U.S. farmers, poised to ship record beef cargoes for a second straight year, may get a further boost as Japan, once their biggest overseas customer, considers easing trade curbs imposed after an outbreak of mad-cow disease.
Sales to Japan may jump 43 percent to 202,100 metric tons, the most since 2003, should the restrictions end in the second quarter, Global AgriTrends, a Denver-based research company, estimates. The government may raise the age limit on cattle slaughtered for beef to 30 months from 20 months around the middle of the year, according to Keiko Yamaguchi, executive director of consumer equity research at Nomura Securities Co. in Tokyo.
Increasing sales to Japan would help shore up farm income at a time when the U.S. Department of Agriculture is forecasting a drop in wheat, corn and soybean exports. Cattle futures rose to a record five times this month and traders anticipate higher prices through at least April 2013 after the herd shrank to the smallest since 1973 as of July 1, Chicago Mercantile Exchange data show. A drought in the southern U.S. last year and rising feed costs prompted ranchers to cull livestock.
“We go to 30 months of age again, all of a sudden most of our cattle are eligible,” said Brett Stuart, the co-founder of Global AgriTrends and a former economist for the U.S. Meat Export Federation who was raised on a cattle ranch in Utah. “We go from a restriction that probably was only allowing 30, 35 percent of U.S. cattle to provide cuts for Japan and we take that percentage up to roughly 90, 95 percent.”
Goldman Sachs
Cattle rose 5.7 percent to $1.2835 a pound on the CME this year, beating the 2.1 percent gain in the Standard & Poor’s GSCI gauge of 24 commodities. The MSCI All-Country World Index (MXWD) of equities advanced 5.2 percent as Treasuries lost 0.3 percent, a Bank of America Corp. index shows.
Futures for delivery in April 2013 closed at $1.323 on Jan. 20. Prices may reach $1.30 in three months, Goldman Sachs Group Inc. said in a Jan. 13 report. The most widely held option confers the right to buy at $1.30 by April, CME data show. Cattle may reach $1.38 by October, said Rich Nelson, the director of research at McHenry, Illinois-based Allendale Inc., who has been studying agricultural markets since 1997.
Japanese imports of U.S. beef shrank to almost zero in 2004, from 298,039 tons in 2003, after the country joined South Korea and China in banning U.S. supply after the discovery of bovine spongiform encephalopathy. The brain-wasting disease was found in three U.S. cows, the last of them in 2006. The U.K. found more than 184,000 cases since 1987, according to the Paris-based World Organisation for Animal Health, or OIE.
