Markets

 

Current consumption and potential meat markets

·         Potential markets

·        Potential demand for beef

·         Potential demand for pork

·        Competition

·         Prices

·         Quality considerations

·        New markets associated with military base expansion on Guam

·         Possible military expansion on Tinian

1.      Potential markets

·         In the Marianas, meat products are consumed by full-time residents, temporary residents (e.g., construction workers brought in to expand the military facilities on Guam), and tourists.

·         Meat products are consumed at home and at restaurants and other food service establishments.  In the Marianas, a small fraction of meat is consumed for fiestas and other family celebrations (a market segment which is currently being served through informal slaughtering of locally produced animals).

·        Sales of products by a local meat business are expected to be primarily to wholesale food supply companies or to large grocery stores (many of whom are set up to produce retail cuts from carcasses or primal cuts), with only a small fraction sold directly to consumers or to retail outlets. 

·         Target markets and sales strategies will also need to consider the extent to which the business produces any value-added processed products (e.g., ground beef, sausage, or smoked meats).

·        It is assumed that all sales will initially be targeted to markets in Guam, Rota, Saipan, and Tinian.  It is conceivable that a successful meat business could eventually contemplate export to other markets.

·        Other factors that could fundamentally impact potential demand for meat in the Marianas

§        Base expansion on Guam – click here for more information.

§         Possible relocation of Marines from Okinawa to Tinian – click here for more information.

 

2.      Potential demand for beef

Click here for estimates of potential demand for beef in the Marianas (based on 2007 population data) as shown in the project spreadsheet in the Economics section.  Based on the average beef consumption rate per person in the U.S. and other assumptions as shown in the calculations, total consumption of beef is estimated as follows:

§         Guam = 12.5 million pounds per year, which is the equivalent of 24,000 cows per year.

§         CNMI = 5.1 million pounds per year, which is the equivalent of 9,900 cows per year.

·         The per capita consumption rate of 61.6 pounds per person per year is the average for the U.S.; additional data regarding beef consumption in the United States is available from USDA at: http://www.ers.usda.gov/publications/ldp/xlstables/Meat/WASDE_Beef.xls

·        Estimated beef consumption in the four islands indicates annual consumption in the Marianas is equivalent to over 39,000 beef cattle – i.e., approximately 12,500,000 pounds per year of dressed beef.

·         Slaughtering 10 cattle per day, 5 days per week, 48 weeks per year, would produce roughly 1,000,000 pounds/year of dressed beef…roughly 8% of consumption in the islands (in 2007).

 

3.      Potential demand for pork

      Click here for estimates of potential demand for pork in the Marianas (based on 2007 population data) as shown in the project spreadsheet in the Economics section.  Based on the average pork consumption rate per person in the U.S. and other assumptions as shown in the calculations, total consumption of beef is estimated as follows:

§         Guam = 12.5 million pounds per year, which is the equivalent of 24,000 cows per year.

§         CNMI = 5.1 million pounds per year, which is the equivalent of 9,900 cows per year.

·         The per capita consumption rate of 50.1 pounds per person per year is the average for the U.S.; additional data regarding beef consumption in the United States is available from USDA at: http://www.ers.usda.gov/publications/ldp/xlstables/Meat/WASDE_Pork.xls 

·        The average market weight for hogs for slaughter in the mainland U.S. is 220 to 260 pounds live weight, whereas the average live weight for pigs used for fiestas and other personal consumption in the Marianas varies from 40 to 120 pounds (based on information provided by local producers).

·         Estimated pork consumption in the four islands indicates annual consumption in the Marianas is equivalent to over 200,800 pigs – i.e., approximately 14,500,000 pounds per year of dressed pork.

·        Slaughtering 60 cattle per day, 5 days per week, 48 weeks per year, would produce roughly 1,000,000 pounds/year of dressed pork…roughly 7% of consumption in the islands (in 2007).

 

4.      Competition

·        As of December 2010, all meat consumed in the Marianas is imported (except for the small amounts consumed for fiestas and other family celebrations, which consists of locally produced and informally slaughtered animals).

·        Essentially all imported meat products are frozen upon arrival.  A small portion of the meat is thawed before retail sales. Some frozen meat is imported as carcasses or primal cuts and subsequently thawed and cut into retail pieces by the grocer.  Sources of imported meat products include the U.S. mainland, Australia, New Zealand, and other countries.

·        Click here to see some advertisements of retail meats being sold in Guam and Saipan during December 2010. 

·        Since competition for meat sales into wholesale (and, to a lesser extent, retail) markets is from frozen, imported meat products, it can be expected that fresh, locally produced and slaughtered meat products would enjoy certain marketing advantages, at least in some market segments.

 

5.      Prices

·         Click here to see several advertisements for retail meat sales in Guam and Saipan during December 2010.  These advertisements indicate that some frozen imported meat products are priced at the retail level for as low as $2 per pound, although higher quality cuts command prices up to $8 per pound.

§         During visits to grocery stores on Guam, Rota, Saipan, and Tinian during December 2010, it was observed that “Black Angus” products are being widely promoted in the Marianas.  While these products appear fresh, butchers at two stores stated that the cuts are actually imported frozen primal cuts and are thawed and cut prior to sale. 

·         For comparison purposes, click here for a price list of JJ’s Country Market on the Big Island of Hawaii, which specializes in grass-fed beef products.

 

6.     Quality considerations

·         Quality control is essential for any slaughtering/meat business to maintain customer satisfaction.  Several factors during the slaughtering process will affect meat quality, e.g.:

§        Handling and treatment of the animals prior to slaughter, including minimizing animal stress; refer to: http://www.grandin.com/meat/meat.html andhttp://www.fao.org/DOCREP/003/X6909E/x6909e00.htm#Contents 

§         Consistent and hygienic processing methods will help ensure consistent meat quality; refer to: http://www.nda.agric.za/vetweb/VPH/Manuals/AbattoirHygieneStudyGuide.pdf

§        Aging and other post-slaughter practices; refer to: http://ag.ansc.purdue.edu/meat_quality/processors.html

§        Proper operation and maintenance of the facility to ensure sanitary conditions; refer to: http://www.fao.org/docrep/003/X6552E/X6552E08.htm andhttp://www.fsis.usda.gov/OPPDE/rdad/FSISDirectives/6410.1.pdf

·         The inspection and grading of meat and poultry are two separate programs within the U.S. Department of Agriculture (USDA). Inspection for wholesomeness is mandatory and is paid for out of tax dollars. Grading for quality is voluntary, and the service is requested and paid for by meat and poultry producers/processors.  http://www.fsis.usda.gov/factsheets/inspection_&_grading/index.asp

 

7.     New markets associated with military base expansion on Guam

·         From the Defense Industry Daily:

§         “The 2006 agreement between the United States and Japan to shift 8,000 U.S. Marines from bases in Japan to the island of Guam by 2014 is likely to have more far-reaching implications than just a change of address for some units of the Marine Corps’ III Marine Expeditionary Force (III MEF). The move is accelerating the return to prominence of Guam in the U.S. defense posture and fostering a higher level of cooperation among the U.S. armed forces in the Pacific region…. Congress authorized $193 million in military construction funds for Guam in the fiscal year 2007 National Defense Authorization Act, a $31 million increase over 2006 funding. “Guam is likely to see between $400 million and $1 billion in military construction each year for a period of six to 10 years,” [Guam’s representative in Congress, Madeleine Z. Bordallo] said.”  http://www.defenseindustrydaily.com/us-military-gearing-up-on-guam-03011/

·        The scope of the expansion is evident from the website http://guambasebuildup.com/:

§        “Guam, the tiny little island paradise that lies in the Western Pacific Ocean is about to experience the largest military facility expansion in U.S. history. Over 30,000 jobs will be created in Guam, the other Marianas, and the Marshall Islands during the initial stages of what is called the ‘Guam Base Buildup’. ”

§          “Over the next 5 years, billions of dollars will be invested in harbor improvements, infrastructure, industrial, commercial, residential and above all, major military construction.”

§          “All projects for Guam’s infra-structure and military bases will be open for bid by approved construction companies, GSA Vendors and suppliers from the United States and other countries. Sensitive areas and developments may be limited to US companies and citizens but everything else is free game.”

§         “The Guam Base Buildup is a joint venture of the American, Japanese, and Guam governments and will accommodate the influx of nearly 35,000 military and civilian personnel.”

·         Other articles describing the scope of the buildup on Guam include:

§         “On Guam, planned Marine base raises anger, infrastructure concerns;”  Washington Post; March 22, 2010; http://www.washingtonpost.com/wp-dyn/content/article/2010/03/21/AR2010032101025.html

§        “Guam residents voice concerns about military's expansion plans;” Stars and Stripes; January 11, 2010; http://www.stripes.com/news/guam-residents-voice-concerns-about-military-s-expansion-plans-1.97910

§        According to the Guam Strategic Development Regional Center (http://www.guameb5.com/business_investment_opportunities.asp), military-related construction expenses on Guam have skyrocketed in recent years.  Click here to see a chart of expenses.

·        An increase of 30,000 residents on Guam (including Marines, dependents, and construction workers) would mean the following estimated increases in meat consumption:

§         Beef: approximately 4,100 head per year (roughly 17 head/day)

§         Hogs: approximately 21,000 head per year (roughly 88 head/day)

8.     Possible military expansion on Tinian

There has been some discussion about the use of Tinian as an alternate location for the relocation of the Marines from bases in Japan, or use of Tinian as military training grounds for soldiers based on Guam.  Although Tinian’s future role in the base expansion is still unclear, as of January 2011 military construction on Guam is underway, while no military construction has begun on Tinian. 

·         “The Tinian option”; Marianas Variety - Guam; February 5, 2010; http://mvguam.com/index.php?option=com_content&view=article&id=10827%3A-the-tinian-option&Itemid=64

·        “Tinian to benefit from Guam expansion”; Radio New Zealand; December 14, 2008; http://www.rnzi.com/pages/news.php/pages/news.php?op=read&id=43673

·        “Pacific Island of Tinian awaits the Marines”; PRI’s The World; June 9, 2010; http://www.theworld.org/2010/06/09/pacific-island-of-tinian-awaits-the-marines/

The consolation for Tinian may be the survival of its bucolic environment, along with opportunities to provide meat products (and other foodstuffs such as fresh vegetables) to meet the increasing demand for food created by the military expansion on Guam.