Beef imports have been up by double digits so far this year, a topic that we have referenced in the past but is worth updating. Official USDA statistics is only updated through March, with April data available next week. But USDA-AMS offers a weekly update on imports that is based on FSIS inspector reports. We have our qualms with this data but the good thing is that it is current. It’s a trade-off we have to often make, get immediate information (ahem Twitter…) or get the most accurate information.
Through May 21, USDA-AMS pegs total imports of fresh/frozen beef at 506,699 MT, 98,339 MT or 24.1% higher than a year ago. By the end of May, it is all but sure that imports will be up by more than 100,000 MT compared to the previous year. Over 90% of that 100,000 MT increase is due to higher imports from two countries, Brazil and Mexico.
The increase in imports from Brazil has been truly astounding. According to the weekly USDA update, through the third week of May imports from Brazil were 71,798 MT, 61,168 MT higher than a year ago, an almost 6 fold increase. This supply only covers imports of fresh/frozen beef. In the first quarter imports of processed beef represented another 19,343 MT, 45% higher than the previous year. Brazilian beef enters the US under 65,000 MT quota that is available to all countries that do not have either a free trade agreement or a specific country quota. This includes Japan, Ireland and any other very small suppliers in Europe or Africa. Central American beef enters the US without a quota given the free trade agreement with countries in the region and Mexican/Canadian beef also does not face a quota because of the USMCA (NAFTA 2.0) free trade agreement. The other major suppliers, Australia and New Zealand, have their own quota although the quota with Australia will continue to increase until it is phased out.
The rush to fill the available quota was a factor in bringing in all that Brazilian beef in the first three months of the year. But even more important, in our view, is the fact that Brazil was suspended from shipping to China in late 2021. The suspension came after Brazil discovered 2 cases of atypical BSE in September. Brazil’s export business with China has increased significantly in recent years and last year it accounted for about half of all exports, even with the Q4 suspension. Without access to its biggest, most lucrative market, Brazilian exporters pushed hard to ship more product to other markets, including the US.
In one month Brazil ships to China more than the annual available quota in the US. Trade with China appears to have normalized, however, and this has coincided with a notable decline in shipments to the US. Shipments to the US market in April were just a little over 4,000 MT compared to an average of 17,000 MT in the previous four months. As Chinese businesses emerge from COVID lockdowns, we expect demand from that market to improve. Brazil now faces a 26.5% tariff for all out-of-quota beef that enters the US. Brazilian beef availability may have helped some businesses keep their grinding beef costs in check so far this year. That option may not be as available in the second half of the year.