Report Highlights:

U.S. beef is poised to reclaim lost market share in 2016, as Australian supplies tighten and price offers climb, despite a widening tariff advantage for Australian beef. Japanese beef production is expected to fall again in 2016 as the domestic feeder calf industry contracts further. Japanese pork production should finally recover from PEDv in 2016, tamping prospects for imported chilled pork. Ample global supplies of frozen pork in 2016 should help Japanese processors rebuild stocks and fuel continued competition between North American, South American and EU suppliers in the Japanese market.

Preface:

Post has updated the 2015 market summary and revised previous demand and supply estimates based on the Government of Japan's official figures (some are still preliminary). Post has also revised the previous forecast for 2016 based on the most recent market information and industry accounts available to date.

2015 Market Dynamics (Re-cap)

There were several major factors affecting the beef supply dynamics in the Japanese market in 2015. With regard to imports, exportable supplies of U.S. beef were tight while Australian supplies remained ample. Specifically, the U.S. cattle inventory bottomed out as high cow retention continued, lowering cattle slaughter and beef production (despite heavier slaughter weights). Further, U.S. producers forfeited nearly an entire quarter of chilled beef exports in 2015 as a result of the West Coast ports labor dispute. In Australia, persistent drought conditions continued to fuel cattle slaughter at or near record high levels, while implementation of the Japan – Australia Economic Partnership Agreement (JAEPA) reduced the duties assessed on Australian beef. Japanese domestic supplies were constrained by continued contraction of both the cow-calf and dairy industries.

Meanwhile, supplies of pork on the international market were higher than usual in 2015 as North American hog slaughter recovered smartly from the earlier effects of Porcine Epidemic Diarrhea virus (PEDv) and as EU-origin pork remained shut out of the Russian market at a time when several EU countries were expanding hog production. The ripple effects of PEDv, which peaked in Japan in the fall of 2014, on Japanese hog production continued into 2015, slowing the pace of Japan's hog slaughter recovery.

2016 Market Dynamics (Forecast)

Looking forward into 2016, the long-expected contraction of Australia's cattle slaughter will outweigh higher slaughter weights, dragging down exportable supplies of Australian beef and raising export offer prices. Offsetting those trends, on April 1, Australia's tariff advantage over the United States (Australia's primary competitor in the Japanese market) will grow to 11 percentage points on frozen beef and 8 percentage points on chilled beef. Meanwhile, U.S. cattle inventories are expected to climb while grain prices remain lower, pushing up slaughter numbers, slaughter weights and beef production in 2016. Continued tightness in the supply of Japanese wagyu, F1, and Holstein feeder calves should sustain upward pressure on the price of Japanese domestic beef, while Japanese hog production is expected to fully recover after finally shaking off the effects of PEDv. However, as Russian import bans on EU and North American pork are expected to remain in place for most of the year (and possibly longer), global exportable supplies of pork should remain higher.

Quantities listed in the text are made on the basis of Carcass Weight Equivalent (CWE) unless specified otherwise. Some numbers in the 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 in the report are provided for the reader's own analysis.

Beef

Animal Numbers, Cattle

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Total Cattle Beg. Stks

3962

3962

3860

3860

3765

3765

Dairy Cows Beg. Stocks

773

773

750

750

740

735

Beef Cows Beg. Stocks

595

595

580

585

575

575

Production (Calf Crop)

1217

1217

1185

1185

1150

1160

Total Imports

11

11

9

9

8

8

Total Supply

5190

5190

5054

5054

4923

4933

Total Exports

0

0

0

0

0

0

Cow Slaughter

534

534

523

516

513

510

Calf Slaughter

7

7

7

6

7

5

Other Slaughter

616

616

595

595

585

590

Total Slaughter

1157

1157

1125

1117

1105

1105

Loss

173

173

164

172

163

168

Ending Inventories

3860

3860

3765

3765

3655

3660

Total Distribution

5190

5190

5054

5054

4923

4933

(1000 HEAD)

Meat, Beef and Veal

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Slaughter (Reference)

1157

1157

1125

1117

1105

1105

Beginning Stocks

171

171

185

185

203

185

Production

502

502

490

481

480

475

Total Imports

739

739

740

708

727

725

Total Supply

1412

1412

1415

1374

1410

1385

Total Exports

1

1

2

2

2

2

Human Dom. Consumption

1226

1226

1210

1187

1215

1190

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

1226

1226

1210

1187

1215

1190

Ending Stocks

185

185

203

185

193

193

Total Distribution

1412

1412

1415

1374

1410

1385

(1000 HEAD) ,(1000 MT CWE)

2015 Situation Summary

Domestic Cattle Slaughter Downed and Prices Remained High

Japan's total cattle slaughter in 2015 ended down for a third successive year, falling three percent from 2014 to 1.117 million head (representing total beef production of 481,000 MT, down four percent). A closer look at that slaughter number points towards continued contraction in the dairy cattle population and a pronounced contraction of the beef supply across wagyu, F1 and Holstein steers. The steady exit of increasingly older, rural cow-calf operators is driving the continued contraction of the cow-calf industry, which has long been small in scale, and the short supply of wagyu feeder calves, prices for which have increased by over 70 percent over the last three years.

Note 1: Japanese cattle slaughter breakdown by major breeds in 2016:

  • Wagyu heifer/cow: 299,810 head, down seven percent
  • Holstein heifer/cow: 177,885 head, up one percent
  • F-1 heifer/cow: 106,500 head, down four percent
  • Holstein steers: 206,795 head, down five percent
  • F1 steers: 116,741 head, down seven percent
  • Wagyu steers: 260,944 head, down three percent

The average finishing age is about 30 months for wagyu steers, 24 months for F1 cross breeds, and 20 months for Holstein steers.

Overall Beef Consumption Fell on Tight Supplies and High Prices

Japanese beef consumption fell three percent in 2015 to 1.187 million MT due to weaker than anticipated retail sales and shrinking food service utilization (see Note 2). With tighter domestic and global supplies, beef prices in Japan were significantly higher than 2014 levels, pushing down Japanese consumption more than previously projected.

Note 2: MAFF estimates 2014 household and food service utilization shares of Japanese beef consumption were 32 and 62 percent respectively. (2015 shares are scheduled to be announced later in 2016.)

Throughout 2015, tighter domestic supplies pushed average wholesale prices for medium-grade Japanese beef carcasses (across all breeds) up between 24 and 33 percent over 2014 levels. Furthermore, average wholesale prices of grain-fed, chilled beef cuts from Australia and the United States in 2015 remained relatively higher than 2014 on continued tight supplies, coupled with the relatively weak yen, especially against the U.S. dollar. The competition between animal proteins for limited Japanese consumer spending continued to play out in 2015 as consumers increasingly reallocated their spending towards relatively lower-priced poultry and pork as retail beef prices climbed higher. Price competitive, chilled Australian grain-fed cuts performed relatively well in the retail sector supported by sustained supplies.

Relatively high average wholesale prices, especially for grass-fed frozen Australian beef and grain-fed frozen U.S. beef, softened demand for beef across the board in the food service and institutional sectors, which further diversified menu offerings to include more poultry and pork options. Japan's relatively large volume of imported frozen beef stocks carried through to the fall of 2015, tamping demand for additional purchases of Australian frozen trimmings (by major hamburger-centric quick-serve chains that have yet to fully recover from major food safety scandals that occurred in the summer of 2014), of U.S. frozen short plate (by major beef bowl chains), and Australian grass-fed, frozen and U.S. grain-fed, frozen lower value cuts.

According to the Japan Food Service Association, overall food service sales and the total number of outlets were mostly unchanged from 2014, while customer numbers fell three percent, due partly to higher menu prices (inclusive of the eight percent national consumption tax). While western-style quick-serve chains (including major hamburger chains) were hardest hit, with sales falling eight percent and outlet numbers down nine percent, sales at the hamburger chain at the center of the 2014 food safety scandals reportedly began to recover at the end of 2015. The 'yakiniku' (Korean-style barbecue) segment was a bright spot in the food service firmament in 2015, with sales growing by nine percent on higher customer (up four percent) and outlet (up three percent) numbers. Japanese 'yakiniku' chains typically utilize both domestic and imported chilled or frozen short plates, chuck short rib, short rib and edible offals (mostly tongue and skirt meat).

Total Imports Dip in 2015

Japan's total beef imports fell for a second straight year in 2015, down four percent to 708,000 MT. Combined imports of chilled and frozen cuts (including a fairly small volume of whole carcasses, halves, quarters, and bone-in cuts) were down five percent from 2014 to 691,580 MT (Chilled Cuts at 286,534 MT, down seven percent; Frozen Cuts at 405,044 MT, down three percent), with the remainder attributed to imports of prepared and processed beef products.

In 2015, Australia gained market share at the expense of the United States in Japan's relatively stagnant beef market, driven largely by a relatively stronger dollar, persistently high Australian slaughter and exportable supplies, as well as the lower import duties for Australian beef following implementation of the JAEPA. Australia tallied a 62 percent share (up five percentage points from 2014) of Japan's total imports of chilled cuts in 2015, at 178,786 MT, growing two percent on additional demand for Australian chilled, grain-fed beef to replace short supplies of higher priced domestic beef in retail cases (see Note 3). The U.S. share of the chilled cuts segment fell five percentage points to 33 percent, as import volumes fell sharply, down 19 percent to 94,039 MT, driven by high prices, a strong dollar and the significant impact of the West coast port labor dispute on chilled shipments in the first quarter of 2015.

Note 3: According to Meat & Livestock Australia (MLA), Japanese imports of Australian chilled, grain-fed cuts (mostly short-fed cattle with around 100 days on feed) grew six percent over 2014, accounting for 33 percent of total imports from Australia, up three percentage points from 2014.

Australia also claimed a 56 percent share (up four percentage points from 2014) of total imports of frozen cuts, growing four percent over 2014 to 225,226 MT. Per MLA, solid demand for frozen, grain-fed cuts (other than trimmings) from family restaurants and hotels more than offset reduced demand for frozen, grass-fed cuts (mostly trimmings). The U.S. share of the frozen cut market was 34 percent, with volume falling seven percent from 2014 to 136,969 MT (largely plate cuts for 'yakiniku' and beef bowl chains).

Note 4: MLA also indicated that Australian frozen, grass-fed exports to Japan were 10 percent lower in 2015, partially due to sustained strong U.S. demand for Australian trimmings, which reduced exportable supplies and pushed up price offers for Japan.

2016 Market Outlook

Japanese Production Falls Further; U.S. Beef to Reclaim Lost Market Share

Beef will continue to face stiff competition for consumer spending in the retail case and on the food service menu, as forecasts project ample supplies of and lower prices for pork and poultry (broiler meat) in the Japanese market in 2016. Japanese consumer buying power remains constrained, reinforcing the conditions pushing consumers towards lower-priced animal protein options.

Meanwhile, Japan's total domestic cattle slaughter in 2016 is projected to fall for a fourth consecutive year (down one percent) to 1.105 million head (or total beef production of 475,000 MT), primarily on continued calf production shortfalls dating back to 2013 – 2014 (see Note 5).

Note 5: According to the National Livestock Improvement Center's national cattle ID database, the total number of cattle being raised as of January 31, 2016, was 3,823,921 head, down one percent year-on-year.

Breakdown by major breeds were:

  • Black Wagyu: 1,556,232 head, down two percent,
  • F-1 Cross breed: 513,611 head, up five percent
  • Holstein steer: 325,114, head, down five percent
  • Holstein cow/heifer: 1,360,350 head, down two percent

The above data suggests that dairy farmers are responding to high feeder calf prices by increasing the use of wagyu genetics in their breeding programs. Wagyu feeder calf price growth has also supported a growing, though nascent, trend to implant full-blood wagyu embryos in Holstein cows in Hokkaido, Japan's major dairy producing region.

Total imports in 2016 are projected up two percent over 2015 to 725,000 MT (chilled and frozen combined beef cuts, up two percent to 708,000 MT; prepared and processed products unchanged at approximately 16,000 MT) to fill a continued shortfall in Japan's domestic beef supply. A modest recovery in the U.S. cattle inventory as of January 1, 2016 (up three percent to 91.988 million head, of which beef cattle was up four percent to 30.331 million head), combined with widely forecasted decreases in 2016 Australian beef production, point towards improved prospects for U.S. beef in the Japanese market in 2016. MLA's recent long-term forecast projects Australia's total cattle inventory to decline by five percent from 2015 levels, driving slaughter down 16 percent to 7.6 million head (or total beef production of 2.212 million MT, down 13 percent on increased slaughter weights). Within the overall decline, sources forecast a more modest contraction in grain-fed cattle inventory numbers, down six percent to 900,000 head by the end of 2016.

Post projects Japan's imports of U.S. beef to grow by 12 percent, to 259,000 MT, as imports from Australia are projected to fall by seven percent to 378,000 MT, resulting in overall market shares of 36 and 52 percent respectively. U.S. chilled cuts are expected to lead the expansion, replacing a percentage of Australian chilled, grain-fed cuts on retail shelves. Minor suppliers like Mexico and Canada may also increase their market share in 2016, though absolute import volumes from these two countries should remain relatively small.

Pork

Animal Numbers, Swine

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Total Beginning Stocks

9537

9537

9440

9440

9590

9600

Sow Beginning Stocks

885

885

890

890

895

895

Production (Pig Crop)

17050

17050

17150

17150

17200

17250

Total Imports

1

1

0

1

0

1

Total Supply

26588

26588

26590

26591

26790

26851

Total Exports

0

0

0

0

0

0

Sow Slaughter

0

0

0

0

0

0

Other Slaughter

16203

16202

16270

16105

16600

16450

Total Slaughter

16203

16202

16270

16105

16600

16450

Loss

945

946

730

886

580

711

Ending Inventories

9440

9440

9590

9600

9610

9690

Total Distribution

26588

26588

26590

26591

26790

26851

(1000 HEAD)

Meat, Swine

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Slaughter (Reference)

16203

16202

16270

16105

16600

16450

Beginning Stocks

195

195

246

246

239

200

Production

1264

1264

1270

1254

1290

1280

Total Imports

1332

1332

1270

1269

1250

1300

Total Supply

2791

2791

2786

2769

2779

2780

Total Exports

2

2

2

2

2

2

Human Dom. Consumption

2543

2543

2545

2567

2540

2570

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

2543

2543

2545

2567

2540

2570

Ending Stocks

246

246

239

200

237

208

Total Distribution

2791

2791

2786

2769

2779

2780

(1000 HEAD) ,(1000 MT CWE)

2015 Market Situation Update Summary and Outlook

Japanese Pork Production Slightly Lowered on Delayed Recovery

Lingering impacts of the 2014 PEDv outbreaks and piglet losses delayed the recovery of Japan's domestic pork production in the second half of 2015. As sporadic outbreaks persisted (see Note 6) through the third quarter of 2015, monthly domestic hog slaughter remained lower year-on-year. It wasn't until the fourth quarter of 2015, that national production began to recover (up four percent year-over-year). Consequently, Japan's total hog slaughter in 2015 fell slightly from the previous year to 16.015 million head (representing total pork production of 1.254 million MT).

Note 6: Japan's reported cases of PEDv and subsequent piglet losses peaked in the fall of 2014. According to MAFF's monitoring record, for the period between October 1, 2013 and August 31, 2014, there were 817 reported PEDv outbreaks in 38 of 47 prefectures, with 419,852 out of 1,289,090 total infected animals dying. For the period between September 1, 2014 and August 31, 2015, there were 233 reported PEDv outbreaks in 28 prefectures, in which 71,211 head of out of 299,697 total infected animals dying. For the period between September 1, 2015 and January 24, 2016, there were 50 reported PEDv outbreaks in 13 prefectures, in which 3,585 head of out of 28,300 total infected animals died.

Total Consumption Lowered Marginally on Processed Products Market Stagnation

As domestic chilled pork remained in tight supply and relatively high-priced through the first three quarters of 2015, imported chilled pork made new inroads in the Japanese market, particularly the expansion of U.S. and Canadian loins in the retail sector. Combined with persistently high beef prices, average household pork consumption grew modestly in 2015, up three percent over 2014.

According to trade sources, increased consumption of 'tonkatsu' (fried pork cutlet) in food service and home meal replacement (e.g., convenience stores, prepared food sections in grocery outlets, etc.) outlets supported higher total pork utilization in those highly competitive segments, where lower-priced broiler meat products have shown significant growth in recent years. Those same sources report that, faced with tight domestic supplies in 2015, tonkatsu purveyors increasingly turned to imported, chilled cuts to distinguish their products (both in quality and taste) from products manufactured with imported, frozen cuts.

However, overall sales of processed pork products, which mainly rely on imported, frozen pork cuts and seasoned ground pork as raw materials, continued to stagnate in 2015, especially in the retail segment. Media reports on the World Health Organization's (WHO) health warning regarding increased intestinal cancer risks from excessive consumption of processed meat products (announced in October 2015) was timed particularly badly for processed pork producers, as it cast a shadow over the important year-end gift season in Japan. Despite statements from the Japanese Health Authority pronouncing the safety of processed meat products, media coverage of the WHO reportedly drove declines of processed meat product sales in the fourth quarter of 2015 (see Note 7 and 8).

Note 7: MAFF estimates sector utilization shares of Japan's 2014 household, processing, and other (food service and institutional uses) in Japanese pork consumption at 48 percent, 28 percent, and 24 percent respectively each (2015 shares are scheduled to be announced later in 2016).

Note 8: According to data published by the Japan Ham and Sausage Processors Cooperative Association, Japan's 2015 combined total production of processed pork products was at 532,793 MT, down one percent from 2014 (ham down one percent to 104,827 MT; sausage down two percent to 306,743 MT; bacon up two percent to 88,552 MT; and pressed ham up seven percent to 32,671 MT). The total carcass equivalent volume of raw material pork cuts (mostly frozen) used to manufacture processed pork products was 487,217 MT (imported cuts up two percent to 386,526 MT; domestic cuts down five percent to 100,697 MT), while imports of seasoned ground pork (used mostly for relatively low-priced prepared and processed products) was down eight percent at 129,879 MT.

Thus, stagnation in the processing sector offset positive growth in other sectors, limiting Japan's total pork consumption growth in 2015, up only slightly from 2014 to 2.567 million MT.

2015 Total Pork Imports Lowered, Frozen Decline More Than Offsets Chilled Growth

Japan's total pork and pork product imports fell five percent from 2014 to 1.269 million MT, primarily driven by contraction in the processed pork products segment and the unwinding of significant 2015 year-beginning stocks, which were up 26 percent over 2014 at 246,000 MT. Imports of pork cuts (including a very low volume of bone-in carcasses) fell five percent to 1.027 million MT. Prepared products (mostly North American and some Chinese seasoned ground pork) also fell by five percent to 242,000 MT.

Imports of chilled pork cuts, which mainly supply the Japanese retail market for in-home consumption, rose seven percent over 2014 to 418,869 MT, driven largely by tighter than anticipated supplies of domestic chilled pork and an improved North American supply situation as producers put PEDv behind them. According to trade sources, the greater utilization of imported chilled pork by food service outlets created significant additional demand and could develop into a longer-term trend even after Japanese domestic pork production recovers in 2016.

Despite losing much of the first half of 2015 to the West Coast port labor dispute, the United States posted a substantial recovery in the latter half of 2015, exporting a total of 244,178 MT of chilled pork to Japan in 2015, nearly on par with 2014 exports. While still the largest supplier of chilled pork to Japan, the United States saw its market share fall five percentage points to 58 percent in 2015. Meanwhile, Canada, unaffected by the port labor dispute, was able to expand its market share by five percentage points, reaching 157,461 MT (a 20 percent increase from 2014).

Japan's 2015 imports of frozen pork cuts, mainly used to manufacture processed/prepared pork products and to a lesser extent by the food service sector, were significantly lower than projected, down 12 percent to 608,976 MT. The decline was attributable to a significant drop in imports from the EU (down 14 percent to 350,966 MT) and from the United States (down 19 percent to 93,140 MT), in part due to the large amount of frozen pork cut stocks (mainly of EU origin) carried over from 2014 and sluggish sales of processed pork products in 2015 (see Note 4). Japan's imports of prepared pork products were down five percent to 241,697 MT, including imports of U.S. seasoned ground pork, which fell eight percent to 146,259 MT, affected by weak demand for lower value sausages.

Note 9: Russia's wide-ranging import bans on North American and EU food products (in place since August 2014 and currently scheduled to extend through August 2016) have created sizable exportable supplies of EU pork, a large portion of which entered Asian markets in 2015, especially China. China and Korea were reportedly the leading EU pork export markets in 2015.

2016 Market Outlook

Higher Japanese Production Should Increase Competition with Imported Chilled Pork

Despite projections that total pork consumption will be flat in 2016, Japanese domestic pork should recover market share lost to imported chilled pork in 2015 as Japanese production recovers from PEDv and consumers find more Japanese chilled pork on retail shelves. Japanese consumer preference for domestically produced products remains strong, a recent survey the Japan Finance Corporation confirmed that 77 percent of respondents consider whether or not their food is “domestically produced" when making purchasing decisions. Food service and institutional segments of the market have traditionally been more open to imported products, in part because they are not required to publicize country of origin information for their ingredients. Post projects Japan's total pork consumption in 2016 to remain unchanged from 2015 at around 2.570 million MT.

With ample supplies of pork on the world market and the expected rebound in Japanese production, downward pressures on pork prices throughout 2016 should support modest growth in household consumption. The food service and home meal replacement sectors are projected to increase utilization of lower-priced, imported pork and poultry in 2016, as pork and broiler meat compete for greater shares of consumer spending overall.

The recovery in Japanese hog slaughter that began in the last quarter of 2015, appears likely to continue, pushing Post projections for total slaughter in 2016 up two percent to 16.450 million head (representing 1.28 million MT of pork). According to MAFF's February 29 forecast for live hog shipments over the first six months of 2016, the Government of Japan expects a four percent increase in hog slaughter, compared to the same period in 2015, as the swine inventory fully recovers from PEDv; year-on-year increases will taper in the second half of 2016, reflecting the recovery that began in earnest in late 2015. Post projections for total slaughter in 2016 are still below pre-PEDv levels (including 2013 when the virus first appeared in Japanese hogs), suggesting that Japan's domestic hog production could increase further in 2017, provided that sow recovery continues, feed prices remain stable, and retail demand doesn't slacken.

The projected increase in the supply of Japanese chilled pork in 2016 should place downward pressure on domestic retail pork prices, narrowing the price gap between domestic and imported chilled cuts (wholesale price discounts for U.S. chilled loins in Japan ranged between 33 and 47 percent in 2015) and driving further retail competition with U.S. and Canadian-origin chilled pork (maintaining approximately 20 and 10 percent retail market shares, respectively, in 2015). Though Japanese prepared food producers have recently shown greater interest in imported chilled pork (though still limited in quantity), increased supplies of Japanese domestic pork are expected to drive slower total chilled pork import growth in 2016. As relatively large year beginning stocks were drawn down in 2015 (down 16 percent at the beginning of 2016 to 200,000 MT), processors are expected to replenish stocks in 2016, pushing 2017 year beginning stocks four percent higher to 208,000 MT.

As Japanese ham and sausage manufacturers are expected to replenish stocks, imports of frozen pork should post a modest recovery in 2016. Competition in the frozen pork segment is expected to remain fierce, as continued Russian import bans on North American and EU-origin agricultural products, scheduled to remain in place through August 2016, amplify the effects of expanding EU production on importable supplies for Japanese buyers.

Post projects Japan's 2016 total pork imports to rise by two percent to 1.300 million MT from the previous year. Combined total imports of chilled and frozen cuts (including a very low volume of bone-in carcasses) are projected up three percent to 1.053 million MT, as recovery of frozen raw material pork imports drives overall volumes higher. As U.S. supplies of frozen picnics and shoulder cuts (the primary raw materials for Japanese sausage and ground pork products) are expected to be ample and relatively lower priced in 2016, Japan's import demand for seasoned ground pork is projected to remain lower, at the 2015 level of 247,000 MT.

Australian Beef Exports to Japan

Unit: Metric Ton (Shipped Weight Basis)

Calendar Year

2012

2013

2014

2014

2014

2015

2015

2015

Jan/Dec

Jan/Dec

Jan/Dec

% chg.

Share

% chg.

Share

Chilled Beef

129,230

115,766

126,987

10%

100%

127,633

1%

100%

Grass

43,510

39,668

37,762

-5%

30%

32,617

-14%

26%

Grain fed

85,720

76,098

89,225

17%

70%

95,016

6%

74%

Frozen Beef

179,310

173,028

166,793

-4%

100%

157,591

-6%

100%

Grass

140,929

132,744

125,371

-6%

75%

112,922

-10%

72%

Grain fed

38,381

40,284

41,421

3%

25%

44,668

8%

28%

TOTAL

308,540

288,795

293,779

2%

100%

285,224

-3%

100%

Grass

184,439

172,412

163,133

-5%

56%

145,540

-11%

51%

Grain fed

124,101

116,382

130,646

12%

44%

139,684

7%

49%

Note: With the January 15, 2015 implementation of the Japan-Australia Economic Partnership Agreement (JAEPA), Japan adjusted the beef safeguard trigger mechanism, such that the beef safeguard is triggered only if the following two conditions are met:

1. When cumulative quarterly imports for chilled and for frozen beef (each calculated separately) from the world exceed 117 percent of the previous year's imports

2. When cumulative quarterly imports for chilled and for frozen beef (each calculated separately) from all non-EPA partner countries (i.e., imports from the United States, Canada and New Zealand plus imports from EPA partner countries in excess of EPA beef TRQ limits) exceed 117 percent of the previous year's imports

Exceeding the trigger level for only one of the above conditions will not trigger the beef safeguard.

In the event that the trigger levels for both conditions are exceeded, then the import duty for non-EPA trade partners would revert to 50 percent (from the current 38.5 percent), while the import duty for EPA trade partners would climb to 38.5 percent. Prior to this adjustment, the so-called special safeguard (SSG) trigger level was calculated from imports from all trade partners.

Tariff reductions for Australian chilled and frozen beef were substantially front-loaded in the first two years of the agreement, after which the annual tariff reduction rate will slow considerably (roughly 0.6 percent per annum for chilled beef; roughly 0.3 percent per annum for frozen beef from years 3-12 and 0.9 percent per annum for years 13-18).

Japanese Total Beef Import, Chilled and Frozen Cuts Combined

Unit: Metric Ton (Customs Clearance Basis)

Partner Country

Quantity

% Share

% Change

2015/2014

2013

2014

2015

2013

2014

2015

World

534,255

518,708

493,986

100%

100%

100%

-5%

Australia

285,923

280,842

288,581

54%

54%

58%

3%

United States

186,056

188,675

165,427

35%

36%

33%

-12%

New Zealand

29,429

24,112

16,652

6%

5%

3%

-31%

Mexico

19,571

10,369

11,840

4%

2%

2%

14%

Canada

12,691

14,104

9,941

2%

3%

2%

-30%

Others

585

606

1,545

0%

0%

0%

155%

Japanese Total Pork Import, Chilled and Frozen Cuts Combined

Unit: Metric Ton (Customs Clearance Basis)

Quantity

% Share

% Change

2015/2014

Partner Country

2013

2014

2015

2013

2014

2015

World

738,451

829,382

790,650

100%

100%

100%

-5%

United States

281,144

276,033

259,475

38%

33%

33%

-6%

EU 28

225,530

312,318

270,063

31%

38%

34%

-14%

Canada

142,241

148,016

165,828

19%

18%

21%

12%

Mexico

59,379

63,041

69,642

8%

8%

9%

10%

Chile

29,522

26,847

22,412

4%

3%

3%

-17%

Brazil

24

2,447

2,701

0%

0%

0%

10%

Others

611

680

529

0%

0%

0%

-22%