U.S. beef access to China market should be a win-win
CENTENNIAL, Colo. — The announcement that China will begin importing U.S. beef in July brought cheers from many in the cattle industry, and for good reason: The country's large population has increased its meat consumption substantially in the years since it closed off its market to U.S. beef.
"From a producer standpoint, it's a win-win," says Kevin Good, senior market analyst at Cattle Fax, an information and analysis service on topics related to the beef and agricultural industries.
China imported $15 million in beef in 2003, including $10 million in beef from the U.S. That year, a case of bovine spongiform encephalopathy was confirmed in Washington state in an animal that came from Canada.
China and numerous other countries closed off their markets to U.S. beef imports. The U.S. overall exported 2.447 billion pounds of beef in 2002, followed by 2.518 billion pounds in 2003. But in 2004, following the BSE detection, exports plummeted to 460 million pounds. It took until 2011 for the level of exports to rebound above the 2003 level, according to U.S.Department of Agriculture data.
In the years since, China has increased its beef imports substantially. The USDA in September 2016 said China imported $2.3 billion in beef in 2015, with the increase fueled by middle-class growth.
Now that China has said it again will allow imports of U.S. beef beginning July 16, there is some speculation about how much of an impact the move will have at the sale ring. Good says many unknowns remain about what conditions China will place on the beef it imports, including source verification, age restrictions, use of implants and the use of ractopamine.
Ractopamine is a feed additive used for growth promotion. While it has been banned in some places, the U.S. and several other countries consider it safe to use in meat-production animals. Good says China has banned imports of U.S. pork that have been given ractopamine, and it seems likely the same action would be take regarding U.S. beef.
There likely will be a cost of entry into the Chinese market, which can include giving up a tool like ractopamine, Good says. But if there is enough premium involved in selling there, the industry will react. He says it's possible that if China does prohibit the use of ractopamine, packers may segregate animals for the purpose of selling into that country.
China imports beef from Brazil, Uruguay, Australia, New Zealand and Argentina, Good says, pointing out that the U.S. may not take market share from any of those countries but get a piece of the market as it expands.
"It's a huge market," he says. "We know that. It's growing rapidly."
Cattle industry groups, politicians and others were pleased to hear the U.S. had made an inroad into the Chinese market, a move several years in the making.
"We look forward to providing nearly 1.4 billion new customers in China with the same safe and delicious U.S. beef that we feed our families," said National Cattlemen's Beef Association President Craig Uden in a statement.
"Montana's ranchers have been waiting since 2003 to ship the nation's highest quality beef to China's 1.3 billion consumers," Errol Rice, executive vice president of the Montana Stockgrowers Association, said in a statement.
"The agreement ... is a monumental step forward that will open the door for the sale of commonly recognized beef cuts, like chucks and rounds, as well as other specialty cuts, to nearly 1.4 billion new customers," said Warren Zenker, North Dakota Stockmen's Association president, in a statement.
U.S. Senators John Hoeven, R-N.D., and Heidi Heitkamp, D-N.D., applauded the deal with China, as did the American Soybean Association.
Still, Good doesn't think gaining access to China will eliminate the volatility the beef market has experienced in recent years. Dependence on the global market means being impacted by more variables, including disease outbreaks, trade policies, currencies and more, he explains. But it's a trade off, he says.
"People need to recognize, we've got a lot of volatility, but we've got some positives," he says. "Trade is one of those that has been positive for beef, pork and poultry."