USDA GAIN: Livestock and Products
17 February 2012
2012 Japan Market Outlook
Live Cattle PS&D Table
Live Swine PS&D Table
This report is an update to JA1038 Japan Livestock and Products Annual, dated September 5, 2011. In updating the demand and supply outlook and forecast numbers for CY 2012, Post applied the following assumptions:
- No changes to Japan’s Export Verification (EV) Program for U.S. beef, thus continued limited market access during CY 2012
- Continued lack of positive income growth, thus average consumers will remain price conscious
Quantities listed in the text are made on the basis of Carcass Weight Equivalent – CWE (unless specified otherwise). Some numbers in the inserted tables are on a product weight basis and have not been converted to CWE.
Rates of conversion from product weight to CWE are:
Beef Cuts (Boneless) – 1.40
Pork Cuts (Boneless) – 1.30
Processed/Prepared Beef Products – 1.79
Processed/Prepared Pork Products – 1.30
All supplemental tables provided in the report are provided for the reader’s own analysis.
2012 Beef Market Outlook (Revised)
In the 2011 annual report, Post’s 2012 beef market outlook presented a scenario which predicted a recovery from last year’s drop in domestic production and consumption due to the March earthquake/tsunami, E. coli 0157 incident, and Cesium 137 detection in domestic beef (See the previous annual report: JA 1038 dated September 5, 2011). In the 2011 report, Post projected a slight decline in 2011 total consumption, a slight increase in total imports, and relatively high year ending stocks. For 2012, Post forecasted a gradual depletion of the high carryover stocks due to a slight increase in total consumption over the previous year. Post also projected that the 2012 total slaughter was to continue its decline and that total imports would remain unchanged over the previous year. However, there was actually an increase in total imports due to greater demand, which contributed to total consumption being slightly higher in 2012. Also, the actual year ending stock for 2011 was only slightly above the year’s beginning level. Finally, the 2011 report also noted greater demand for “medium grade grain fed beef”. Post projects this demand outlook to continue to hold and that American beef will perform well in 2012.
Based on the above, Post has re-forecasted the 2012 outlook as explained below.
Slight Rise in Total Beef Consumption Forecasted for 2012
As explained in the previous annual report, last summer’s issue of cesium detection in domestic beef (fed with contaminated rice straw) was the key development that had shaken consumer confidence in the safety of domestic product. Even though it is not a government requirement, major retailers continue to sell domestic beef with stickers/labels indicating “tested” or “no detection” signs. Post is unsure how long these practices will continue as the government’s response seems to have been effective in preventing contaminated beef from entering into distribution channels.
For consumption, last summer’s shift from domestic beef to imported beef and pork continued through the rest of 2011. Post expects this consumption shift, especially to pork, to be temporary and to reverse in 2012. The market prospect for imported beef is also expected to remain good for the year. This is especially true for sales of American grain fed cuts, which can meet demand for “affordably priced medium grade grain fed cuts”. In fact, on a year-to-year comparison, 2011 imports (excluding processed and prepared products) were four percent higher for beef cuts (724,000 MT) and ten percent higher for chilled pork cuts (330,740 MT). Due to this increase in beef cuts imports, Post has changed its previous forecast for Japan’s total beef consumption from “slip slightly” to “net increase” of one percent to 1.239 million MT. Last year’s main highlight was the remarkable growth of American beef, which shot up 32 percent to 169,000 MT over the previous year, beating Post’s earlier conservative projection. Aussie beef suffered a four percent drop due to its high price. For the new 2012 outlook, Post projects market demand for imported grain fed cuts to continue and improve overall demand. Based on the above, 2012 total beef consumption is now projected to increase by one percent to at 1.256 million MT, a substantial increase from Post’s earlier projection.
Modest Import Growth Forecasted in 2012
Post also projects a modest growth of two percent in beef imports for 2012, with total imports at 756,000 MT (Beef Cuts: up four percent to 724,000 MT, Prepared/Processed, unchanged at 21,000 MT), another substantial increase from last year’s estimate. Currently, Post estimates this year’s U.S. imports to grow at a moderate pace when compared to 2011, up by seven percent to total around 182,000 MT. This estimate is based on the assumption that sufficient numbers of qualified beef cattle under the EV program for Japan are available in the United States to meet Japan’s solid market demand for grain fed cuts.
However, Japanese importers are concerned about the increasing U.S. export offer that started last year. If it persists, it may effectively eliminate the competitive price advantage which the United States enjoyed against Australia in 2011. The increase in the export offer may be due to the historically small number of cattle in U.S. feedlots forecast for this year. Also, according to market sources, some Australian suppliers have started to lower their export offer for Japan. This move may also be related to their increased slaughter and production forecast for the year. At this time, Japan’s imports of Aussie beef in 2012 are projected down by three percent from the previous year at around 471,000 MT. As in the previous year, Australian supplies of chilled grass and grain fed cuts are expected to continue to be replaced by increased American grain fed cuts. Readers may note that Japan’s Aussie frozen grass fed cuts (mostly used for fast food hamburger paddies) may continue to perform well in 2012 catering to low price seeking consumers.
Stable Domestic Beef Outputs Forecasted for 2012
Post has revised Japan’s 2012 total cattle slaughter downward from its previous projection. The actual total slaughter in 2011 fell more than Post’s previous forecast, with a three percent decline at 1.179 million heads (501,000 MT). Reflecting a slow recovery, Post projected, on a year-to-year comparison, a marginal decline for the 2012 total slaughter to 1.175 million Heads (500,000 MT). There is a report that some spent dairy cows (estimated 4,000 – 5,000 heads) that were raised in the radiation-affected Tohoku and Kanto regions were voluntarily retained last year due to contamination concerns and that these cows are expected to be slaughtered this year. Therefore, some increase in dairy cow slaughter may be seen in 2012, but this will most likely be offset by reduced slaughters elsewhere.
On-going Review of BSE Restrictions May Change Forecast Later
Late last year, the Government of Japan finally announced that it would review its overall BSE restrictions through the Food Safety Commission (FSC) review. The FSC review may change Japan’s import restrictions imposed on American beef, which have been in effect for nearly 10 years, in which case, Post will revise the PS&D numbers. Factors to be incorporated in Post’s assessment will be; 1) Substitutability of American beef for Aussie beef, 2) Likely growth of total beef imports, 3) Possibility of beef safeguard triggering, and 4) Likely impacts on pork market.
2012 Pork Market Outlook (Revised)
Post’s previous projection for Japan’s 2012 pork market still holds, and consumption is expected to be affected by a potential recovery in Japan’s beef consumption as outlined in the previous outlook scenario. Given preliminary 2011 annual production and trade data just publicized, Post made adjustments to the 2011 PS&D numbers, as well as 2012 total consumption, domestic slaughter (pork production), total imports, and the beginning and ending stocks forecast in the latest annual report. Currently, increased domestic pork production and distribution are expected to hold market prices lower through 2012, which will likely intensify competition in sales with imported chilled cuts. This may subsequently lead to 2012 imports being lower than last year total. The potential recovery in Japan’s beef market may also become a factor in this year’s projected reduction of total imports.
Total Pork Consumption Forecasted to be Lower in 2012
The Japanese 2012 pork market is expected to correct the surplus situation that started late last year. Post projects that the consumption recovery in the beef market and a projected increase in the supply and distribution of low priced domestic fresh/chilled pork cuts may trim 2012 total consumption by lowering total imports, especially those competing with chilled cuts. This scenario assumes that demand for raw material frozen cuts (including seasoned ground pork) will remain stable and hold through this year.
In light of the above, total consumption in 2012 is now projected one percent lower from the previous year at 2.487 million MT, marginally lower than Post’s earlier estimate.
Total Domestic Pork Outputs to Rebound Slightly in 2012
Despite the difficulties experienced in the previous two years (FMD outbreaks in Miyazaki in 2010, and the earthquake/tsunami in March 2011), overall 2011 domestic hog slaughter in 2011 recovered at a faster than previously anticipated rate, with outputs (on a month-to-month comparison) reaching their 2010 levels late last year. Therefore, in 2011, Japan’s annual base hog slaughter and outputs fell only a modest two percent to 16.4 million heads (1.267 million MT), with the second half recovery partially offsetting any first half decline. For 2012, Post projects a gradual rise in domestic slaughter and production to occur, up by one percent to 16.5 million heads (1.275 million MT) on an annual basis, slightly lower than Post’s earlier projection.
Overall Supply Surplus to Cut Back Total Imports in 2012
Some surplus remained in the market due to the combination of stronger than anticipated imports (especially chilled cuts) and the recovery of domestic pork outputs, which took place in the latter half of 2011. Competition with imported chilled cuts caused market prices for domestic pork to slump during 2011’s fourth quarter. This situation has carried into 2012 and has somewhat kept market prices weak during the first quarter. This situation, if it persists, will most likely tighten imports at some point. Since 2011 total imports were actually higher than Post’s earlier projection (up five percent to 1.25 million MT), Japan’s total pork imports for 2012 are now projected down by three percent to 1.21 million MT (Pork Cuts: down by four percent to 988,000 MT, Processed/Prepared Products: down by one percent to 221,000 MT). This level is also lower than Post’s earlier projection. At this time, Post is projecting Japan’s imports of American pork (pork cuts combined with seasoned ground pork in the prepared/processed category) to decline by two percent to 553,000 MT. Post anticipates that chilled pork imports from the United States and Canada may be cut back in 2012.
Stable Year Ending Stock is Projected for 2012
Post estimates the 2012 year ending stock to be roughly at the same level as last year, assuming that the relatively stable raw material demand for processing (including seasoned ground pork) holds at 213,000 MT, lower than the actual year’s beginning level.
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