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  • Published on: 14th September 2019
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U.S Beef exports to China

Introduction

As we all know China has the largest population and the third largest land in the whole world, but with the only 11.3% arable area of land area (fig.1), China became one of the world's largest importer of food products. After 14 years banned U.S beef after a cow in Washington state tested positive for the BSE as known as mad cow disease in 2003, China finalize details to send U.S beef to China in May 2017. In 2013, China imported nearly $2.6 billion of beef and beef products. Because back in 2013, the ban for U.S beef was still existed, which made Australia holds about 47 percent market share in China by volume and 51 percent by value. Uruguay is in the No. 2 position in China, which holds 27 percent of the whole quantity and value, New Zealand holds 17 percent, Canada holds 8 percent and Argentina holds 2 percent(fig.2).

Figure 1

China Arable Land (% of total land), 2014

Source: World Bank

Figure 2

Chinese beef import market share, January-June, 2013

Source: U.S. Meat Export Federation

On June 12, 2017, the USDA Food Safety and Inspection Service updated the Export Requirements for the People's Republic of China with the technical conditions that must be met to export beef to China. Accordingly, U.S. beef exports must meet the requirements of the USDA Agricultural Marketing Service (AMS) Beef Export Verification (EV) Program for China. The China beef EV program has five specific requirements:

1. Beef and beef products must be derived from cattle that were born, raised, and slaughtered in the United States; cattle that were imported from Canada or Mexico and subsequently raised and slaughtered in the United States; or cattle that were imported from Canada or Mexico for direct slaughter.

2. Cattle must be traceable to the U.S. birth farm using a unique identifier or, if imported, to the first place of residence or port of entry.

3. Beef and beef products must be derived from cattle of less than 30 months of age.

4. Chilled or frozen bone-in and deboned beef products are eligible for shipment, as well as various offals (i.e., organ meat and parts such as tongue).

5. Carcasses, beef, and beef products must be uniquely identified and tracked up until the time of export. (USDA, 2017)

Influence

For U.S

The North American Meat Institute called the terms of the deal “very favorable.” “The demand in China for high quality U.S. beef is high, so opening the market offers great potential for our businesses and the U.S. economy as a whole,” said Meat Institute President and CEO Barry Carpenter. (The Hill, 2017)

"About 10 percent of U.S. cattle may meet traceability requirements," Derrell Peel, an agricultural economist at Oklahoma State University in Stillwater, said in a telephone interview. "If we see a noticeable increase in sales volume by the end of the year, that will be promising. It takes time to develop trade." (Bloomberg Markets, 2017)

According to all the information above, this is absolutely a great news for the U.S. Especially the average production of U.S beef was up 0.9 percent compare to the data from last year (fig.3), but the price currently is facing downward pressure. Monthly cattle prices are down to the lowest level in nearly five years. After the policy of U.S beef exports to China changed, this would open an enormous market for beef producer in the U.S.

Figure 3

U.S Beef production rate-of-Change, 2010-2016

Source: The national provisioner

For China

China imports an estimated $2.6 billion worth of beef every year, which makes it the second largest beef importer all over the world. Nowadays, the demand of beef in China has raising rapidly, in some of the larger cities like Shanghai and Beijing, along with the quality of life improved, which makes a gap between local beef supply and demand (fig.4). U.S beef exports to China, means that U.S beef will share a huge percent of beef import market with Australia and Brazil beef. This is also a great chance for cattle in China to improve their technology in beef production and starts to fit in with the international rules. Import U.S beef is not only import the meat, but also import foreign slaughter and segmentation technology, learning how to low cost, standardization, in order to improve the level of development of beef cattle industry.

Figure 4

China's Beef supply, 2009-2015

Conclusion

In one hand, U.S beef exports to China is a great opportunity for the U.S beef industry, this will help the beef production and price achieve a reasonable balance by facing lower price pressure, and produce better beef. Even thought, there's only about 10 percent cattle meets the requirement of U.S beef exports to China, who said this is not a good start for the beef industry.

In the other hand, import U.S beef, gives Chinese people another choice on buying beef. The first batch of U.S beef sold out in two days right after they arrived. The price for the first batch was higher than other import beef, mainly reason is the shipment, they choose air transport as their shipping method, which makes a huge price difference compare to shipping via boat. But in the future, after large-scale imports, freight and other costs down, U.S beef will have a certain price advantage through other beef export countries.

Reference

Arable land (% of land area). (n.d.). Retrieved October 09, 2017, from https://data.worldbank.org/indicator/AG.LND.ARBL.ZS?end=2014&locations=CN&start=2014&view=map

China bans U.S. beef. (2003, December 24). Retrieved from http://www.cnn.com/2003/BUSINESS/12/24/madcow.reax/

U.S. Meat Export Federation. (n.d.). Retrieved October 09, 2017, from https://www.usmef.org/chinas-beef-imports-continue-to-soar/

U.S., China Finalize Details to Send U.S. Beef to China. (2017, June 12). Retrieved October 09, 2017, from https://www.usda.gov/media/press-releases/2017/06/12/us-china-finalize-details-send-us-beef-china

Beef Exports to the People's Republic of China. (2017, May). Retrieved from https://www.ams.usda.gov/services/imports-exports/beef-ev-china

Needham, V. (2017, June 13). US, China strike deal on beef exports. Retrieved from http://thehill.com/policy/finance/337522-us-china-strike-deal-on-beef-exports

Durisin, M., & Wilson, J. (2017, June 12). U.S. Beef Exports to China Closer to Restarting. Retrieved from https://www.bloomberg.com/news/articles/2017-06-12/u-s-beef-exports-to-china-closer-to-restart-as-rules-published

Signs of growth in U.S. beef production despite downward price pressure. (n.d.). Retrieved October 09, 2017, from http://www.provisioneronline.com/articles/103794-signs-of-growth-in-us-beef-production-despite-downward-price-pressure

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