President’s Proclamation on Imported Beef

President Trump’s proclamation issued last week, Further Ensuring Affordable Beef for the American Consumer, formalized his previous social media announcement of his intent to allow an additional 300,000 metric tons (mt) of imported beef into the U.S. with no out-of-quota tariff. According to the proclamation, the expanded quota: applies for 90 days beginning September 1; allows up to 100,000 mt of imported beef per month; applies only to lean beef trimmings; encourages imported beef trimmings to be sold at a 25% discount from the going market price; and does not apply to countries with already-established, country-specific quotas.  

Brazil is the only major beef exporter to the U.S. without an already-established, country-specific quota. Thus, it will be the primary beneficiary of the President’s action, although in theory Paraguay, Japan, Netherlands, and Ireland could benefit too. Additional imports from Argentina, Canada, Mexico, Uruguay, and Australia above their quotas would still be levied the out-of-quota tariff. According to the Daily Livestock Report, Brazil’s beef shipments to the U.S. thus far this year trail only those from Australia. Under the proclamation, the Secretary of Agriculture and the Trade Representative are to monitor the additional imports. If they determine the imported beef trimmings are not being sold at a 25% discount, the President will be notified and can cancel the additional quota amount. Last week imported trimmings traded at a 28% discount to domestic trimmings.  

Cattle prices responded negatively to the President’s action. According to Beef magazine, both live and feeder cattle futures fell to eight-month lows at the opening bell last Friday morning. In response to cattle producers’ negative reaction to the proclamation, President Trump also announced he would ease regulations on producers wanting to process animals on farm. It’s highly doubtful that the President’s decision will move the needle on retail beef prices — the additional imports only amount to roughly 2% of projected beef consumption — or provide much incentive for additional on-farm processing. Instead, the actions have only created confusion, uncertainty, headaches for cattle producers and could delay herd expansion.