China market holds promise, but risk involved

posted June 26, 2017 8:15 a.m. (CDT)
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by / Heidi Clausen, Regional Editor |

Earlier this month, there were two major developments regarding trade between the U.S. agriculture industry and China.

After a more than 13-year hiatus, the first shipment of U.S. beef was sent to China under a new agreement between the two countries. The shipment left Nebraska’s Greater Omaha Packing Co. on June 14.

China halted U.S. beef imports in 2003 after the discovery of a single case of BSE, or mad cow disease, in Washington State. The recent load shipped to China was an airship container of boxed steaks.

Officials say they aren’t sure how quickly the Chinese market for beef will take off, but they’re hopeful that once the Chinese get a taste of U.S. beef, they’ll be hungry for more.

Nebraska Gov. Pete Ricketts said the Chinese market holds tremendous potential, as its worth has gone from about $139 million in 2010 to about $2.6 billion in 2015.

“As one of the world’s largest importers of beef, China has long been an area of great opportunity for the U.S. beef industry,” said House Agriculture Committee Chairman K. Michael Conaway, R-Texas.

The second exciting development came the next day on the dairy side of the industry, as the U.S. and China inked a memorandum of understanding that will increase access to China for more than 200 U.S. dairy exporters in the short term and pave the way for more U.S. entrants in the future.

This action — sorely needed in light of this country’s abundant milk supply — could create big, new opportunities for dairy farmers and processors and the milk, cheese, infant formula and ingredients they produce.

The U.S. shipped $384 million worth of dairy products to China in 2016, making it the industry’s No. 3 single-country export market, behind Mexico and Canada. With Chinese demand for imported milk and other dairy products growing, the potential for U.S. exports has been high, but market access has been a challenge.

In 2014, the Chinese government implemented a new food-safety regulation mandating that a nation must register and certify dairy facilities that want to ship to China and meet Chinese food safety standards. It was more a question of compliance with regulations between two countries with rigid regulatory systems than one of U.S. product safety.

Finally this year, the U.S. and Chinese governments reached an accord on dairy trade assurances that will open the door to more exports from the U.S. The MOU formally outlines a process in which third-party certification bodies will audit U.S. dairy facilities to ensure compliance with Chinese rules.

“China is already the world’s largest dairy importer, even though per capita consumption remains far below that of the U.S., Europe and even its Asian neighbors like Japan and South Korea. The potential to increase exports there is tremendous,” said Tom Vilsack, president and chief executive officer of the U.S. Dairy Export Council.

Before U.S. companies can begin shipping, plants must officially be listed as registered on the Certification and Accreditation Administration of the People’s Republic of China website; that is expected to happen soon.

“We … want to work with everyone involved to streamline (the process) in the future,” said Jaime Castaneda, USDEC senior vice president of trade policy.

It’s tempting to pin all our hopes on China. After all, this is a huge market with a lot of potential due to its rising middle class and its demands for higher-quality products and more protein. But the path forward in trade with China could be tricky, particularly for beef, Brenda Boetel, ag economist at UW-River Falls, told producers at a cow/​calf field day this spring.

“The groundwork we lay now with China and Japan will be felt for years to come,” she said.

So far, China isn’t offering the desired premiums for U.S. beef, she said, so the U.S., with its expanding beef production — up an estimated 4 percent this year — must further expand export opportunities.

“We need to focus on Japanese markets the next few years,” she said. “They can afford and like our highly marbled beef.”

Also, not all beef is the same in China, which also takes in water buffalo from India, Boetel said. “We are overpriced relative to most of China’s consumers, so that market won’t just open up to the U.S.”

Still, these tentative moves to welcome more U.S. beef and dairy into the Chinese market are exciting opportunities for American agriculture that hopefully translate into better prices at the farm level.

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