January 17, 2013

China: missing a beefy opportunity


00483_BeefKoreaThis week, I read that China has approved four additional Canadian beef facilities that will now be able to export beef to China. These newly approved establishments will increase the Canadian export capacity for beef in a market estimated by the industry to be worth approximately $20 million annually.

Timeout! Nothing against Canada, but why is China investing in Canada and not looking towards the U.S. beef supply?

What is China’s beef with U.S. beef? As of December 24, 2003, China has banned U.S. beef from being imported due to the BSE concerns. Beijing later lifted the outright ban but the U.S. has been unable to overcome continued barriers involving the inspection of the beef. More recent talks with China came up with a staged-basis solution to getting U.S. beef into the country.

Who is our competition for getting beef into China? China allows beef imports from seven countries, including Costa Rica which was approved recently. The main competitors include Australia, Uruguay, New Zealand and now, Canada.

Worldwide beef exports from the U.S. are strong. According to the U.S. Meat Export Federation (USMEF), year-end reports for 2012 reported weekly exports were up 4 percent from 2011. However, for the leading markets of Mexico, Japan, Korea, Vietnam/Hong Kong, Russia and Taiwan, reported exports were 1 percent lower. Export growth in 2012 was led by Vietnam/Hong Kong (+18 percent) and Russia (+12 percent), with Japan and Canada each up 1 percent. Exports were lower for Korea (-9 percent), Mexico (-7 percent) and Taiwan (-39 percent).

Interestingly enough, some of those exports to the Southeast Asia region are making their way into China (off the record).

There is a potential for having a future with China in the beef export market. Even at a relatively low per-capita consumption level, China still consumes about 10 percent of total global beef production. Challenges to China’s domestic beef industry, including high input costs, are making it increasingly likely that China will have to increase beef imports to meet growing demand, led by a booming restaurant industry.

What is the potential if we can open up this export market? U.S. beef exports would likely reach $200 million in value in the first full year of access, swiftly putting China among the top five export markets.

In a recent food exhibition in China with USMEF to promote U.S. pork, Joel Haggard, USMEF-Asia/Pacific senior vice president said, “…almost every Chinese meat buyer we met asked when U.S. beef will return to the market.”

It seems that Chinese meat buyers and consumer want U.S. beef, but politics are getting in the way. Thankfully, USMEF is working to overcome this issue to allow U.S. beef back into China. China’s market for beef has changed considerably since U.S. beef’s exit a decade ago. Unlike pork and poultry production, which has grown due to an influx of private investment and government subsidies, the Chinese beef industry has languished. Domestic production has fallen 10 percent over the past 5 years, from 6.13 million metric tons (13.5 billion pounds) in 2007 and 2008 to an estimated 5.54 million metric tons (12.2 billion pounds) this year, according to USDA statistics.

Hopefully this will provide for a future break to take over from our many missed opportunities. 谢谢 (thank you), China.

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