China is a Growing Market for U.S. Beef


by Chris Clayton, DTN Ag Policy Editor

HONOLULU (DTN) — While work is progressing on boosting U.S. exports to several Asian markets, China remains the primary target for increasing trade potential, particularly for meat products.

Bill Westman, vice president of international trade for the American Meat Institute, told producers attending the American Farm Bureau Federation convention in Honolulu that trade relations between the U.S. and China are becoming more intertwined, even though he acknowledged China has a complex culture that is often difficult to understand. Yet, the country’s increase in gross domestic product — 10.5{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} in 2011 and 9{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} forecast in 2012 — means U.S. producers will have more opportunities for exports to grow.

China already is the largest market for U.S. agricultural products, having eclipsed Canada, Mexico and Japan. U.S. ag exports to China hit $17.5 billion in 2010. The country had tremendous demand for pork and corn in 2011. Still, soybeans remain a dominant U.S. export to China, accounting for $7.26 billion in just the first 10 months of 2011 alone. Cotton is the second-biggest U.S. export to China at about $2.2 billion for the first 10 months of 2011.

China imported only $138 million in U.S. beef in the first 10 months of 2011, a relatively small portion, almost all of which flowed to Hong Kong. Still, the value was 74{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} higher than in 2010. Despite the nearly complete drop-off in global cases of bovine spongiform encephalopathy, China has not shifted its stance because of a few cases in the U.S., now going back six years. The interest is there to import significantly more U.S. beef, but that market remains tied to other trade policy issues, Westman said.

“There is no question the demand for our beef is accelerating in north Asia,” he said.

Beef remains a product purchased by the upper classes in China and those needs will increasingly be filled by imports. A boom in upscale hotels has led to more desire for beef, and consumption patterns are changing overall. Further, USDA forecasts a slight decline in Chinese beef production over the next few years, mainly because of lack of land and feedstuffs to sustain those larger animals.

“They don’t have the land, they don’t have the grain,” Westman said. “They can’t do it.”

Thus, Chinese livestock production will continue to emphasize hogs and poultry. China is implementing more policies that consolidate smaller livestock operations into larger ones.

Much of that shift in farm size stems from recent livestock disease outbreaks. Though the Chinese government often remains quiet about such events, pork producers have had to slaughter more than 10 million sows in recent years because of illnesses.

“That’s a difficult thing to track,” Westman said. “It’s hard to get validation. It’s hard to confirm.”

Yet, the livestock losses were reflected in retail prices for pork spiking 52{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} in parts of China from August 2010 to 2011.

In response to food illnesses in recent years, China also is becoming more technologically sound in processing. While street vendors remain the norm for meat, Westman said there has been an explosion in packing facilities capable of processing 500 or so head a day. Along with that, consumers are willing to pay for packaged food in supermarkets more comparable to what a U.S. consumer would see.

“There is a market shift to higher quality,” Westman said.

There are concerns that in some areas of agriculture China could copy U.S. technology, but Westman said he didn’t think that was much of an issue in agriculture, particularly given the demand and need for food. Simply put, China has 19{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} of the global population, but only 7{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} of the arable land. The country will continue struggling to produce enough food.

“They will always need our products based on their physical limitations,” Westman said.

Further, Westman doesn’t see issues such as currency manipulation leading to a trade war despite frequent saber rattling from politicians.

“I don’t think it’s in either of our best interests to do that,” he said.

Still, issues remain. China has difficulty addressing quality and safety issues — known as sanitary and phytosanitary rules. That has actually done more to hold back China’s own export trade in agriculture. Also, the country is slow to reduce tariffs. Despite the struggles with pork prices, China has not been willing to lower its 27{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} tariff on imported pork to reduce the cost to consumers.

Phil Seng, president and CEO of the U.S. Meat Export Federation, said one of the problems with exporting more beef to China right now is the lack of formalized talks in 2011 between the U.S. and China on the topic. The two countries only met twice last year, but promised to talk more in 2012.

“So we’re looking forward to seeing more movement on these things this year,” Seng said.

Seng also affirmed some of Westman’s comments about China working to further thin out its smaller farmers and expand larger operations to maximize efficiency, create more predictable product quality and manage traceability.

“Traceability is now very big over there,” Seng said. “It’s not from a marketing standpoint but all the food-safety issues that they have had.”


© Copyright 2012 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

Posted with DTN Permission by Haylie Shipp



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