Cattle PS&D

Animal Numbers, Cattle

2013

2014

2015

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Japan

USDA Official

New post

USDA Official

New post

USDA Official

New post

Total Cattle Beg. Stks

4,065

0

3,962

3,962

3,840

3,850

Dairy Cows Beg. Stocks

798

798

773

773

765

765

Beef Cows Beg. Stocks

618

619

595

595

590

590

Production (Calf Crop)

1,237

1,237

1,195

1,195

1,185

1,185

Total Imports

12

12

10

11

10

10

Total Supply

5,314

1,249

5,167

5,168

5,035

5,045

Total Exports

0

0

0

0

0

0

Cow Slaughter

556

556

545

534

530

520

Calf Slaughter

7

7

7

7

7

7

Other Slaughter

622

622

605

616

595

590

Total Slaughter

1,185

1,185

1,157

1,157

1,132

1,117

Loss

167

167

170

161

163

168

Ending Inventories

3,962

3,962

3,840

3,850

3,740

3,760

Total Distribution

5,314

5,314

5,167

5,168

5,035

5,045

1000 HEAD, PERCENT

Beef and Veal PS&D

Meat, Beef and Veal

2013

2014

2015

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Japan

USDA Official

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USDA Official

New post

USDA Official

New post

Slaughter (Reference)

1,185

1,185

1,157

1,157

1,132

1,117

Beginning Stocks

136

0

171

171

180

185

Production

508

508

495

502

482

485

Total Imports

760

760

750

739

740

727

Total Supply

1,404

1,268

1,416

1,412

1,402

1,397

Total Exports

1

1

1

1

2

2

Human Dom. Consumption

1,232

1,232

1,235

1,226

1,230

1,235

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

1,232

1,232

1,235

1,226

1,230

1,235

Ending Stocks

171

171

180

185

170

160

Total Distribution

1,404

1,404

1,416

1,412

1,402

1,397

1000 HEAD, 1000 MT CWE, PERCENT, PEOPLE, KG

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

Processed/Prepared Beef Products – 1.79

Beef

2014 Production, Market and Trade Situation Summary:

Japan's total beef consumption remained relatively flat in 2014, (down one half of one percent to 1.226 million MT), despite significant price increases for domestic and imported beef products in 2014. Total beef supplies remained tight for the year, with total imports down moderately to 739,000 MT and total production down slightly to 502,000 MT. On lower consumption and higher procurement costs, which have further narrowed retail and food service profit margins on beef, 2014 year ending stocks rose six percent to 185,000 MT.

Lower Domestic Cattle Slaughter Reduced Production in 2014

Following the recent trend, Japan's 2014 total domestic cattle slaughter continued to decline modestly in 2014 to 1.157 million head. Increases in average carcass weights (up 1.2 percent at 434 kg) were unable to offset the decline in total slaughter, driving Japanese beef production down one percent to 502,000 MT. The breakdown by major breeds was: Wagyu heifer/cow (288,000 head, down six percent), Holstein/F-1 heifer/cow (246,000 head, down two percent), Holstein/F1 steers (344,000 head, unchanged), and Wagyu steer (261,000 head, down two percent). The noticeable reduction in Wagyu cow slaughter suggests a modicum of herd rebuilding in response to fairly high prices for Wagyu feeder calves over the past two years.

High Global Prices Pushed Total 2014 Imports Lower

Japan's total imports of beef and prepared products were moderately lower in 2014 at 739,000 MT [beef cuts (inclusive of a very low volume of bone-in carcasses) down three percent at 726,191 MT; prepared products unchanged at 12,500 MT]. Lower total imports in 2014 were primarily driven by reduced imports of beef cuts from Australia (393,179 MT, down two percent), New Zealand (33,757 MT, down 18 percent) and Mexico (14,517 MT, down 47 percent).

The rapid import growth of U.S. beef that followed the February 2013 market access expansion, slowed considerably in 2014 as imports of U.S. beef were up only slightly above the 2013 level at 264,145 MT. According to market sources, high U.S. price offers and the continued weakening of the yen through 2014, allowed price competitive Australian grain fed chilled cuts to claw back market share across the board (loins, chuck and clod, and brisket/plates). Japan's 2014 imports of Australian chilled beef cuts were up eight percent to 175,640 MT, while U.S. chilled cuts were down three percent at 116, 939 MT. In spite of the high offer prices, imports of U.S. frozen cuts were up five percent at 147,206 MT, though just barely offsetting lower chilled cut volumes. Continued strong demand from barbecue and beef bowl chains drove much of this increase, with U.S. plate cuts alone (mostly short plate) up 14 percent and accounting for 85 percent of the U.S. frozen cuts total, despite the annual average CIF price climbing 11 percent from 2013 to $4,232 USD per MT. Strong U.S. domestic demand for beef and historic low cattle inventories resulted in record U.S. imports of Australian frozen grass fed cow trimmings, tightening Australian exportable supplies and driving up prices for Australian beef.

The United States and Australia continued to be the two major suppliers of beef to Japan, accounting for 36 percent and 54 percent respectively of Japan's total beef cut imports in 2014.

2014 Beef Consumption Growth Stalled by High Market Prices

Tight domestic and global beef supplies, coupled with the weakening of the yen and the 2014 consumption tax hike, were largely responsible for average market prices for domestic and imported beef rising well above 2013 levels throughout 2014. On average, Japanese consumers spent eight percent more on retail chilled and fresh cuts in 2014, despite carrying four percent less beef home from the store. As domestic beef dominates retail shelves, this suggests that a large number of consumers were willing to trade down the value scale from high-priced domestic beef to lower priced imported beef cuts. In fact, while Japanese consumers spent more on each of the three major livestock proteins (beef, pork, and poultry), only poultry consumption volumes rose in 2014. The relatively low price of domestic chicken breast meat compared to higher priced chicken leg meat as well as lower-priced imported pork and beef cuts likely supported the moderate household chicken consumption growth recorded in 2014 at the expense of imported proteins.

Food service demand for imported beef cuts in 2014 was reportedly slow, as the industry was compelled to raise menu prices in response to increased procurement costs (inclusive of the consumption tax hike) for imported beef and other raw material foods. Japanese beef bowl and Korean-style barbecue chains bucked this trend with 2014 all store sales reportedly rising five to eight percent above 2013 levels on continued solid demand and relatively abundant supplies of U.S. frozen short plate cuts. Western-style fast food chains were on the opposite end of the spectrum in 2014, showing seven percent sales declines on average, in the wake of a series of widely publicized food safety incidents in the latter half of 2014. As a result, hamburger sales fell nationally in 2014, reducing Japan's import demand for already high priced Australian frozen trimmings.

2015 Market Outlook

Total Beef Production to Fall in 2015 on Lower Cattle Numbers and Lower Slaughter

Persistent calf production shortfalls from 2011 – 2013 should continue to suppress Japan's total domestic cattle slaughter in 2015. Post projects slaughter down roughly four percent from 2014 at 1.117 million head (or 485,000 MT). (See Note 1.) As domestic supplies grow even tighter in 2015, average market prices for domestic beef are expected to exceed 2014 levels, dampening prospects for household consumption recovery in 2015.

Note 1: December data from the national cattle ID system, which is a close approximation for the following year's beginning inventory numbers (scheduled to be published in July 2015), puts the total number of cattle raised in Japan at around 3.858 million head, down three percent from 2014 and suggestive of a continuing decline in Japan's cattle inventory in 2015. Breakdown by major breeds were: Black Wagyu (steers and cows/heifers), down three percent at 1.57 million head, F-1 cross breed (steers and heifers), down slightly at 489,000 head, Holstein steer, down six percent at 342,000 head, and Holstein cows/heifers at 1,386 million head, down two percent.

Total Consumption Flat in 2015 on High Market Prices and Continued Tight Supplies

Total beef consumption is projected to fall slightly in 2015 to around 1.235 million MT, as high Japanese market prices for beef are anticipated to continue throughout the year. While the U.S. West Coast port labor dispute was substantively resolved in late February 2015, the negative impact on U.S. exports is expected to suppress U.S. chilled beef import volumes through the first half of 2015. While overall U.S. import volumes received a modest fillip in early 2015 from the delayed arrival of frozen beef shipments originally scheduled to arrive in late 2014, supplies of Australian chilled beef largely filled the gap left by the absence of U.S. chilled supplies. As Japan's overall food prices are expected to rise on increased procurement costs (resulting from the high share of imported foods and a relatively weak yen), Japan's beef consumption in 2015 is unlikely to grow as beef prices remain high relative to other protein options.

Tight Exportable Supplies and High Market Prices to Reduce Total Imports in 2015

Post projects a moderate decline for Japan's total beef imports in 2015, down two percent to 727,000 MT (beef cuts (inclusive of a very low volume of bone-in carcasses) down two percent to 714,000 MT; and prepared products unchanged at 13,000 MT) on high price offers from both the United States and Australia, as cattle slaughter and beef production in both countries is projected to fall in 2015. The continued high price outlook for imported beef cuts from these two dominant suppliers may drive consumers towards less expensive alternatives (chicken, pork, and some seafood) at both retail and food service outlets in 2015.

After two successive years of record high output, Australian beef production is expected to fall in 2015 as drought driven herd liquidation measures taper off. Tighter Australian supplies and continued solid U.S. demand for Australian frozen trimmings in 2015 could reduce the impact of the duty advantages that Australian beef imports enjoy over U.S. beef (ten percentage points lower for frozen cuts and seven percentage points lower for chilled cuts, as of April 1, 2015). While expected higher price offers for Australian beef trimmings could further dim the outlook for fast foods in Japan, it could also open the door to innovative beef product imports. Anticipated increases in Australian grain fed chilled cuts price offers may create opportunity for expanded imports of U.S. grain fed chilled cuts as the price gap narrows.

Note: With the January 15, 2015 implementation of the Japan-Australia Economic Partnership Agreement (JAEPA), GOJ 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, AND

2. When cumulative quarterly imports for chilled and for frozen beef (each calculated separately) from the sum of TRQ imports made under EPAs with Australia, Mexico and Chile exceed 117 percent of the previous year's imports. For JFY 2014, third and fourth quarter trigger levels are calculated based on actual imports of JFY 2013 from Australia, plus imports under EPA TRQs for Mexico and Chile.

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.

The table below represents the tariff reduction and safeguard trigger levels for Australian beef under the JAEPA. 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, and roughly 0.3 percent per annum for frozen beef from years 3-12 and 0.9 percent per annum for years 13-18).

Tariff Reduction Schedule

Remark

Frozen Beef

JFY (April - March)

JFY 2014

JFY 2015

3

4

5

10

11-17

18

(50% reduction after 18 Years)

Tariff Rate

38.5% (Bound Rate)

30.5

28.5

27.5

27.2

26.9

25.6

~

19.5

Safeguard Trigger Level (1,000 Metric Ton)

195

210

The level to be re-negotiated after 10 years.

Chilled Beef

JFY (April - March)

JFY 2014

JFY 2015

3

4

5

10

11-14

15

Tariff Rate

38.5% (Bound Rate)

32.5

31.5

30.5

29.9

29.3

26.4

~

23.5

(40% reduction after 15 years)

Safeguard Trigger Level (1,000 Metric Ton)

130

145

The level to be re-negotiated after 10 years.

Source: MAFF Meat and Egg Division

Monthly Ending Beef Stock Estimate YTD

Unit: Metric Ton (CWE Basis)

2012

2013

% Chg.

2014

% Chg.

Jan.

129,254

128,838

-0%

166,335

29%

Feb.

121,915

120,344

-1%

155,893

30%

Mar.

111,626

119,699

7%

150,046

25%

Apr.

107,579

117,029

9%

149,295

28%

May

112,944

135,064

20%

145,508

8%

Jun.

124,592

145,328

17%

154,976

7%

Jul.

139,138

172,175

24%

161,944

-6%

Aug.

148,562

187,239

26%

171,396

-8%

Sept..

154,256

182,398

18%

181,558

-0%

Oct.

152,671

186,949

22%

188,727

1%

Nov.

149,373

183,560

23%

191,113

4%

Dec.

135,492

170,537

26%

185,395

9%

Source: ALIC Monthly Statistics

Japanese Total Beef Import, Chilled and Frozen Combined/CIF Price YTD

Year To Date: January - December

Partner Country

Quantity (Metric Ton, Customs Clearance Basis)

Share (%)

% Change

2012

2013

2014

2013

2014

2014/2013

Jan./Dec.

Jan./Dec.

Jan./Dec.

Jan./Dec.

Jan./Dec.

Jan./Dec.

World

514,186

534,255

518,708

100%

100%

-3%

Australia

318,400

285,923

280,842

54%

54%

-2%

United States

131,921

186,056

188,675

35%

36%

1%

New Zealand

31,412

29,429

24,112

6%

5%

-18%

Canada

11,468

12,691

14,104

2%

3%

11%

Mexico

20,450

19,571

10,369

4%

2%

-47%

Others

535

585

606

0%

0%

4%

Source of Data: Global Trade Atlas (Japan Ministry of Finance)

Japanese Beef Import, Prepared and Processed Products/CIF YTD

Partner Country

Quantity (Metric Ton, Customs Clearance Basis)

Share (%)

% Change

2014/2013

Jan./Dec.

2012

2013

2014

2013

2014

Jan./Dec.

Jan./Dec.

Jan./Dec.

Jan./Dec.

Jan./Dec.

World

9,548

6,503

7,272

100%

100%

12%

Australia

5,534

4,847

5,279

75%

73%

9%

China

1,983

1,148

1,066

18%

15%

-7%

New Zealand

431

256

345

4%

5%

35%

Others

1,600

252

582

4%

8%

131%

Source of Data: Global Trade Atlas (Japan Ministry of Finance)

Partner Country

Unit Value(United States Dollars/Metric Ton)

% Change

2014/2013

Jan./Dec.

2012

2013

2014

Jan./Dec.

Jan./Dec.

Jan./Dec.

World

7,643

6,719

6,785

1%

Australia

6,468

5,678

5,577

-2%

China

8,072

8,426

7,599

-10%

Mexico

8,091

7,196

23,790

231%

New Zealand

16,158

13,054

10,888

-17%

Source of Data: Global Trade Atlas (Japan Ministry of Finance)

Japanese Beef Import, Edible Meat and Offal/CIF YTD

Partner Country

Quantity (Metric Ton, Customs Clearance Basis)

Share (%)

% Change

2014/2013

Jan./Dec.

2012

2013

2014

2013

2014

Jan./Dec.

Jan./Dec.

Jan./Dec.

Jan./Dec.

Jan./Dec.

World

43,325

59,164

61,343

100%

100%

4%

United States

16,358

30,794

32,949

52%

54%

7%

Australia

17,890

19,246

19,554

33%

32%

2%

New Zealand

3,810

3,900

4,369

7%

7%

12%

Canada

1,668

2,469

2,307

4%

4%

-7%

Mexico

2,645

1,997

1,447

3%

2%

-28%

Others

954

758

717

1%

1%

-5%

Source of Data: Global Trade Atlas (Japan Ministry of Finance)

Partner Country

Unit Value(United States Dollars/Metric Ton)

% Change

2014/2013

Jan./Dec.

2012

2013

2014

Jan./Dec.

Jan./Dec.

Jan./Dec.

World

10,128

8,977

9,310

4%

United States

12,170

10,229

10,763

5%

Australia

9,235

7,710

7,593

-2%

New Zealand

8,064

6,925

6,803

-2%

Canada

10,633

8,445

8,979

6%

Mexico

7,203

7,201

8,373

16%

Source of Data: Global Trade Atlas (Japan Ministry of Finance)