Chinese market likely a key component to future expansion of U.S. beef exports

Friday, April 21, 2017

It has been sort of the ultimate tease to the U.S. beef industry since the fall of 2016: The Chinese government’s expressed willingness to open China to American-produced beef.

Although talks have been ongoing, no agreement has been reached on protocols for U.S. beef to move into the Chinese market. There is no indication of when such access might be realized or what conditions or restrictions will be attached to that access.

“Questions of traceability and use of beta agonists and other technologies are likely to factor into U.S. access to Chinese beef markets,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. “Still, there is significant hope and anticipation relative to the opening of the China marketplace. There are a lot of potential customers for U.S. beef in China.”

China has been the fourth-largest beef-producing country for at least the last 20 years. For most of those years, China also has been the fourth-largest beef-consuming country, although it moved up to be the third-largest beef-consuming country in 2016 and is projected to be the second largest in 2017.

Per capita beef consumption of beef in China is relatively low but has increased by about 20 percent in the last six years to a projected 2017 level of 12.7 pounds.

“Growing per capita consumption multiplied by an estimated 2017 population of 1.39 billion people is pushing total beef consumption in China ahead of the European Union and second only to the United States,” Peel said.

Economic growth is the principal driver of beef demand in China with an emerging middle class and rapid urbanization dramatically impacting beef demand. Population growth in China is slow, less than 0.5 percent per year, but still adds several million additional consumers each year.

“The role of China in global beef markets has evolved rapidly in recent years,” Peel said. “Despite being a large beef producing and consuming nation for many years, China has never been a player in global beef markets until recently.”

For many years China neither imported nor exported much beef. However, since 2012, growing beef consumption has resulted in a rapid increase in beef imports as consumption outpaced beef production in Asian nation.

China emerged as the second-largest beef-importing country in 2016. Major beef suppliers to China in 2016 were Brazil, 29 percent of total Chinese imports; Uruguay, 27 percent; Australia, 19 percent; New Zealand, 12 percent; and Argentina, 9 percent.

In 2017, Chinese beef imports are projected to be 950,000 metric tons, an increase of 17 percent from 2016.

The United States has not had access to China for beef exports since 2003, though some U.S. beef reaches the country unofficially through Hong Kong and Vietnam. Of course, the rapid growth in Chinese beef imports recently provides significant export market potential for U.S. beef.

Peel said the long-term potential of beef exports to China is likely larger and more certain while short-term prospects may be more modest as U.S. beef establishes market share and official shipments displace unofficial shipments.

“Still, if U.S. access to China happens rather quickly, our 2017 U.S. beef exports could be boosted by an additional 1 percent to 3 percent this year in addition to the currently projected 6 percent to 7 percent year-over-year increase in beef exports,” Peel said.

Prior to 2012, China represented less than 0.5 percent of total global beef imports. Projected 2017 beef imports in China will exceed 12 percent of global beef imports.

“It seems clear China will continue to become an increasingly major factor in global beef markets,” Peel said. “Prompt U.S. access to the Chinese beef market may well be the most important component of expanded U.S. beef export potential in the coming years.”

The 2017 Southern Agricultural Economics Association Lifetime Achievement Award recipient, Peel joined the OSU Division of Agricultural Sciences and Natural Resources in 1989. His economic insights are featured weekly on DASNR’s award-winning agricultural television program SUNUP, viewable online at http://sunup.okstate.edu.