers are trying to flag their beef for the Japanese consumer, but the latest trade agreement may trigger tariffs that price their products out of the market.

Beef exports to Japan fighting an uphill battle
New trade agreement in place can trigger swing in tariffs on beef shipments.
Scott Brown | Feb 05, 2019

The challenge for U.S. beef exporters to continue to grow market share in Japan recently stiffened.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership entered into force Dec. 30. This trade agreement is comprised of 11 nations, including Japan and major beef exporters such as Australia, Canada and New Zealand.

Under the agreement, Japan’s beef tariffs were lowered from the 38.5% most-favored nation rate (this is the tariff on U.S. beef shipments) to 27.5%, with further decreases occurring for the next 15 years until the tariff drops to 9% in 2033.

Nations that are a part of the CPTPP also will receive preferential treatment regarding the triggering of Japan’s beef safeguard tariff, which raises tariffs when beef import volumes sharply increase relative to recent history. This policy caused the tariff on U.S. exports of frozen beef to Japan to increase to 50% as recently as from Aug. 1, 2017, to March 31, 2018.

Beef Outlook chart

Critical access
The importance of the Japan beef market to U.S. beef and cattle prices was detailed in this column a few months ago. Japan imports more than a billion pounds of beef each year, with the total growing to eclipse 1.2 billion pounds in both 2017 and 2018.

The U.S. market share of Japan’s beef imports recently has risen to about 40%, fighting the long uphill battle after the discovery of bovine spongiform encephalopathy, or BSE, in December 2003, which lowered market share from more than 45% at the time to less than 10% for more than four years.

Australia supplies just more than half of Japan’s imported beef, with Canada and New Zealand combining for about 6%. Beef imports from other nations only account for about 2% of the total.

Time for talk
Although the CPTPP is a recent development, the U.S. has been at a tariff disadvantage relative to Australia for some time now, after the Japan-Australia Economic Partnership Agreement, which began in 2015. This initially dropped tariffs on Australian beef from the 38.5% level to 32.5% on fresh beef and 30.5% for frozen product, with additional decreases over time, which now will be superseded by the lower CPTPP rates beginning April 1.

So far, the lower tariffs on Australian product have not resulted in a sharp downturn in U.S. market share, as beef production in Australia has been constrained because of dry weather and herd rebuilding.

While trade issues affecting U.S. pork have dominated the headlines in recent months, the lack of headlines regarding improved access into Japan’s beef market may continue to be a hindrance to the beef industry.

With negotiations for a potential U.S.–Japan trade agreement continuing since last September, there is hope that the tariff disadvantages to this most important beef market may be a short-term issue to navigate, rather than a long-term drag on exports. Only time will tell.

Brown is a livestock economist with the University of Missouri. He grew up on a diversified farm in northwest Missouri.

Soybeans and corn still move slightly higher in pre-WASDE positioning

A 95-million-bushel soybean sale is normally nothing to sneeze at, but grain markets pretty much did just that today, handing out only small gains in some pre-report positioning ahead of USDA’s next supply and demand data dump, out Friday morning. Corn also moved slightly higher amid some technical buying, with wheat coming in narrowly mixed.

Some seasonally cool weather has returned to portions of the Midwest and Plains, although areas further east can still expect to see above-average temperatures for the next several days. Most of the central U.S. will see additional rain or snow fall over the next three days, according to the latest 72-hour precipitation map from NOAA, with the greatest amounts probable in the eastern Corn Belt.

Some better-than-expected corporate earnings reports gave stocks a lift on Wall St., with the Dow up nearly 150 points in afternoon trading to reach 25,387. Energy prices reversed lower, meantime, with crude oil down almost 1.4% this afternoon to fall back under $54 per barrel. Gas and diesel took more modest losses. The U.S. Dollar firmed slightly.

Corn prices earned a modest lift on some technical buying Tuesday as traders continue to square positions ahead of Friday’s USDA supply and demand report. March and May futures each picked up 1.5 cents to close at $3.8075 and $3.89, respectively.

Corn basis bids were mixed Tuesday, rising 2 cents across multiple river terminals but falling 2 to 5 cents at several Midwestern ethanol plants today.

Basis has seen an overall firming trend over the past week or more. Click here for the latest analysis from Farm Futures senior grain market analyst Bryce Knorr.

Ahead of Friday’s World Agricultural Supply and Demand Estimates (WASDE) report from USDA, analysts are anticipating the agency will report total corn production of 14.532 billion bushels last year across 81.680 acres, for an average yield of 177.9 bushels per acre. All those numbers are down slightly from USDA’s prior assessments from November.

Preliminary volume estimates were for 120,926 contracts, which was less than half of Friday’s final count of 248,708.

Soybean prices appear to have already factored in large Chinese purchase announcements yesterday and today, but still trended slightly higher on some technical maneuvering. March and May futures each added 1.75 cents to reach $9.2025 and $9.3425, respectively.

Soybean basis bids were mixed but mostly steady Tuesday, gaining as much as 3 cents at an Ohio elevator and dropping as much as 5 cents at an Iowa processor today.

Private exporters reported to USDA the sale of 95.7 million bushels of soybeans for delivery to China for delivery during the 2018/19 marketing year, which began September 1. Exporters reported a separate sale totaling 10 million bushels for delivery to unknown destinations in 2018/19.

Meantime, the agriculture industry has unsteady opinions of the progress (or lack thereof) of U.S.-China trade negotiations. Click here to catch up on the latest developments.

Analysts expect USDA to slightly downgrade U.S. soybean production estimates in its WASDE report this Friday, with an average guess of 4.569 billion bushels produced across 88.187 million acres, for average yields of 51.8 million bushels. USDA’s November estimates were for 4.600 billion bushels with average yields of 52.1 bpa.

Brazilian state research group Deral reports that the soybean harvest in Paraná is now 25% complete, with most of the crop in average or good condition. The country’s second-largest soybean producing state is expected to harvest about 617 million bushels this season.

Statistics Canada reports that the country’s 2018 canola stocks are up 4.9% from a year ago after reaching 643.7 million bushels by the end of December.

Preliminary volume estimates were for 117,855 contracts, sliding moderately below Monday’s final count of 148,446.

Wheat prices were mostly steady today after dialing in some inconsistent (but small) changes. Some May contracts moved fractionally lower while most March contracts firmed slightly amid some light technical maneuvering. March Chicago SRW futures added 1.5 cents to $5.2725, March Kansas City HRW futures gained a penny to $5.1150, and March MGEX spring wheat futures inched ahead 0.25 cents to $5.75.

Analysts expect USDA to show U.S. winter wheat acreage for 2018/19 to reach 32.128 million acres, which is moderately lower than a Reuters poll average a month ago, which was for 32.279 million acres. USDA will provide its latest estimates for winter wheat acres in Friday’s WASDE report.

Statistics Canada reports the country’s ending wheat stocks for 2018 reached 852 million bushels by the end of December, trending slightly lower (-0.2%) year-over-year. Canadian barley stocks of 225 million bushels dropped 18.2% year-over-year.

Japan made offers to buy 4.8 million bushels of food-quality wheat from the U.S., Canada and Australia in a regular tender that closes Thursday. Nearly half of that total is expected to be sourced from the U.S.

Jordan purchased 2.2 million bushels of hard milling wheat from optional origins in a tender that closed earlier today. The grain is for shipment in August.

Preliminary volume estimates were for 66,606 CBOT contracts, falling significantly below Monday’s final count of 142,681.

grains table

TAGS: MARKET NEWS CORN SOYBEAN WHEAT AFTERNOON RECAP

© 2019 Informa USA, Inc., All Rights Reserved

Leave a comment

Your email address will not be published. Required fields are marked *