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We don’t export a lot of beef to China—yet. Question is, will trade uncertainty unhinge future growth?
August 15, 2018
A while back, a neighbor asked me if Trump’s trade wars had affected beef. “Not yet,” I said, “but it will.”
I was thinking mostly of our competitor proteins, especially pork. Pork exports are more directly affected by all the shenanigans and that ultimately means more pork on the domestic market competing with beef for U.S. consumer’ dollars.
Last week, we looked at some of the reasons that U.S. beef has maintained its strong foothold in international markets, despite all the trade uncertainty worldwide. So far, U.S. beef exports remain largely unaffected and that's very good news for cattle prices.
Now let’s focus on China, which recently reopened to U.S. beef but is one of Trump’s main targets for trade retaliation. During a conversation with Dan Halstrom, CEO of the U.S. Meat Export Federation, I asked how much of the ongoing international trade uncertainty will affect our access to China.
“Definitely it will,” he said. Looking at numbers from January through May, the U.S. was exporting about 600 tons a month to China. That’s not a huge amount, but what we’re exporting now isn’t the point. It’s what we have the potential to export that’s important.
“We don’t have any official data for July yet, but weekly data would indicate that…it’s going to be something considerably less than that in July, which is the first month affected,” Halstrom said.
But business with China continues. The real problem is that it’s a value proposition.
Adding the extra tariff ultimately flows back to those U.S. beef producers who are providing beef that will qualify for the Chinese market. “The incentive for the producer to backfill with additional cattle that qualify will probably be less because of the economics,” he said.
“This is what concerns us. I don’t think the business is going to stop. But it will definitely slow down in growth.
“That is the whole question. The packers, producers who are dealing with feedlots, the whole supply chain, it creates more uncertainty which more than likely, unless something changes, will slow down the growth of these value-added cattle.”
Plus, he points out that we’re not the only ones who have figured out the value opportunities that China presents. “Australia is our big competitor in China, but honestly, we have a lot of other competitors, too.
“We were at 12% before the increase to 25% and now we’re at 37%. But even at 12%, Australia with their FTA is at 7% today, headed to zero over time. New Zealand is already at zero. So some of these other competitors already have a very favorable duty status because of their agreements.”
However, Halstrom cautions that it’s a little early to jump to conclusions. It’s early in the process and it takes a little time to get numbers back from China. And he points out that overall, international demand for U.S. beef remains strong.
“From our perspective, the end game is as free and as fair of a trade as we can have. And we don’t disagree with that goal. It’s a little chaotic in the interim, but the bottom line is that this base demand internationally for beef and other proteins is growing and it’s solid.
“So I think we have to keep that in mind—the underlying dynamics, despite all the rhetoric and the obvious disruptions, still bodes very well for the future to increase this business in these foreign markets.”
Senior Editor, BEEF Magazine
Burt Rutherford is director of content and senior editor of BEEF. He has nearly 40 years’ experience communicating about the beef industry. A Colorado native and graduate of Colorado State University with a degree in agricultural journalism, he now works from his home base in Colorado. He worked as communications director for the North American Limousin Foundation and editor of the Western Livestock Journal before spending 21 years as communications director for the Texas Cattle Feeders Association. He works to keep BEEF readers informed of trends and production practices to bolster the bottom line.
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