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Hong Kong Expansion Lauded; China Access Imperative

Hong Kong Expansion Lauded; China Access Imperative
Hong Kong was the seventh-largest volume destination for U.S. beef exports in 2012, and the fifth-largest in terms of value.

The U.S. beef industry received good news last week when USDA announced expanded eligibility for U.S. beef in Hong Kong. Since reopening to U.S. beef in 2006, Hong Kong had only been allowing boneless muscle cuts from cattle less than 30 months of age. But effective Feb. 25, Hong Kong began accepting U.S. bonelessbeef cuts from cattle of all ages. Bone-in cuts – excluding those from the vertebral column – are now eligible from cattle less than 30 months of age.

This is an excellent opportunity to expand the U.S. presence in the Hong Kong market, one of the most fiercely competitive in the world. The U.S. Meat Export Federation (USMEF) expects an immediate bump in sales now that customers can purchase items such as bone-in short ribs and other bone-in cuts – orders that U.S. suppliers could not fill previously due to market access restrictions.

Even with limited market access, Hong Kong’s appetite for U.S. beef has been steadily increasing. Last year, exports to Hong Kong increased 28% in volume and 43% in value compared to 2011, reaching 65,033 metric tons (mt) valued at $339.5 million. This made Hong Kong the seventh-largest volume destination for U.S. beef exports and the fifth-largest in terms of value.

U.S. beef is still held back to some degree, however, by the lack of access for vertebral column cuts, ground beef, processed meats and offal. We are not yet on a level playing field with Canada which, in three separate phases, achieved full access for all beef products consistent with World Organization for Animal Health (OIE) recommendations. So while the changes that took effect Feb. 25 were a significant step in the right direction, and we believe access will continue to unfold in a phased process similar to Canada’s, U.S. beef is playing catch-up compared to some of our key competitors.

The situation is even more frustrating in the People’s Republic of China, where U.S. beef has no access to an ever-expanding market. When China closed to U.S. beef as a result of the December 2003 BSE case, beef was still a minimal part of the Chinese diet. While we saw great potential for U.S. beef in China, the actual range of business was rather limited. China’s imported beef market grew fairly slowly for nearly a decade, even for suppliers that enjoyed full access. But this has changed dramatically in recent months as China’s beef imports have simply exploded.

In 2012, China’s year-over-year beef import volume grew 164% to 70,574 mt., while import value grew 150% to $281.4 million. Australia, Uruguay, Brazil and New Zealand all posted very impressive increases in their beef exports to China, and Canada also made its first significant post-BSE sales in China. All of these countries view this as a top priority and have really stepped up their marketing efforts in China.

Because the U.S. industry is unable to do the same, we are falling further and further behind as our competitors establish their brands and capitalize on a rapidly growing customer base. On a daily basis, USMEF staff members in China are asked when U.S. beef will be allowed into the market. 

I recently spoke to an importer of Australian beef who supplies 1-kg tomahawk bone-in ribeyes to five-star hotels in one of China’s southern resort areas. The hotels offer these items for up to $250/portion to a largely local clientele, and the importer notes that they are “flying off the shelves.” There are now 500 five-star hotels in China, and we are not able to serve them. On the retail side, Walmart now has more than 300 stores in China – but U.S. beef is not in the meat case.

It’s extremely frustrating to know that China’s demand for high-quality beef is growing stronger every day, but U.S. cattle producers don’t have access to the fastest-growing and potentially largest beef market in the world.

Joel Haggard is a USMEF senior vice president, overseeing the Asia Pacific region. He is based in Hong Kong.

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