A Look at the Global Economy
Economies of key trading partners affects the outlook for beef.
SAN ANTONIO, TEXAS (Jan. 27, 2010) — The global recession has hit rock bottom and is now slowly moving to recovery mode, said Gregg Doud, chief economist for the National Cattlemen's Beef Association (NCBA). Speaking Jan. 27 during a Cattlemen’s College session at the 2010 Cattle Industry Annual Convention and NCBA Trade Show in San Antonio, Texas, he commented on the relationship between key trading partners and how their economies affect our beef industry.
China
"China buys our national debt because it wants U.S. consumers to continue buying Chinese products," Doud said, noting that the Chinese have a much better perspective on the importance of global trade than Americans do. Doud says he sees increasing protectionism in the United States, with only 59% of Americans agreeing that it is "beneficial for our country to sell goods around the world." By contrast, 91% of Chinese agree with that statement.
That understanding has assisted China in making a much faster economic rebound than the United States, Doud said. China needs at least 8% growth to sustain its social programs, and its economy is already back at 10% growth.
There are signs the Chinese are starting to "tap on the brakes a bit," Doud said, noting that they've increased their national reserve requirements and slowed loan growth, signs that they're trying to stave off inflation.
Russia
"The first half of 2009 was a total bust for exporting U.S. meat," Doud said. For the first nine months of 2008, Russia had the highest imports of beef in the world. Then the global recession hit in October 2008, and Russia immediately refused to purchase the Australian beef that was already waiting in its ports. South Korea was able to purchase that beef at a substantial discount because it was one of the only countries in the world with enough cold storage space to house it.
"So that leaves us with Russia not importing any beef because they couldn't pay for it and South Korea not importing any beef because they have enough in storage to last them," Doud explained.
The most recent stumbling block for U.S. beef exports is that Russia has now shut its borders to U.S. poultry and pork. Historically, Russia has been the largest export market for U.S. poultry, but it is now trying to build its own poultry and pork industries domestically, which leaves excess poultry and pork on the U.S. market at lower prices.
Other countries
Doud said Brazil is not expected to grow its beef herd this year because the exchange rate would prohibit it. If the World Trade Organization (WTO) sides with Mexico and Canada on their suits filed against the United States’ country-of-origin labeling (COOL) laws, he added, border closure is a likely and legally justified retaliatory action.
Looking forward
Doud said there is tremendous economic growth potential in "BRIC" investments, an acronym for the economies of Brazil, Russia, India and China. Additionally, he said, growth of world gross domestic product (GDP) is expected in southeastern Asia, so that's where the United States will have opportunity to export beef.
Doud predicted unemployment would stay at 10% this year, noting that it would take the creation of 12 million new jobs to bring us to full employment in the United States.
"As long as we have a weak dollar, we can expect to see our manufacturing industry grow," he said. Additionally, we can expect to see the weak dollar translate into higher input costs for the beef industry, specifically for fuel and fertilizer since they come from overseas.
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