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China is coming

May 19, 2017

China is big. Can you imagine 1.4 billion new customers having the opportunity to buy U.S. grain-fed beef?

When the market was closed to U.S. beef producers in 2003 because of the mad cow—BSE—episode, China was a different market. I don’t think they had 300 million middle class consumers at that time. Much of China’s wealth was created in the 21st century. Now they have the money and want to move their diets to the top of the food spectrum, which means beef. Lots of people have been attempting to estimate what the Chinese market could be worth to U.S. beef producers, but it’s really hard to tell. It’s a different market today; some estimate its value at $2.5 billion.

It does appear that President Donald Trump and China’s President XI Jinping had a productive meeting at Trump’s Mar-a-Lago resort last month. As far as the beef industry is concerned, China and the U.S. are to hold one more round of technical negotiations to figure out the details before July 16.

China is to allow beef imports on conditions consistent with international food safety and animal health standards and consistent with the 1999 Agricultural Cooperation Agreement.

One of the tradeoffs is that the U.S. is to resolve outstanding issues to import Chinese cooked poultry. The U.S. is to publish a proposed rule by July 16. China is also supposed to start importing liquid natural gas from the U.S. There are also some financial issues addressed in the Commerce Department’s 100-day Plan.

If both countries operate under the 1999 agreement, it should be fairly simple. There isn’t any mention about source and age traceability or beta antagonists simply because it wasn’t much of an issue back then and beta antagonists didn’t exist in cattle feeds.

The agreement says that “China and the U.S. have agreed that both sides should insure the health and safety of U.S. meat exports to China. In recognition of the situation that the U.S. possess a sound system of epidemiological disease control and a program for chemical residue control, China will accept meat from all USDA Food Safety Inspection Serviceapproved plants. China maintains the right to audit the U.S. inspection system through random inspection of establishments and random inspection of U.S. product at the Chinese point of entry.” But, if they don’t like it they can send it back. So I wonder just how much wiggle room is in that agreement.

There doesn’t seem to be much concern in meeting the age and source qualification because there are already a bunch of USDA-approved programs. I was also told that the Chinese have already signed off on the adequacy of existing programs and they should be able to source enough cattle for Chinese markets. And who knows how many cattle that could be.

The beta antagonists might be the bug-a-boo though. I have been told that roughly 90 percent of the fed cattle are still being fed the stuff and it does offer feeders a production advantage. But if there is a better market advantage I can see feeders moving away from it. And it wouldn’t take long; the product is only fed the last 30 days of the finishing phase, so that could be accomplished very quickly. Or they could agree on some minimum residue level. I was told that JBS has been doing some testing on residue levels and has found trace levels in beef tallow. It would be hard to just sneak it through.

I find it interesting that China is so concerned with food safety from the U.S.; we have the best food safety system in the world. The big concern for the U.S. accepting Chinese poultry was also food safety. China has had a rash of food safety issues over the past several years that have been widely exposed. But it appears that we have worked through these non-tariff trade barriers. The Chinese have been tough negotiators and to see this plan come together so fast is amazing.

It appears that China is sincere in opening their markets to the U.S. and vice versa. Everyone who I have talked with or listened to is optimistic that we will get this done by fall. Agreeing to accept Chinese cooked chicken was a big roadblock for our side, even though China quit taking U.S. chicken in 2015 when we had the avian bird flu epidemic. Let’s hope that we have a great long-term relationship with China. And let’s also hope we can together quell North Korea. — PETE CROW

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