Trade

Kay’s Cuts: US beef to China is a trickle

Steve Kay, Cattle Buyers Weekly, 20/07/2017

A monthly column written exclusively for Beef Central by Steve Kay, editor and publisher of US Cattle Buyers Weekly

 

 

 

TO great fanfare, US beef re-entered China three weeks ago for the first time since 2003.

US Agriculture Secretary Sonny Perdue, the US Ambassador to China and industry leaders almost salivated as a beef rib roast was sliced before clicking cameras. And there was more talk of how important this moment was after 14 years of being shut out of this colossal market.

Symbolism is one thing, however. Reality is altogether different. And the reality is, US exports to China began at a trickle and will remain that way for some time until and unless US cattle producers radically alter their production practices.

The industry will have to comply with rigorous requirements involving animal identification and traceability, and prohibition of the use of hormones (HGP implants) and ractopamine (Optaflexx) widely used in US cattle feeding. China will not accept beef from cattle implanted with synthetic or naturally-occurring hormones.

The only cattle currently eligible for export to China are those in programs such as the Non-Hormone Treated Cattle (NHTC) program for the European Union, or cattle enrolled in age and source-verified programs or a company’s Natural program.

This means the amount of US beef eligible for export to China might take several years to build into a meaningful amount. The number of cattle enrolled in USDA’s NHTC program currently is only 150,000 to 175,000 head per year.

China requires that cattle must be traceable to their US birth farm using a unique identifier or if imported (from Canada or Mexico), to the first place of residence or port of entry. Carcases, beef and beef by-products must be uniquely identified and controlled up until the time of shipment.

This means that once tagged, calves have to be segregated from then on, and the beef from those finished cattle segregated from the moment the cattle are slaughtered to the time the beef leaves a plant. This will add additional cost from the US ranch to the feedlot and then in a processing plant.

“Feeding of Optaflexx and using implants are deeply ingrained in US cattle feeding. Cattle feeders will only abandon these practices if they are guaranteed a premium”

Cow-calf producers would have to start tagging their calves this fall (September-October) to be able to enroll them in USDA’s export verification China program. Then packers would have to start offering premiums for cattle if cattle feeders decided not to feed Optaflexx and not use HGP implants. Fully 90pc of all cattle on feed in the US are currently fed Optaflexx and implanted.

This means there is plenty of room for numbers of eligible cattle to grow, but that feeding the supplement and using implants are deeply ingrained in US cattle feeding. Cattle feeders will only abandon these practices if they are guaranteed a premium. Packers would then also have to get a premium for beef items sent to China to cover the premiums they would pay cattle feeders.

Mid-sized packer Greater Omaha Packing Co in Nebraska became the first company to export beef to China when it air-freighted a test shipment of 40 boxes of USDA Prime ribeyes, tenderloins and New York strips just two days after export protocols were announced. This beef ended up in restaurants in Shanghai.

Tyson Fresh Meats’ Lexington, Nebraska plant was next to send a shipment, which went to Sam’s Club. It was thus the first retail outlet in China to resume selling US premium quality beef. Sam’s, a unit of US retail giant, Walmart, sold the beef at its store in Beijing. The selection included boneless short ribs.

Eight US beef packers, one fabricator and one further processor are currently certified to export beef to China. But shipments of a few dozen tonnes won’t put even a dent in the US $2.6 billion of beef that China imports each year from other countries.

Any talk that China could be a US $100-200 million market for US beef is a fantasy, at least for now.

NZ exports commence

US beef will also face competition from New Zealand beef. NZ has just sent its first-ever export consignments of chilled meat to China. That product, destined for supermarkets around Shanghai, came from meat processor Greenlea Premier Meats based in Hamilton.

The consignment will soon be followed by a container shipment as part of a six-month trial to assess market acceptance of NZ chilled meat. New Zealand’s Alliance Group, another of ten processors chosen to take part in the trial, will be second after Greenlea to send chilled meat to China.

Until now, New Zealand has sent only frozen meat to China, in a trade worth NZ$1.14 billion for the year ended March 31 this year. One boost for air freighting chilled meat is that since 2012, the number of flights per week that Chinese airlines offer from New Zealand to China has risen from seven to 59.

It is worth noting that Australia’s beef exports to China in fiscal 2016-2017 fell 24pc year-on-year to 97,000 tonnes. The presence of lower-value product from Brazil continues to challenge Australian exports, says Meat and Livestock Australia. But grain-fed exports to China increased 11pc year-on-year to 26,000mt. Overall Australian exports for the year slipped below the one million mt mark for the first time since 2011-12. Volumes reached almost 963,000 mt, a 17pc decline year-on-year.

As Beef Central readers know well, two years of drought-driven herd liquidation, which saw the Australian cattle herd hit a two-decade low, resulted in a considerable reduction in beef available to exports. Grassfed beef exports were 22pc lower at 705,000mt, says MLA. Improved seasonal conditions across cattle-producing regions then incentivised producers to retain stock and start to rebuild their herds, underpinning the limited availability of product for export, says MLA.

It might take several years before Australia’s exports to China and elsewhere return to pre-drought levels. But Australia need not be concerned about US beef gaining a significant market share in China during that time. US beef will likely be a scarce, novelty item for Chinese carnivores for some years.

 

 

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