CALF_News_August_September_2019

16 CALF News • August | September 2019 • www.calfnews.net THE OF THE ART DEAL U.S. Beef Trade with China Remains Small and Fights for a Foothold U nited States beef exports to China resumed in June 2017 after a 14-year halt. That year, the United States sold only $36 million of U.S. beef to China. In July 2018, the Chinese raised the tariff on U.S. beef from 12 percent to 37 percent as part of the ongoing trade war between the United States and China. On June 1, 2019, the Chinese increased the tariff on U.S. beef to 35 percent for live cattle, 37 percent for fresh or chilled U.S. beef, 45 percent for fresh or chilled carcasses, and 50 percent on frozen carcasses – too high for U.S. beef to remain competitive. In 2018, the United States exported $60 million of beef to China. The trade war between the United States and China played a prominent role in the slow sales, as did the need to build supply chains that no longer existed and to learn to deal with Chinese regulations. In reality, U.S. beef exporters have not gained a foothold in China, and China remains a small market for U.S. beef. The Chinese beef market faces turbulent market forces and change in 2019. The domestic beef cattle inventory will shrink 3 percent to 91 million head, according to the USDA, even though prices and profits remain strong. The reduction will occur because of structural problems in the Chinese cattle industry, not demand for beef, which continues to rise. Approximately 93 percent of Chinese beef cattle operations have fewer than 100 head. These small operations face obstacles that prevent them from expanding. Operations of that size find it hard to obtain capital. The trade war between China and the United States has caused feed costs to rise, and Chinese bureaucrats have cracked down on environmental regulations. Given the time it takes to see a return on an investment in an expansion, and the uncertainty created by the trade war and Chinese environmental regulations, most small cattle operations have chosen to not expand and some have even exited the industry. Chinese cattle producers feed their cattle rations composed of 75 percent corn and 5-10 percent soybeans. A lower-than-expected domestic corn crop in 2019 has con- strained corn in China. The Chinese government has ordered farmers to plant more soybeans, but China will import 95 percent of the soybeans it uses in 2019. Brazil SOURCE: USDA (metric tons) By David F. Crosby Contributing Editor The Chinese market offers American beef producers some 1.4 billion consumers and a growing middle class that wants beef on the menu. China now rates as the No. 2 nation in beef consumption, second only to the United States. Its beef cattle inventory ranks as the third largest in the world, surpassed only by Brazil and India. Despite its large beef cattle inventory, to feed its huge population China imports $9 billion a year in beef. Some experts claim that in a fair trading environment, U.S. beef could capture up to $4 billion of the Chinese beef market. Unfortunately, a fair trading environment for U.S. beef in China doesn’t exist. WORLD BEEF CONSUMPTION: Ranking of Countries WORLD 60,910,000 Rank Country 2018 % of World 1 United States 12,593,000 20.67% 2 China 8,530,000 14% 3 Brazil 7,935,000 13.03% 4 European Union 7,825,000 12.85% 5 Argentina 2,565,000 4.21%