U.S. beef to China by July
— Beef tops list of priorities on trade
The U.S. and China have made their beef relationship official; we’ve set a date!
Late on the evening of Thursday, May 11, the Department of Commerce released an announcement that China will open to U.S. beef no later than July 16, 2017. The next day was flooded with announcements of appreciation and excited projections of the future. However, over a week later, there are still more questions than answers on the details.
The Department of Commerce’s beef announcement was one of 10 points included in its “Initial Actions of the U.S.-China Economic Cooperation 100-Day Plan.” More than included, beef trade received top billing.
“Following one more round of technical consultations between the United States and China, China is to allow imports of U.S. beef on conditions consistent with international food safety and animal health standards and consistent with the 1999 Agricultural Cooperation Agreement, beginning as soon as possible but no later than July 16, 2017,” reads the entry.
The referenced 1999 agreement outlines a number of things, including that “China will accept meat from all USDA Food Safety Inspection Service (FSIS)-approved plants.” It additionally allows China to reject shipments of U.S. meat originating from certain plants if random inspec tions show the meat “is not wholesome.” No definition of “wholesome” was offered.
Other items addressed in the 100-Day Plan include:
• The import of Chinese cooked poultry into the U.S.;
• Continued safety inspections of eight U.S. agricultural biotech products;
• Export of U.S. liquid natural gas to China;
• Several different provisions involving financing and credit services, electronic payment systems, banking operations, and other financial-related issues; and
• The creation of a Memorandum of Understanding between the U.S. Commodity Futures Trading Commission and the Shanghai Clearing House.
The announcement was celebrated by many groups in the beef industry. In short order, the North American Meat Institute, the U.S. Meat Export Federation (USMEF), National Cattlemen’s Beef Association (NCBA), U.S. Cattlemen’s Association, and others had all issued responses praising the move and applauding the current administration and/or President Donald Trump directly for making beef a priority in his talks with Chinese leader Xi Jinping.
NCBA CEO Kendal Frazier told WLJ in an interview that he had not seen something of this magnitude where beef got top attention in his career.
“The president met with the premier of China about four weeks ago in Florida and they put together a short list of trade issues that they wanted to resolve and they made a commitment to resolve in 100 days. Beef was on that short list and it stayed on that short list and it’s been a priority of the administration and obviously it’s a priority of the Chinese government too.”
Looking to the future
There was a noticeable theme during a press conference held by NCBA with members of the ag news media following the announcement: Excitement.
“We are very excited by this development,” said Kent Bacus, NCBA director of international trade and market access. “We are another step closer to restoring access to China.”
NCBA President Craig Uden outlined the potential of a China open to U.S. beef.
“The Chinese market means access to 1.4 billion new customers of U.S. beef. Right now with a growing middle class that’s larger than the entire U.S. population, these middle class consumers are buying record amounts of protein.
China’s becoming one of the greatest importers of beef around the world. With that said, with trade accounting for over $300 per head and demand growing internationally for U.S. beef, that number will continue to grow, bringing more value to the U.S. cattle producer.”
China was additionally describes as having seen “exponential growth in imports in the last five years.”
According to the USMEF, China imported 600,000 metric tons (mt; 1.32 billion pounds) of beef in 2016, valued at almost $2.6 billion. In the first quarter of this year, Chinese beef imports were up 15 percent compared to 2016. Domestically, China produces about 4 million mt (8.82 billion pounds) of beef with an annual per capita availability of 4 kilograms (8.82 pounds).
The Chinese market currently sources its beef imports from Brazil, Uruguay, Australia, New Zealand, Argentina and Canada, in that order of volume. Most of the imports are grass-fed lean cuts from South America, according to USMEF, these being items with which U.S. beef does not directly compete.
“When the market opens to U.S. beef, USMEF expects China to demand a similar mix of cuts as our other main Asian markets, so they will be competing with Japan, Korea and Taiwan for items like short plate, short ribs, chuck short ribs, chuck roll items, middle meats, etc. for use at high-end foodservice and retail,” USMEF told WLJ.
USMEF also added that China has a strong demand for grain-fed beef. Australia is currently China’s dominant supplier of grain-fed beef, exporting about 55.12 million pounds last year. Chinese imports of Australian beef have grown this year despite Australia’s current tight supplies and subsequent higher prices.
“What they’ve agreed to so far is basically the principles of how they’re going to trade, and now they have to put that trade in more detail,” Frazier told WLJ.
“What they’ll do is they’ll work on the actual protocols of how we’re going to trade with China. At the end of the day it will be a document that the U.S. government and the Chinese government can agree to. It will be the terms of the trade and the technical aspects of it.”
The current lack of actual protocols or many details of any kind means there are many unanswered questions. Among the biggest questions—asked repeatedly during the press conference—was how much beef might go to China and what might be required of U.S. producers.
“It’s kind of hard to estimate what [volume] will be without all of the details of the agreement,” said Bacus, speculating that there will be significant growth in the Chinese market given the “sheer buying power of the Chinese middle class.”
Frazier also declined to speculate on what trade volume to China might be, but foresaw potential.
“To sit here today and speculate short-term what we’re talking about in volume would be difficult to do.
I think, long-term, this really has a lot of potential for the U.S. When I say ‘long term,’ I’m thinking one or two years down the road. Three to five years down the road, this could be a really significant market for the U.S.”
The issue of what might be required of U.S. producers hoping to ship beef to China also came up repeatedly. Both Bacus and Uden declined to speculate on potential protocol details, but USMEF gave WLJ some information about what China requires of its existing beef suppliers.
“China’s import requirements vary somewhat based on whether the exporting country has had cases of BSE and/or [foot and mouth disease] and their related [World Organisation for Animal Health] risk classifications as well as other factors. China does not allow hormones or beta agonists in domestic production and requires some suppliers to certify that their beef exports comply with China’s requirements.”
Such things as age- or source-verification requirements, potential tariffs, likely cuts, and rate of trade remain among the unanswered questions. The protocol has likely not been created yet, let alone publically released.
“It would probably be slow to start but, when you see the growth they’ve had in the last three to five years, that demand is there,” Uden speculated. “I’m very confident the U.S. cattle producer will figure out how to produce for that market.” — Kerry Halladay, WLJ editor