U.S. must jump hurdles before beef heads to China

CALGARY — A deal that re-opened beef trade between the United States and China, an-nounced in May, won’t see major product flow for at least three years, says an American beef trade expert.

Don Close, vice-president of animal protein with Rabo AgriFinance, said it will take at least that long for the U.S. beef supply chain to meet China’s requirements.

“Our perspective is that it holds incredible, incredible opportunities but it’s also going to be a slow start,” Close said about beef trade with China.

“It’s our view that it will probably be three to five years before we really find the balance of the production requirements of the source verified traceability, of the ranch of origin or import on the cattle, the NHTC (non-hormone treated cattle) requirements and the (non) ractopamine. What does that mean for the U.S. production model and what items will China buy and how will we get that distributed?”

China has been closed to beef from the U.S. since 2003. It imports about US$2.5 billion worth of beef annually and is considered to be the world’s fastest growing beef market.

Speaking to those at the Canadian Beef Industry Conference, Close added that China attaches high consumer confidence to e-commerce methods of ordering meat on-line and having it delivered directly to homes.

That same trend is coming to North America, and has already started in major urban areas.

“If you do not think we’re going to rapidly transition our food purchases from conventional grocery stores to on-line, you’re kidding yourself. And there’s a whole host of ramifications that come with that.”

Conventional retail grocery stores are already losing market share to discount stores, big box stores and high-end specialty markets, said Close.

Competition from e-commerce will further alter current retail beef sales scene.

“Think about how we distribute meat, beef. We have boxes of primals come from the packer, go to a distribution centre and then … distributed to stores, and it is trimmed, portion cut, thrown in a foam tray and put on the counter.

“If we make this conversion to an e-commerce structure, is our industry really in the best position, and what transition will that require?”

Close also noted rapid development of Mexico’s cattle feeding and processing industry, which he deemed “mind boggling.”

Recent figures indicate Mexico has 1.6 million head on feed, compared to about one million in Canada.

“I think its really, really time that we persuade Mexico to … collect and distribute monthly cattle-on-feed numbers so we can calculate a North America cattle-on-feed number,” he said.

Mexico is also second only to Israel in the number of bilateral trade agreements it has with other countries.

Though Japan is considered the hot ticket in beef trade today, Close said an aging population there might make it less attractive in the future because import amounts are likely to decline.

The U.S., Canada and Australia compete for market share in Japan, even though they deal with tariff rate quotas that can trigger tariffs of up to 50 percent.

Close said Australia has large quantities of beef in inventory. That combined with a drought that could force higher slaughter could bring lots of low cost product into the global trading mix.

As for the U.S. situation, Close said the cow herd is growing but at a slower pace than the previous two years.

“We’re looking for another year, possibly two years of overall cow herd growth but at a really slow pace.”

About the author

Markets at a glance


Stories from our other publications