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U.S. and China beef trade begins a new long-game strategy on regulations

Amy Schutte for Progressive Cattleman Published on 22 September 2017

An opportunity to be a part of the exploding $2.5 billion Chinese beef import market was met with initial excitement and enthusiasm from the American beef industry, but experts say it will be a long, slow road.

The beef market opportunity for China’s population of 1.3 billion adds up fast despite the fact that beef is the least-consumed protein in the country, at a mere 13 pounds per capita, according to the USDA, and now that the regulations are officially set in place, the beef industry must choose how they move forward.

Brett Stuart, president of Global AgriTrends, visited China in May 2017 and says the chief question asked by Chinese importers has to do with price.

“It’s a very price-sensitive market,” Stuart says. “It is being touted as a great deal, but it’s not commercially viable on a large scale. It’s not a market for infinite potential under this agreement.”

Meeting Chinese standards

Shipping to China

The trade agreement regulations call for a number of standards Stuart says will make the journey difficult and expensive for the U.S. beef industry, which will potentially price the products out of most retailers’ range.

With regulations requiring cattle to be traceable to the farm of origin, zero tolerance for beta agonists and no synthetic hormone residues, Stuart estimates there are currently only a very small percentage of cattle that qualify. And for producers to eventually meet those standards, it may cost upward of $275 per head, not to mention the sustainability of providing enough cattle to packing facilities for a China-verified shift.

“China has always been good at finding ways to restrict or manage U.S. agriculture, and the beef deal is an example of that,” he says. “Were it not for the growth-promotant restriction, we could do it.”

Joe Schuele, spokesman for the U.S. Meat Export Federation, says the restrictions China requires for its beef trade are no different for the U.S. than any other country.

“These restrictions are consistent with what China asks of other suppliers,” he says. “Our negotiators were able to create some terms of access that other countries don’t have, like chilled meat and offal items. China definitely didn’t single us out, but these restrictions are somewhat unique to China, which presents a challenge.”

Both Stuart and Schuele agree the new agreement is complex, challenging and should be viewed with a long-term game plan in mind.

“Limitations will hold back the industry-wide volumes, but for those who do participate, we can see some really good opportunities there. You always want to have full access to a market, and you want 100 percent of cattle eligible, but that wasn’t going to happen with China,” Schuele says.

“Now that we understand the requirements, the beef industry will have to decide for themselves how they want to meet them. But at least we have an opportunity that we didn’t have for 13 years.”

The road back

American beef was pulled from China in 2003 after a threat of bovine spongiform encephalopathy (BSE) and is now facing the challenge of remarketing itself to consumers. Schuele says their marketing efforts will be focused on metropolitan areas and high-end retailers.

“High-end restaurant and retail sectors will see the most activity to start with and that’s certainly where we will look to gain the most immediate foothold,” Schuele says. “As more cattle are produced that are eligible for China, you will see more economically priced cuts moving that way. People will think this will be one of our largest markets, but we need to temper that enthusiasm a little bit. We expect Japan and Korea to continue to be bigger exports for us.”

While beef from the U.S. won’t begin pouring into China in large quantities any time soon, for those producers looking for a catalyst to reinvigorate their interest in source- and age-verification and hormone-free products, this provides a new opportunity.

“It takes time to market and build demand,” Stuart says. “We don’t know the potential yet, but it will be a slow process. We are good at doing what we get paid to do here in the U.S. I advise producers to contact feedlots and packing plants and find out if there is an opportunity there. Be very cautious; we don’t really know what China will look like for the U.S.”

Anticipation in the field

While beef producers initially expressed excitement for the deal, the reality of the requirements on the industry are still unknown.

The Winecup L Cattle Company in Idaho, owned by Laurie and Bill Lickley, is GAP 4- and NHTC-certified. Their beef is marketed into conventional, natural and grass-fed markets, and the Lickleys are a strong advocate for U.S. beef quality and open markets.

“We have a premiere protein here in the U.S., and Chinese consumers want and like our product. Now we just have to get all of the trade regulations ironed out,” Laurie Lickley says. “There are 2.3 million head of cattle in Idaho and 1.6 million people here, so we have a great export opportunity for our product, and we need to take advantage of that. There was initial excitement over the fact that China is now open, but I think we are looking at an extremely complex issue.”

Producers like the Lickleys are poised for export opportunities, but much hinges on the economic demand for U.S. beef in China as well as the response from the U.S. beef industry.

Dwayne Mays, owner of the Ogallala Livestock Auction Market in Ogallala, Nebraska, is excited about the prospect of the new export market. His market is NHTC-certified, and Mays says they have remained certified to be ready for these types of opportunities.

“Any type of news like this is good news when we open up more trade,” he says. “It’s a little new to all of us, but we like to be on the cutting edge of that and take a leadership role. The entire industry will have to step up though; it can’t just be one end of the industry, everyone will have to get involved.”  end mark

ILLUSTRATION: Illustration by Sarah Johnston.

Amy Schutte is a freelance writer based in Idaho.

Requirements for export to China

Beef exports to the People’s Republic of China must meet specified requirements under the USDA Export Verification (EV) Program. These requirements apply to U.S. companies – slaughterers, fabricators and/or processors – that supply beef and beef products as listed on the USDA Food Safety and Inspection Service (FSIS) website.

The specified requirements for exports to China include:

  • Beef and beef products must be derived from cattle that were born, raised and slaughtered in the U.S., cattle that were imported from Canada or Mexico and subsequently raised and slaughtered in the U.S., or cattle that were imported from Canada or Mexico for direct slaughter

  • 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

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

  • Chilled or frozen bone-in and deboned beef products are eligible for shipment – for a complete listing, refer to the FSIS Export Library

  • Carcasses, beef and beef products must be uniquely identified and controlled up until the time of shipment

Only eligible products may be issued an FSIS Export Certificate. The Agricultural Marketing Service (AMS) verifies that cattle meet the specified product requirements, as outlined in QAD 1030AA Procedure, through an approved USDA Quality System Assessment (QSA) or USDA Process Verified Program (PVP).

These programs ensure that a company’s requirements are supported by a documented quality management system and are verified through audits conducted by AMS.

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