Billings, MT- R-CALF USA CEO Bill Bullard will testify at a June 22, 2010 hearing before the U.S. International Trade Commission (USITC) regarding opportunities for the exportation of U.S. beef to China. R-CALF USA, in its extensive 37-page pre-hearing brief concluded that conditions in China do not indicate that China would represent a substantial beef export market for the United States, though it could represent smaller, niche market opportunities.
R-CALF USA’s brief states, “For far too long Congress and the Administration have uncritically accepted the false assumption that increased exports of beef and other products derived from cattle benefit the nation’s hundreds of thousands of U.S. cattle producers in the form of higher cattle prices. While this assumption should be true, historical data do not support this claim.”
The brief goes on to explain that the current, concentrated structure of the U.S. cattle and beef market allows dominant meatpackers to not only pass any losses associated with lower wholesale beef prices back to cattle producers in the form of lower cattle prices; but also, to capture profits associated with increased export sales, without passing those profits back to producers in the form of higher cattle prices. “History shows that increased beef exports not only fail to translate into higher domestic cattle prices, but also, domestic cattle prices fell and remained severely depressed during the period when U.S. exports were rapidly increasing and reaching new record highs,” the brief states.
“We, therefore, urge extreme caution in working to increase access for U.S. beef exports in China until reforms are instituted to restore a fully functioning competitive marketplace for U.S. cattle producers,” wrote R-CALF USA.
R-CALF USA’s brief also describes current conditions in China and states that with 105 million head, China currently has the fourth largest cattle population in the world, behind India and Brazil, respectively. China is also the world’s fourth largest beef producer, behind the US, Brazil, and European Union (EU-27). Additionally, China consistently produces more beef than it consumes, further limiting U.S. trade opportunities.
Although China has the world’s largest population at 1.3 billion people, export opportunities are limited due to a low annual per capita consumption rate for beef. Chinese consumers eat only 4.3kg of beef (9.5 pounds carcass weight) of beef annually, contrasted by the US where consumers eat 40kg of beef (88 pounds carcass weight) of beef annually. This discrepancy is mostly caused by Chinese preferences for substitute protein products such as poultry and pork. Chinese consumers eat 9.1kg (20 pounds carcass weight) of poultry annually, and 36kg (70 pounds carcass weight) of pork, resulting in low demand for beef.
China’s economic growth has been cited as a factor that could increase Chinese demand for beef. R-CALF USA’s review of historical data, however, suggests other factors influence Chinese consumption patterns as China has experienced 10 years of uninterrupted growth in per capita incomes, but beef consumption during this period rose, fell, and stagnated. Another limiting factor as an export market is that China possesses one of the world’s largest grasslands, which could allow China to continue its present course of producing more beef than it consumes, even with increased per capita consumption. While some analysts cite widespread outbreaks of foot-and-mouth disease (FMD) as a factor limiting China’s ability to expand beef production, R-CALF USA pointed out that Brazil has managed to significantly increase its beef production despite being plagued with FMD.
R-CALF USA also pointed out that ongoing distortions caused by China’s undervaluation of its currency likely would result in U.S. beef being priced beyond the reach of even China’s middle-income population. The brief states that China’s currency undervaluation is an effective tariff on U.S. beef exports and unless this distortion is addressed the prospects of exporting beef to China at prices that would enable U.S. cattle producers to remain profitable remains dismal.
R-CALF USA’s brief recommends that the USITC work to 1) reverse the United States’ recently weakened disease import standards for countries with ongoing BSE outbreaks; 2) accept China’s 2007 offer to partially lift its current ban on U.S. beef; 3) facilitate the voluntary testing for BSE by private beef packers; 4) revise the current standard of “substantial transformation” used to determine the country of origin for international trade purposes by establishing that the origin for beef and products derived from cattle shall be the country where the animal from which the beef is derived was born, raised, and slaughtered; 5) thoroughly assess the impacts that current trade policies and trade agreements are having on the profitability and viability of the U.S. live cattle industry and take into account the market concentration and cattle procurement practices in the industry as well as the perishable nature of live cattle and the cyclical nature of the live cattle industry in the assessment; 6) thoroughly investigate and determine why U.S. cattle prices have responded inversely to rising and falling exports; and, 7) neutralize the tariff caused by China’s undervalued currency.
Source : R- Calf