Structure of the Global Markets for Meat - By John H. Dyck and Kenneth E. Nelson. Market and Trade Economics Division, Economic Research Service - Meat trade flows among countries and world regions are determined largely by differences among countries in their resource base, their preferences for meat types and cuts, the extent and character of barriers to trade, and the industry structure. Future growth of meat trade depends on further liberalization of protectionist barriers, eradication of animal diseases, economic development, and population growth. Trade growth is likely to feature greater complexity in trade patterns, with more countries engaging in trade, and with an increased tendency for individual countries to import and export meat cuts and offal from the same animal species.

Summary

Poultry meat, beef, and pork are the three most important meats in world trade. The United States, the European Union, Australia, Canada, Brazil, and Argentina are leading meat exporters, and Russia, Japan, China (including Hong Kong), Mexico, and the United States are leading importers.

Acknowledgments

Shayle Shagam, Terry Crawford, Ron Gustafson, and Tom Worth invested considerable expertise and effort in preparing earlier drafts that helped shape this report. The material builds on discussions at three seminars on this topic held in August and September 1997. Participants in those discussions deserve credit for useful insights in this report, without sharing the blame for any mistakes. They were, in alphabetical order, Chris Bolling (who also reviewed the manuscript), Richard Brown, Lon Cesal, William Coyle, Terry Crawford, Frederick Crook, Terry Disney, Larry Duewer, Ron Gustafson, William Hahn, Mildred Haley, David Harvey, Sophia Huang, Elizabeth Jones, Suchada Langley, Milton Madison, Linda Bailey Nottingham, Shayle Shagam (also a reviewer), Leland Southard (also a reviewer), Jim Stout (also a reviewer), and Gary Vocke. Reviewers for this report, in addition to those mentioned above, were Carlos Arnade, Praveen Dixit, John Dunmore, Joy Harwood, Dale Leuck, David Skully, and Keith Wiebe of ERS; Joel Greene of the World Agricultural Outlook Board; Jeff Jones and Yoonhee Macke of the Foreign Agricultural Service; Phylo Evangelou of the Animal and Plant Health Inspection Service; Frank Fuller of the University of Arkansas; Dermot Hayes of Iowa State University; and Laurian Unnevehr of the University of Illinois. Reviewer suggestions were unusually insightful and helpful and were gratefully incorporated. The excellent editorial and design effort of Lou King, Wynnice Pointer-Napper, and Victor B. Phillips, Jr., are greatly appreciated.

Meat trade flows among countries and world regions are determined largely by differences among countries in their resource base, preferences for meat types and cuts, the extent and character of barriers to trade, and the industry structure. Those parts of the world with low-priced inputs—feed, labor, equipment, etc have competitive advantages in meat production. Land for forage and grain production is important for success of livestock operations. Among the keys to competitiveness in meat processing are large and reliable livestock supplies, low labor costs either through low wages or economies of size, and a profitable market outlet for a full range of meat products and byproducts.

Pronounced differences exist in the preferences for meat expressed by cultures around the world. Americans pay more for white poultry meat, but consumers in other countries place a premium on dark meat, and this dual market has been one of the underpinnings of large U.S. poultry exports. Some major markets are willing to pay higher prices for meat offal than others, again leading to large trade flows. The ability to ship sub-primal and retail cuts to retail outlets around the world has created the opportunity to exploit the differences between countries in their preferences for particular cuts of meat from the same animal species.

Trade barriers, both sanitary and protectionist, have strongly influenced meat trade. The distinction between countries free of foot-and-mouth disease (FMD) and those that are not free largely defines world trade in fresh, chilled, or frozen beef and pork. Bovine spongiform encephalopathy (BSE) virtually ended Britain’s beef exports in the late 1990s. In the 1990s, gains were made in eradicating FMD in many countries, but recent outbreaks in Taiwan, Britain, and Argentina provide strong reminders of both the difficulty of control and the damage caused by disease.

The evolution of world and regional trade agreements, such as the World Trade Organization, the North American Free Trade Agreement, and MERCOSUR, has lowered protectionist barriers. However, significant protectionist barriers still remain, such as high tariffs and tariff-rate quotas, which prevent or inhibit significant potential trade in meats.

Large multinational firms are prominent in the meat trade. The success in world trade of the largest firms is likely linked to their ability to achieve economies of size, and perhaps of scope. Achieving such economies lets them compete on the basis of price while providing a variety of meat types, at consistent levels of quality, in large units. Large firms are also more likely to have sales offices and plants in many parts of the world. Maintaining operations in diverse production areas and markets also provides a degree of protection against a shortfall in livestock supplies owing to disease quarantines or natural disaster in any one country. The outlook for future world meat trade appears to be for more growth, given further liberalization of protectionist barriers, animal disease eradication, economic development, and population growth. If some or all of these changes fail to materialize, trade in meats will show less growth. Greater complexity in trade patterns is likely to accompany trade growth, with more countries importing and exporting meat, and with an increase in countries that both import and export meat and offal from the same animal species.

U.S. firms, marshaling the large U.S. resource base for animal production and the capital and labor resources for meatpacking, have fashioned a meat distribution network that sends cuts to domestic and foreign markets that pay the highest price for each cut. Those firms have become preeminent in the world meat markets, and the United States has become the largest meat-exporting country. Underpinning much of the U.S. export success, especially for poultry meat, are important differences among major foreign regions in preferences for meat cuts, combined with the United States’ position as one of relatively few nations with disease-free status for the major meats. If countries with different preferences for meat cuts achieve disease-free status, the United States could see greater imports in the future, especially of chicken breasts. Significant protectionist trade barriers still limit U.S. exports in much of the world. If tariffs, tariff-rate quotas, and nontariff barriers are reduced by future agreements, U.S. exports will continue to grow.

Introduction

Global meat trade is large (over 24 million tons in 2000), high in value (over $43 billion in 2000 - about 10 percent of total agricultural trade), and growing rapidly (by about 6 percent per year, 1990-2000). This report reviews the elements of production, marketing, and consumption that determine today's global markets for meat, and highlights general themes so that readers interested in agricultural trade can better understand meat trade and the issues surrounding it.

• Meat trade flows among countries and world regions are determined, in the absence of trade barriers, by differences among countries in their resource base for animal production and meat processing and by differences in their preferences for meat.

• Trade barriers - protectionist and sanitary - do exist, however, acting both to channel the existing trade and to prevent some potential trade.

• Rising consumer demand for meat, aided by trade liberalization and changes in technology (for example, in shipping), has helped meat trade more than triple in the past three decades.

• Large firms appear to have lower costs and increasing returns to investments in meat production, and world trade in meats offers an opportunity for firms to increase the size of their markets to absorb increased production.

While a number of factors can influence meat trade in the near term, especially currency exchange rates and the general macroeconomic, cultural, and political climate, this report focuses chiefly on the factors listed above, whose influence is more long term.

Contents

Please click on the section headings to view the relevant information

Competitiveness in the Supply Chain

Differing Preferences for Meats

Barriers to Meat Trade

Current Structure of World Meat Trade

Indications of the Future Structure of World Meat Trade

Appendix 1: Feeding Meat Animals - Where Are the Feed Resources?

Further Information

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Source: U.S. Department of Agriculture, Economic Research Service - September, 2003