By Phil Seng
The U.S. beef industry recently welcomed the news of a long-awaited breakthrough when China reopened to U.S. beef for the first time since the 2003 BSE case. China is the world’s fastest-growing beef import market, taking more than 600,000 metric tons (mt) last year valued at nearly $2.6 billion, up from less than 27,000 mt just five years ago.
Early interest in U.S. beef by potential customers in China has been very encouraging, and the U.S. Meat Export Federation (USMEF) is planning a series of educational and promotional activities to build on this positive response.
But it is important to note that China’s zero tolerance standard for residues of synthetic hormones and beta agonists, as well as its traceability requirements, mean that today a relatively small percentage of the U.S. beef supply meets China’s requirements. As a consequence, USMEF expects U.S. beef exports to China to start slowly and build over time as producers and packers assess opportunities in the Chinese market and make decisions about whether or not to adjust their production practices.
With trade tensions between the U.S. and China so often in the news, some might conclude that China singled out the U.S. with unusually stringent import requirements – but this is not the case. While it is true that China’s requirements on production technologies and traceability are more restrictive than those we face in most major markets, U.S. negotiators actually achieved a higher level of access than any of China’s other beef suppliers.
For example, China agreed to accept both chilled and frozen beef from the United States. Prior to this agreement, only Australia had access for chilled beef, and only from a limited number of plants. Our access for chilled beef will facilitate USMEF’s focus on positioning chilled, grain-fed U.S. beef at the top of the Chinese foodservice and retail sectors.
The U.S.-China agreement also includes a wide range of offal items, none of which is permitted under China’s agreement with any other supplier. The United States also maintained sovereignty over plant approvals, something no other supplier to China has, so any federally-inspected U.S. plant can ship beef to China once it receives USDA approval under its Export Verification program.
The agreement negotiated by USDA also established that China will keep its market open if another BSE case is confirmed in the United States, as long as the U.S. retains its negligible BSE risk status with the World Organization for Animal Health (OIE). In addition, under the agreement China recognizes the animal health status and associated animal disease control measures of the United States.
Even with China’s restrictions on growth promotants and its traceability requirements, which also apply to its other beef suppliers, the market-opening agreement creates an opportunity for the U.S. industry to participate in China’s large and very dynamic market. The agreement does not dictate how U.S. producers will meet China’s requirements – for example, there is no requirement that beef is produced under the Non-hormone Treated Cattle (NHTC) program – but the Chinese government has emphasized that it will enforce its standards on production technologies by testing imported product for residues of banned substances.
The challenge now is to find ways to meet China’s requirements that balance the added costs associated with doing so. If demand from China proves to be a catalyst for expanding production of beef that meets China’s requirements, this will be a positive development for producers and one that presents a new opportunity to enhance their profitability.
With the added costs of producing beef for the Chinese market, USMEF’s focus is on premium buyers in the foodservice and retail sectors in China’s largest cities. Although grain-fed product accounts for only about 5% of China’s total imports, demand for grain-fed beef is increasing and there is tremendous potential for further growth.
Australia’s grain-fed exports to China were about 24,000 mt last year, up 9% from 2015. Through May of this year, exports were nearly one-third higher than their 2016 pace. Canada’s exports to China were only 6,583 mt in 2016, but volume is up 40% this year, reaching 3,425 mt through April.
The recent arrival of the first U.S. beef shipments to China in more than 13 years has generated great enthusiasm, and the market’s excellent potential justifies this optimism. With experienced USMEF personnel already in place in Beijing and Shanghai, and promotional resources available through industry checkoff programs and USDA, we are well-prepared to capitalize on this opportunity.
But producers should remember that we are in this market for the long haul, not just an initial splash. By keeping this firmly in mind, the U.S. industry will invest the time and resources necessary to develop China into a market that delivers significant benefits for our nation’s cattle producers.
Seng is president and CEO of the U.S. Meat Export Federation