While the possibility of exporting beef to China should be seen as very positive for US beef producers, there is a long way to go before the first loads cross the briny deep, said Josh Maples, assistant professor in the Department of Economics at Mississippi State University.
Maples made the statement for the Livestock Marketing Information Center’s In The Cattle Markets. The resurgence of the topic in media stories last week is a reminder of just how important this could be to the industry, he said.
The official Chinese market has been closed to US beef since Bovine Spongiform Encephalopathy, or “Mad Cow Disease,” was discovered in an imported cow in December of 2003. Only a smattering of US beef is reported to have found its way into the country through the black market since then, even though virtually every market around the world has reopened to US beef.
Last week’s announcement was very similar to one made in September of 2016, Maples said. However, no actual trade has emanated from the earlier statement.
The Chinese market represents a multibillion-dollar market and has the greatest growth potential for beef consumption of any country in the world, he said. China has a large and growing middle class and has seen steady increases in beef consumption.
China and Hong Kong combined to be the largest beef importers in the world in 2016, Maples said. The US already exports to Hong Kong, but 87% of China’s 2016 beef imports were from Brazil, Uruguay, Australia and New Zealand.
CRACKING THE PAPER CEILING
If the US is to export beef to China, a bilateral agreement over trade specifications must be reached by both countries, Maples said. The three-step process for resuming trade was discussed in a USDA Foreign Agriculture Service report last September.
The first step was lifting the ban on US beef. The second and third steps involve negotiating export protocol conditions and an audit of these protocols.
The report also pointed toward the discussion of traceability requirements as part of the protocol negotiation, he said.
Other analysts have said that requirement for traceability could limit the amount of beef sent to China since the US operates on a series of verified export agreements in which the USDA verifies that the importing country’s protocols are being met. While this allows market access on a limited scale, it is hardly a nationwide trace-back system that would net the US cattle industry the most access to China.
China also closed the door to Canadian beef in 2003 in response to several BSE cases there. By June of 2010, China announced it would reopen imports of Canadian beef in stages beginning with frozen beef from cattle under 30 months of age.
China required that each animal have a unique identity, the farm of origin, and proof that they were under 30 months at slaughter. Canadian beef now has access to China.
CASH CATTLE QUIET
Only 120 head of Nebraska cattle traded on the fed cattle exchange auction Wednesday at $120 per cwt on a live basis.
Cattle traded last week in a range from $128 to $130 per cwt on a live basis, up $2, and $205 to $208 dressed, up $2 to $3.
The USDA’s choice cutout Monday was up $2.05 per cwt at $214.13, while select was up $1.30 at $200.78. The choice/select spread widened to $13.35 from $12.60 with 50 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $136.12 per cwt, up $0.30. This compares with the Apr settlement Monday of $139.05, up $1.25.