U.S. will Soon Export Beef to China – a Market Estimated to be Worth over $2 Billion – and 'Nebraska has Much to Gain'
Jun 8, 2017
Nebraska’s beef industry is celebrating a long-sought win with news that China has set a July deadline for resuming imports of U.S. beef after a 13-year ban.
But it remains to be seen just how loudly cattle producers should cheer, analysts said.
There are many details still to be learned before the July 16 deadline — things like how much beef China will buy from the U.S., what any tariff structure would look like, and what if any restrictions there will be on how the imported beef is raised. The tentative agreement was announced late Thursday.
“We don’t know what the details are at this point,” said said at Omaha commodities analysis firm Advanced Economic Solutions. “That’s a big question mark in terms of ‘Will it really happen in any meaningful way, or is it a lot of lip service?’ ”
If exports resumed at levels they left off in 2003, when China closed to U.S. beef after a case of mad cow disease, those sales would represent only about a half percent of current U.S. exports, Jones said, although the potential today is much larger than that.
Chinese beef imports grew to $2.5 billion in 2016, from $64 million at the time China stopped buying U.S. beef, according to the office of Nebraska Gov. Pete Ricketts.
Beef consumption has been on the rise in recent years in China, and the nation has emerged as one of the top beef markets in the world, said Kate Brooks, professor of agricultural economics at the University of Nebraska-Lincoln. She said China has significant potential as an export market, but cautioned it could take several years for the U.S. to realize that potential.
“In the short run U.S. beef will have to establish market share in China,” she said. The U.S. will compete with imports from countries including Brazil and Australia.
Exports in the short term also may be limited by any restrictions on U.S. beef, including rules regarding traceability and any restrictions on the use of hormones, Brooks said.
The U.S. Commerce Department said Thursday night that China will allow the imports following one more round of “technical consultations,” and that conditions would be consistent with international food safety and animal health standards.
Whatever the size of the real opportunity in China, Nebraska stands to benefit as much or more than any other state, officials said.
The state is a top cattle producer and leads the nation in feeding and slaughtering cattle, with several major packing plants. Nebraska farmers, who grow the corn that fattens the cattle, also stand to benefit, as do the many related agricultural businesses.
“As a top producer of beef, Nebraska has much to gain from a market estimated to be worth $2.6 billion,” Nebraska Farm Bureau President Steve Nelson said. “With Nebraska beef exports alone reaching $1.126 billion last year, Nebraska’s cattlemen and women stand ready to meet the growing demand in this new market.”
Ricketts welcomed the news, after the work he and other state officials and groups like the Nebraska Cattlemen have done to try to position Nebraska for the opportunity ahead. The Governor’s Office said the State Department of Agriculture’s international trade officer, Stan Garbacz, will be in China this week “to ensure that the state maximizes the potential opportunity for the Nebraska beef community.”
Hopes are high for demand: U.S. Agriculture Secretary Sonny Perdue tweeted Friday, “Once the Chinese people taste U.S. beef again, they’ll want more of it.”
Craig Uden, a Nebraska cattle feeder who serves as president of the National Cattlemen’s Beef Association, said the industry looks to reach 1.4 billion new consumers in China.
“It’s impossible to overstate how beneficial this will be for America’s cattle producers,” he said.
Though he acknowledged there are still details to work out, Pete McClymont, executive vice president of the Nebraska Cattlemen, still was celebrating.
“It’s not every day you wake up to the opening of a $2.5 billion beef market, so this is good stuff,” he said.
Ricketts led a 2016 trade mission to China and made a 2015 trip to Beijing during which he said he urged the Chinese government to reopen the market.
Nebraska Department of Agriculture Director Greg Ibach said, “We have been anticipating this announcement and have already been working to build key partnerships in China for Nebraska beef.”
Ibach hosted a Chinese delegation to Nebraska in September. Beef processor Greater Omaha Packing also played a role with that delegation, said company President and Chief Executive Officer Henry Davis.
The group met with U.S. Department of Agriculture officials and company executives at his South Omaha plant, and toured the facility, Davis said. They discussed criteria for opening the China market, although Davis did not say what criteria.
It was later that month that China said it would lift the ban.
Davis said he’ll participate in other upcoming efforts to develop the market for exports to China.
“We believe that everything in today’s announcement will lead to positives for all sectors of the American agricultural market,” Davis said.
Trump administration officials hailed the deal as a significant advance toward boosting U.S. exports and closing America’s trade gap with the world’s second-largest economy. U.S. trade experts offered a more muted assessment, calling the agreement a modest fulfillment of past assurances made by China.
In addition to the beef exports, the deal enables U.S. companies to export liquefied natural gas to China. It will also lower long-standing barriers that have affected the operation of American financial companies in China.
Commerce Secretary Wilbur Ross hailed the agreement, coming on the heels of President Donald Trump’s April meeting with President Xi Jinping, as “a herculean accomplishment.”
Still, trade experts questioned the magnitude of the deal.
“These are modest moves which by themselves will not have much effect on the U.S. economy,” said David Dollar, a senior fellow at the Brookings Institution and former Treasury Department official.
It remains unclear how far China will go to allow more American exports. Previous administrations have hailed market-opening agreements only to be left disappointed.
“The key in these negotiations is specifics that are enforceable — literally, the devil is in the details,” said Scott Mulhauser, a former chief of staff at the U.S. Embassy in Beijing.
The agreement grew out of negotiations the countries agreed to start after Trump’s meeting at his Mar-a-Lago estate with the Chinese president.
America’s trade deficit in goods and services with China totaled $310 billion last year, by far the largest imbalance with any country.
This article contains material from the Associated Press and the Omaha World-Harald. For more information, click on the following link: http://www.omaha.com/money/u-s-will-soon-export-beef-to-china-a-market/article_19c2d400-372a-11e7-b0a5-f322d810c743.html