Feeding the Dragon

September 26, 2015 02:09 AM

Breaking down China’s market access wall could be profitable for beef producers

China’s demand for beef has boomed in recent years, but the U.S. remains shut out of the growing market.

“We have not had access to the Chinese market since the advent of bovine spongiform encephalopathy (BSE) in the U.S. 13 years ago,” says Phillip Seng, president and CEO of the U.S. Meat Export Federation (USMEF). 

That’s a problem for U.S. beef producers. “China is one of the fastest-growing protein markets in the world whether you talk pork, beef or even fish and poultry,” Seng says. “The amount of consumption that is going on there is phenomenal.”

In a radio interview with “AgriTalk” host, Mike Adams, Seng discussed how USMEF is working with the beef industry and government officials to meet the criteria for exporting beef to China, similar to what is required to export meat to the European Union. 

Traceability has been an issue for China, along with the use of beta agonists and hormone implants.

Cracking the Chinese market has not been easy. Nearly four years ago, the U.S. received some good news when the World Organization for Animal Health (OIE) declared U.S. beef to be of negligible risk, but the market remained closed. “It has always been difficult to have the Chinese abide by international standards,” Seng adds.

U.S. pork producers have encountered similar challenges because of feed additive use. Yet, the Chinese market appears to hold opportunity for U.S. producers. Pork prices in China are roughly double the cost of U.S. prices, so Seng thinks U.S. pork products could be competitive in China.  

The beef market might present the most potential. “This past year, the Chinese beef market grew the fastest of any market in the world,” says Seng, who also notes Chinese beef imports are outpacing pork imports.

USMEF estimates the lack of U.S. beef exports to China costs cattlemen roughly $100 per head in carcass value.

Even without the Chinese market, exports still play a major role in maintaining profitability for the U.S. beef industry. In 2014, 14% of U.S. beef produced was exported, adding $300.36 per head in value.

The top five beef export markets are all vital to the profitability of U.S. beef production. But the U.S.’s market share in Japan and South Korea has yet to reach the pre-BSE numbers of 2003.

Part of the reason for that added value is the tight global beef supply, says Travis Arp, manager of technical services at USMEF. “That is headlined by the U.S. as well as Australia with their prolonged drought over the past couple of years,” Arp says. Australian beef producers have been forced to make large herd liquidations, which has led to a decreased ability to export.

The U.S. and Australia are two of the largest beef exporters in the world, and any culling of the cowherd will affect global markets. 

“As a function of that, beef prices have been at a record high the last couple of years. We’ve continued to see records in export values and records in export tonnage for beef around the world,” Arp says. 

Global economic expansion has helped fuel the beef price increases as developing countries demand more animal protein. Arp adds these developing markets like the quality of U.S. grain-fed beef.

Still, things could be better. Currently, with no market access in China or Russia, U.S. beef producers are missing out on two of the largest beef customers in the world. The strong U.S. dollar has limited some trade advantage, and the West Coast port shutdowns in the spring also lost business.

Issues with country-of-origin labeling (COOL) looms large as well, with Mexico and Canada being two of the top five markets for beef trade. Both countries have threatened trade retaliation over the U.S.’s mandatory labeling program.

Japan, Hong Kong and South Korea round out the top five beef export destinations, and those countries require beef originating from cattle 30 months of age or younger.

Nevertheless, beef exports are a large part of the beef industry with exports accounting for $7.14 billion in value during 2014, up 16% from the previous year. 

China has been demanding an increasing amount of beef during the past few years, with more than 20 times the amount of tonnage entering the country this year compared with 2011.



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