China, U.S. talk about relaxing beef ban in 2014

Recent talks between trade officials with the U.S. and China have spawned new optimism for relaxed export requirements that could mean good news for Tyson Foods and the U.S. beef industry in 2014.

During recent talks in Beijing between U.S. Agriculture Secretary Tom Vilsack and Chinese leaders, discussion of opening mainland China to U.S. beef trade was a theme, according to Joe Schuele, spokesman for the U.S. Meat Export Federation. Schuele said this is notable because beef is not always part of the discussion at the these annual trade meetings between the two counties.

China banned the imports of U.S. beef in 2003 after the discovery of Bovine Spongiform Encephalopathy, more commonly known as “mad cow” disease, that was traced to a cow in Washington state.

Demand for beef has exploded in mainland China over the past 18 months, according to Schuele, who said it is being fueled by higher incomes, diet expansion and a robust growth in restaurants such as steak houses. He said mainland China is a $1 billion business for beef – demand now being met by Australia and Uruguay, primarily, as U.S. packers like are shut out because of the decade-long ban.

“It hasn’t been that big of a deal until the last 18 months or so, when beef demand began to really skyrocket in mainland China. Their imports are up 500% over last year, In one month they are doing the volume of the entire year in 2011,” Schuele said.

According to information from the USDA and the USMEF, the value of U.S. beef exports in 2012 exceeded $5 billion and China’s business was visibly absent.

"Whenever the two sides are actively discussing beef access, there is reason for optimism," Schuele told The City Wire. "We cannot predict whether 2014 will be the year that the market finally reopens, but they have set July as a target date.”

Tyson Food reports that 12% of its $2 billion international beef sales went to China in 2012, through Hong Kong, a market that has remained open to U.S. beef. Vietnam and Mexico were also large customers for Tyson beef during 2012, comprising 12% and 13%, of international beef sales, respectively.

Tyson spokesman Dan Fogleman said the bulk of Tyson’s trade with China is for cow hides at this time and Tyson is not selling muscle meats to mainland China nor Hong Kong.

If mainland China were to open to U.S muscle meat imports Tyson Foods and other U.S. packers would be in position to benefit given the steady growth demand since 2011.

Travis Justice, economist with Arkansas Farm Bureau, said it has taken a decade for the U.S. beef industry to recover the full export volume it lost in 2003 with BSE and during that time packers in Australia, New Zealand and South America have capitalized in those regions where the U.S. is still shut out.

He said robust exports also raise the prices of calves for cow calf operators which are already sitting at record highs given the prolonged drought in much of the nation. The two-year drought forced higher slaughter numbers that has led to the smallest herd in 40 years.

The U.S. beef cow herd has decreased an estimated 1.85 million head since January, 2011. Recovery to pre-drought levels will likely take 3 to 4 years at least, said Darrell Peel, livestock specialist for Oklahoma State University.

"The United States is well-suited to produce and ship large volumes of specific cuts that will form the core of China's high-quality beef demand," notes Joel Haggard, the senior vice president for USMEF for the Asia-Pacific region.

He said the rewards would be large, if the trade challenges between the two countries could be overcome.

“With unfettered access, China is poised to gain a place in the top five U.S. beef export destinations, along with Japan, Korea, Mexico and Canada," Haggard notes.