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USDA GAIN: Livestock and Products

08 March 2013

USDA GAIN: Japan Livestock and Products Semi-annual 2013USDA GAIN: Japan Livestock and Products Semi-annual 2013

Expanded market access and anticipated strong demand for grain-fed cuts are expected to boost imports of American beef, as well as total consumption, this year. However, the high price outlook for U.S. beef could limit the amount of increased exports. Two successive years of growth in total domestic pork output, increased distribution of American beef, and increased competition from chicken and relatively low priced domestic pork could trim U.S. and Canadian chilled pork imports. Japan’s Customs Authority is expected to continue to require inspection and monitoring to ensure compliance with the Gate Price system, holding imports of frozen pork cuts at a sustained level.

USDA GAIN: Livestock and Products


2013 Revised Market Outlook Summary

- New Beef Export Program for Japan Expands Market Access

On February 1, 2013, Japan officially changed its import requirements related to BSE (Bovine Spongiform Encephalopathy) for American beef by instituting a new U.S. beef export program for Japan, hereafter termed “QSA LT 30 Program” (see note). This revised export program is expected to improve the American beef presence in the Japanese market, help U.S. exporters regain the market share that has been lost over the past 10 years, and contribute to the overall growth of Japan’s beef market in the near future. The new program eases the age threshold from animals 20 months old or younger to cattle less than 30 months of age and revises Japan’s definitions of specified risk materials (SRM) to make them correspond with internationally recognized standards.

Note: The Food Safety Commission (FSC) completed its review of its domestic and border control BSE measures in October 2012. Based on the FSC recommendations, the United States and Japan agreed on the new export program “USDA Less than 30 Months (LT30) Age-Verification Quality System Assessment (QSA) Program for Japan” which went into effect on February 1, 2013. Details of the program can be found at the following USDA link:

The revised requirements for U.S. imports will enable Japan to once again source certain specific beef cuts, as well as products in the offal category such as tongue, hanging-tender, and outside skirt. Note: Post’s PS&D projections do not include those products in the offal category, which are an important part of U.S. beef exports in terms of value, especially tongue.

- Japanese Imports of American Beef Forecast to Show Good Growth in 2013

Given improved market access under the new beef export program for Japan, Post has revised its forecast for Japan’s 2013 total beef consumption, up slightly to 1.275 million MT, and total imports, up five percentage points from 2012 levels to 774,000 MT. The increase in imports is expected to be the result of an increase in imports of beef cuts, at 756,000 MT, while imports of prepared and processed products are expected to remain unchanged at 18,000 MT.

On a preliminary basis, Post projects a 25 percentage point (or 46,200 MT) increase from the previous year for imports of American beef, to 231,000 MT. This projection assumes that Japan’s new import requirements will prompt some large scale retail and food service purchases to promote American beef. This expansion is also expected to lead to American beef replacing some Australian chilled grass fed/short grain fed cuts and frozen grain fed cuts. However, substitutability of American beef for Australian frozen grass fed cuts, which make up roughly 45 percent of Australia’s beef cuts exported to Japan, is considered fairly small as these are mostly trimmings used by fast food chains in the manufacture of hamburger patties. In light of the above, Post projects a decrease of six percentage points (or 25,200 MT) for imports of Australian beef cuts to 420,000 MT. The prevailing market preference for medium graded grain fed cuts (American beef), coupled with a strong Australian dollar, and high Australian price offers, have stagnated Japan’s demand for Australian beef in recent years. Post expects that this downward consumption trend will most likely continue despite a long term outlook by Meat and Livestock Australia forecasting a recovery in its cattle slaughter and beef production for 2013 and 2014. Readers should note that Post’s PS&D projections do not include products in the offal category, such as tongue, hanging tender, and outside skirt meat.

Based on the above projections, the American share of total beef imports in 2013 is expected to rise from 2012 levels by four percentage points to 31 percent, while Australian beef is expected drop by 6 percentage points to 56 percent. U.S. beef is expected to gradually regain much of the market share lost to Australia over the past 10 years.

- High Prices Could Cap U.S. Export Potential in 2013

Despite this positive forecast, the high price outlook for American beef in 2013, due to the tight supply of beef cattle, could affect Japan’s prospective purchases this year. Although the number of Japanese buyers interested in American beef is growing, they are expected to remain price-sensitive and, despite some reported packer discounts, generally remain cautious. This apprehension may make trade somewhat less active than anticipated in the near future. The combination of these factors may reduce any risk of the beef safeguard triggering during Japanese Fiscal Year 2013, which starts in April.

- Japanese Domestic Beef Output Forecast Lower in 2013

Meanwhile, Japan’s 2013 domestic cattle slaughter and beef production is expected to fall modestly to 505,000 MT (or 1.17 million head), primarily due to low calf crops (especially for Wagyu), as well as the reduced number of beef cattle reaching finishing age this year. A tight supply of expensive domestic beef could help increase sales of American beef by attracting value-seeking consumers, especially at the retail level.

- Potential for Japan’s Beef Safeguard Triggering in the First Quarter of JFY 2013.

Depending on how high U.S. and Australian offers are in 2013, Japan’s prospective demand for imported beef may be constrained. In Post’s assessment, the greatest risk of the beef safeguard triggering, which would automatically raise the beef import duty from 38.5 percent to 50 percent for the remainder of the fiscal year, seems to exist primarily in the first quarter, when significant imports of American beef for Spring retail promotions could combine with the regular monthly import volume of Australian trimmings for hamburger patties. However, Japanese importers, who have avoided triggering the safeguard in the past by adjusting their shipping dates or delaying clearing customs, are expected to respond with a similar action if the risk of triggering the safeguard appears imminent. With the exception of the first quarter risk, trigger levels for the rest of the year should be better able to accommodate any temporary surges of monthly imports for both chilled and frozen beef.

Chilled Beef: Preliminary safeguard trigger levels calculated by Post through the third quarter for imported chilled beef are:

  • 1st Quarter (April – June): Customs Clearance Product Weight at 74,339 MT (average monthly entry of 24,780 MT)
  • 1st - and 2nd Quarter (April – Sept.): 152,456 MT (average monthly entry of 25,409 MT)
  • 1st – 3rd Quarter (April – Dec.): 230,642 MT (average monthly entry of 25,626 MT)

Frozen Beef: Quarterly trigger levels calculated by Post through the second quarter for imported frozen beef are:

  • 1st Quarter (April – June): Customs Clearance Product Weight at 83,267 MT (average monthly entry of 27,755 MT)
  • 1st - and 2nd Quarter (April – Sept.): 184,749 MT (average monthly entry of 30,791 MT)
  • 1st – 3rd Quarter (April – Dec.): 264,427 MT (average monthly entry of 29,381 MT)

2012 Market Situation Summary

- Domestic Beef Output Recovery and Increased Use in the Food Service Industry Raised Total Beef Consumption in 2012

In 2012, the recovery in Japan’s domestic beef output was higher than previously anticipated, up four percentage points to 519,000 MT (1.68 million head) partially owing to increased average carcass weight gains. Meanwhile, total imports fell slightly to 738,000 MT compared to the previous year’s actual import level (beef cuts down marginally to 720,000 MT; prepared and processed products down 17 percentage points to 18,000 MT). Although Australia remains the top exporter of beef to Japan, imports of Australian beef cuts fell six percentage points from the previous year to 445,200 MT. This decline in Australian beef imports can be attributed to a number of factors, including a high asking price, slowing Japanese demand, and a strong Australian dollar. Following a record asking price in 2011, the average import price of Australian beef remained at high levels in 2012 at US $5,008 per MT.

In contrast, 2012 imports of American beef were at their highest level since trade resumed under the 2005 Export Verification Program, an increase of nine percentage points to 184,800 MT. This was supported in part by the strong market preference for medium and grain fed cuts. However, an 11 percent hike in the average U.S. beef import price, at US $6,378 per MT, has been a concern among Japanese importers and end-users. As a result, the share of American beef rose to 26 percent of total beef cut imports, a three point gain from 2011.

In 2012, although there was no growth in Japan’s retail beef sales (according to household consumption data), the food service sector, which accounts for 50 to 60 percent of total beef distribution in Japan, appears to have increased its utilization of beef, resulting in 2012 annual total beef consumption rising to 1.256 million MT, despite slightly reduced imports. Although there are no specific sales data available for beef, the Japan Food Service Association reported that the industry’s 2012 total sales showed a recovery from the previous year’s slump.


2013 Revised Market Outlook Summary

- Slightly Lower Total Pork Consumption and Imports Projected for 2013

MAFF is forecasting national hog slaughter in the first half of 2013 (Jan. – June) to increase by one percentage point compared to the same period last year. This will mark two consecutive years of an increase in domestic production as the national sow inventory is rebuilt. This increase is partly due to the recovery reportedly taking place in Japan’s Miyazaki prefecture, a major hog producing prefecture that was significantly affected by a massive Foot and Mouth Disease (FMD) outbreak several years ago.

As the above increase is positively affecting Japan’s domestic output growth in 2013, Post has revised its earlier output projection, up slightly from the 2012 level to 1.305 million MT (or 16.9 million head).

Post also revised its earlier projection for Japan’s total pork imports for 2013, lowering it by two percent to 1.228 million MT (pork cuts, including small volume of carcasses: 987,000 MT; prepared and processed products: 241,000 MT). However, the projected increase in total beef consumption, as well as ample supplies of competitively priced fresh/chilled domestic pork and chicken which will likely reduce sales and utilization in the retail and food service sector, could result in a further reduction in chilled pork imports. Although American and Canadian chilled pork are expected to face this stiff sales competition, the United States is expected to hold its position as the top pork exporter to Japan, with its estimated share in imports of total pork cuts and total prepared and processed products at 41 percent and 62 percent, respectively.

As explained in the previous annual report, starting in April 2012, Japan’s Customs enhanced its inspection of imported pork in order to investigate duty evasion cases, as well as to ensure that importers complied with Japan’s complex pork import regime based on differential duties, known as the “Gate Price System”. Several additional arrests of violators were reported since last year’s report (see JA 2023 – Japan Livestock and Products Annual dated October 2, 2012). Post expects these inspections to continue in 2013. However, as the above action has not disrupted actual trade flows of frozen raw material pork cuts, Japanese pork importers/brokers are expected to continue their orderly trade of frozen cuts.

In light of the above, Post forecasts Japan’s 2013 total consumption down slightly to 2.53 million MT.

2012 Market Situation Summary

- Increased Domestic Pork Output Raised Overall Consumption; Import Levels Held Steady in 2012

In 2012, total domestic pork output rose two percentage points to 1.297 million MT (1.68 million head), while total imports were flat at 1.26 million MT, compared to the previous year’s actual import levels (pork cuts: 779,000 MT, down two percentage points; prepared and processed products: 247,000 MT, up 10 percentage points). The United States was the top exporter of pork to Japan (see 8-A, 8-B, 8-C, and 8-D).

The two percent rise in total domestic pork output in 2012 put downward pressure on average market prices of domestic pork throughout the year (Tokyo market 2012 average: 446 Yen per kg. for excellent grade, down five percent, and 402 yen per kg. for medium grade, down seven percent) and contributed to a one percent rise in Japan’s annual pork consumption over the previous year at an estimated 2.56 million MT (see Table 5-A, 5-B, and 5-C).

The food service and processing sectors, as well as users of low priced domestic pork and imported frozen cuts, were active buyers, accounting for roughly 60 to 65 percent of total pork consumption in Japan, and helping raise 2012 total pork consumption slightly higher than last year. In contrast, recently published 2012 household consumption data indicate that retail pork sales, especially for domestic pork, stagnated, due mainly to increased sales of broiler meat and its prepared products, as well as to competition from imported chilled pork.

Despite the above, American chilled pork did relatively well in 2012, with imports sustaining their 2011 levels at 237,485 MT. Japan’s imports of U.S. prepared and processed products, such as seasoned ground pork, were also up six percentage points to 151,596 MT, partly due to uncertainty about frozen pork imports as a result of the previously mentioned enhanced Customs inspections.

March 2013

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