China to Allow Imports of U.S. Beef, Ending 13-Year Ban

China soon will allow imports of U.S. beef, Premier Li Keqiang told business groups in New York last week.

China has mostly banned imports of U.S. beef since 2003 over concerns about bovine spongiform encephalopathy, or “mad cow” disease.

Being locked out of China, which consumes about 13 percent of the world’s beef, is estimated to cost U.S. producers more than $100 per head of cattle, according to Michael Underhill, chief investment officer at Wisconsin-based Capital Innovations.

China will import 825,000 metric tons of beef this year, the U.S. Department of Agriculture forecast in April. That is 24 percent more than in 2015 and up from just 11,000 tons back in 2002, when the U.S. accounted for 70 percent of the total.

“The whole export market has really taken off,” said Angus Gidley-Baird, senior analyst of animal proteins at Rabobank. That has created significant opportunities for producers—these days predominantly from Australia and Brazil.

Any U.S. gain is likely to come at the expense of Australia’s market share, despite Australia’s advantage of a free-trade agreement with China. Already its exports to China are down 35 percent this year, as a shortage of animals available for slaughter—after a long drought ended, allowing farmers to restock their herds—sent prices to record highs. Brazil has overtaken Australia as China’s top supplier.

“Australia has already found itself increasingly getting priced out of that market, and competition is getting quite intense with South America,” said Phin Ziebell, senior analyst and agribusiness economist at National Australia Bank. “Adding the U.S. to that is probably not great for Australia suppliers.”

The impact on Brazil of the U.S. return is likely to be smaller, given that it undercuts both the U.S. and Australia in price.

Source: Wall Street Journal