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Cattle at Beatty Canyon Ranch. (Colorado Beef Council)

A new trade deal will make it easier for Colorado ranchers to develop new markets in Japan without risking increased tariffs on beef.

Japan is Colorado’s fourth largest trading partner for beef and the deal signed earlier this month by U.S. Trade Representative Katherine Tai raises the threshold in sales that triggers an increase in tariffs. 

The move comes as U.S. beef exports reached new records during the pandemic. In 2021, the U.S. was the top beef exporting country in the world, shipping about $10.58 billion in meat to other countries, about 25% of which went to Japan, U.S. Meat Federation data shows. 

Colorado alone exported $171 million worth of beef to Japan in 2021, up about 23% from 2020. 

The revision of the trade agreement comes on the heels of beef producers’ worries that the U.S. would be at a trade disadvantage, since competitor countries enjoyed lower tariffs through the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). 

Under the revised agreement, three conditions must be met before Japan can raise tariffs: imports from the U.S. must exceed the original trigger level; the aggregate volume of beef imports from the U.S. and members of the Trans-Pacific Partnership must exceed the CPTPP beef safeguard; and imports from the U.S. must exceed those of the previous year. 

The safeguard will put the U.S. in a better position to compete with Australia, its primary competitor, for beef exports to Japan, said Amanda Countryman, a professor at Colorado State University who specializes in agriculture and trade. 

Under the CPTPP agreement, Australia saw reduced tariffs for Japan that will fall to 9% over 15 years. But for the U.S. and other countries, tariffs on beef remained at 38.5%. The U.S. Meat Federation predicted that as a result of these trade agreements, U.S. beef export losses could reach $550 million by 2023 and $1.2 billion by 2028. Now, the new agreement will help the U.S. make a dent in those losses.

Though the new agreement doesn’t dramatically change the market for beef exports, it does put the U.S. on a more even playing field with other countries, said Todd Inglee, the executive director of the Colorado Beef Council. 

“When this agreement was signed by the U.S. Trade Representative, it signaled a little bit of relief for us,” Inglee said. “Just a little more assuredness that we’re going to have a strong export market without being deemed by additional tariffs.”

Japan’s growth in beef imports is not expanding as fast as other countries.  Japan ranks fourth among Colorado’s top beef trading partners, but its imports increased just 23% in 2021. Exports to South Korea, the top importer of beef from Colorado, increased 19% compared with China, which grew 418% over the same period.

After South Korea, China, Canada and Japan are the biggest markets for Colorado beef.

Asia is a key export target because cuts that are underutilized in the U.S., such as the tongue and liver, are more common in other cuisines. Cuts that come from the short plate, or belly of the cow, are of limited appeal in the U.S., but are extremely popular in Japan, where they are used in beef bowl dishes in restaurants. In fact, about 95% of the U.S. short plate cut is exported, primarily to Japan and other Asian countries. 

Without export markets, Colorado ranchers might have otherwise had to give discounts or pay people to take these parts of the cattle off their hands. Instead, these cuts could fetch a premium in Asian markets, which have driven much of the growth in U.S. beef exports.  

Inflation, future of beef

The stabilizing tariff comes at a time where ranchers are increasingly concerned about inflation. Although demand for beef is at new heights, costs of production and inflation have been weighing on ranchers and farmers. 

Rural Coloradans in particular are grappling with rising fuel prices that hit a record high in Colorado on Monday at average of $5.52 a gallon for diesel and $4.88 for regular unleaded. Diesel, which fuels farm equipment including trucks that move cattle from ranches to feed yards to processing plants, is up about $2.30 a gallon from a year ago. Regular unleaded is up about $1.66. Consumer prices rose 9.8% in the mountain region from April 2021 to April 2022, according to U.S. Bureau of Labor data.

Drought is a persistent concern in Colorado, and as grass becomes more sparse, the costs of production go up. About 99% of Colorado is in some state of drought right now.

Meat prices are rising, too. With higher prices and inflation, ranchers worry about consumers’ ability to purchase beef and maintain the high demand for beef. Consumers’ declining disposable income, both in the U.S. and globally, are a potential threat for U.S. ranchers and cattle feeders. 

As disposable income shrinks further, ranchers worry about the longevity of the beef industry. 

“Consumers through the pandemic, they chose beef more often, and in greater volumes … than any other protein in any case,” Inglee said. 

“I think what’s on everybody’s mind is how long is that going to continue?”

Brammhi Balarajan

Email: Twitter: @brammhi