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U.S. beef prices rising even after tariff reduction

  • April 3, 2018
  • , Nikkei , p. 24
  • JMH Translation

Wholesale prices for frozen beef from the U.S., which is often used in gyudon beef bowls and shabu shabu hot pot meals, are on the rise. A drop in the tariff on the product in April after the safeguard import cap ended at the end of March was initially expected to push down the market price. U.S. beef is less expensive than domestic beef and the two products are not interchangeable. Demand remained solid even when the import restriction was in place. The tariff reduction is making it easier to procure beef, offsetting the effect of the reduced rate.

 

On April 2, the wholesale price for short-plate cuts of U.S. beef was around 780-790 yen per kilogram, up 2% from last week.

 

The tariff on frozen beef from the U.S. returned to 38.5% from the rate of 50% that the government implemented from August 2017 to March 2018 as part of the safeguard measure. “The price was projected to drop in April, but our expectations have not been met,” said a representative of a meat wholesaler.

 

The growing demand is expected to surge around the Golden Week holidays, which will kick off from the end of April, as cravings for yakiniku barbecue will pick up. Restaurant operators and supermarket retailers are beginning to expand their procurement.

 

U.S. beef consumption in Japan has remained solid. U.S. beef imports grew about 10% on the year to about 127,000 tons during the period from August 2017 to February 2018. Frozen beef from the U.S., for which Japan invoked the safeguard measure, logged a year-on-year decline of 8% during the same period, but chilled beef, which was exempted from the import cap, grew 23%.  

 

With the food market growing more diverse, the way beef is used is generally determined based on origin. “Australian beef is used for ground meat, while U.S. beef is processed into short-plate cuts,” said a person who works in Sojitz’s beef section. “They cannot be switched easily.” This was one reason why the safeguard measure did not facilitate a switch to foreign beef produced in countries subject to lower tariffs.

 

Some food processing firms temporary avoided using frozen beef from the U.S. after the tariff rose and switched to chilled beef instead. Prime Meat Packers imported chilled beef and froze it in Japan, managing to “curb actual cost increases.” Following the lifting of the safeguard cap, the company has gone back to importing frozen beef.

 

Import prices are also going up. Burgeoning beef consumption in China is “pushing up transaction prices in the U.S. and this is offsetting the reduction in the tariff rate,” said the aforementioned Sojitz representative.

 

The introduction of the safeguard measure did not lead to stimulating demand for domestic beef. According to the Agriculture & Livestock Industries Corporation (Alic), domestic short-plate cuts cannot compete with U.S. products. The wholesale price for Japanese short-plate cuts (crossbred) was 1,432 yen per kilogram in February. “The difference in price is substantial and they are not simply interchangeable,” said a meat wholesaler. There was no substantial increase in the consumption of domestic beef.

 

The market price of frozen beef from the U.S. temporarily jumped after the safeguard measure was introduced last August. But it later returned to normal in accordance with demand at home and abroad. Many market observers predict that the price of U.S. beef “will not decline for the time being thanks to strong consumption despite the tariff reduction.” (Slightly abridged)

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