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It is official

It is official: after two years of blocking the importation of U.S. beef, Japan gave the
word earlier this week that they will allow restricted imports of beef from the United States.

The restriction is in regards to age. The agreement only allows beef from cattle 20 months of age and younger to be imported. Secretary of Agriculture Mike Johanns told reporters Monday morning that more than 94 percent of total U.S. ruminant and ruminant products, with a total export value of $1.7 billion in 2003, are now eligible for export to Japan.

Dr. Chris Hurt, Economist at Purdue University, questions how much beef the United States will be able to export under the new age restrictions. He told Brownfield’s Gary Truitt “U.S. producers are not used to getting cattle on feed that fast and getting them through the feedlots by 20 months.”

According to Phil Seng, CEO of the U.S. Meat Export Federation (USMEF), the first shipment of beef will leave Denver for Japan on Saturday. Seng told reporters he believes it will take at least three years to fully regain access to the multi-billion dollar market. What does that mean? Seng explained that “possibly 15% of the cattle today will be eligible” under the current agreement. That translates into between 100,000 and 120,000 metric tons of beef sales over the next few years.

“We need to get up to 30 months of age or beyond thirty months of age, at least having Japan accept international standards. I think once we have that we are going to be able to sell much, much more,” said Seng.

Hurt forecasts cattle prices will rise sharply as demand from Japan and perhaps other Asian countries, increases. “I think we will see cattle prices rise above the $95 cwt mark in 2006 and get very close to $100 cwt,” Hurt said. As the prices increase cattlemen will retain more heifers further restricting the supply and riving up prices.

Hurt doesn’t see the price spike as a flash in the pan. As a matter of fact, he doesn’t think U.S. beef producers will build up their supply enough to depress prices until the 2010 to 2012 time period.

In addition to allowing some U.S. beef in, Japan will soon be buying beef from Canada, as well.

And, in a move that surprised few, the U.S. Department of Agriculture Monday laid out a new rule that allows the importation of whole cuts of boneless beef from Japan.