Expectations for U.S. beef exports to China this year are being tempered by the COVID-19 pandemic, but shipments have already begun and they’re expected to continue strong despite the spread of the virus.

So long as slaughterhouses and packing plants can continue producing beef – domestic output is taking a hit as workers get sick – U.S. exports are expected to supply more to the Chinese than ever before.

Now that China has thrown open its beef market to the U.S. under new guidelines set in the “phase one” deal, U.S. Meat Export Federation economist Erin Borror tells Agri-Pulse she predicts the U.S. will export $1.2 billion worth of beef to China and Hong Kong this year.

That’s about $700,000 less than USMEF was projecting earlier on, but it’s still significant in light of the fact that the U.S. has never “sold more than a thimble full” of beef to China before, in the oft-repeated description by Gregg Doud, the U.S. Trade Representative’s top ag trade negotiator.

And it would be a whopping 43% increase from last year, according to Borror.

Three months ago, Doud was predicting that the U.S. would begin shipping large quantities of beef to China by May. And to some extent that has happened ahead of schedule.

Chinese importers purchased 1,500 metric tons of U.S. beef earlier this month. While not a huge number, it was the highest weekly purchase ever for China, says USMEF spokesman Joe Schuele.

But demand for beef isn’t what it was three months ago. Restaurants are starting to reopen, but China is still fighting the spread of COVID-19 and the economy is far from a full recovery.

“We’re cautiously optimistic about moving more beef to China, but … there are still a lot more hurdles there, especially with the food service of higher-end dining still a long way to go before it gets back to normal,” Schuele said.

But supermarkets are open and demand for protein is strong after nearly half of China’s swine herd was wiped out as the country fought the spread of African swine fever.

So now that China has agreed to remove key import restrictions, such as a zero-tolerance policy for growth hormone residues in beef as well as its ban on beef from cattle over 30 months old at slaughter, the country is open for imports if the U.S. can ship them.

“There’s a lot of interest in developing those supply chains,” says Kent Bacus, director of international trade and market access for the National Cattlemen's Beef Association. “The good news for the U.S. beef industry is that our government has done a fantastic job of creating new rules of trade with China.”

Kent Bacus, NCBA

Kent Bacus, NCBA

In fact, just Tuesday, USDA’s Food Safety and Inspection Service confirmed that U.S. exporters are now permitted to ship beef and pork trimmings to China thanks to another concession agreed to by the country in the “phase one” deal. The only bureaucratic wrinkle is the trimmings need to be labeled as “pieces,” per China’s insistence.

So, China has broadly expanded what the U.S. can ship, but the Chinese government is also making trade profitable. Steep punitive tariffs are still technically in place – a component of the lingering U.S.-China trade war – but China is offering exemptions to some of them and beef importers are taking advantage of the situation.

China charges 42% in punitive tariffs on beef, but the exemptions being offered by China drop the rate to just 12%.

“We know that some importers have had success with that,” Schuele said. “There’s no way to know exactly how many. We know some importers said they have successfully obtained duty exclusions.”

While China isn’t fully open for business with packed restaurants and hotels, the country is recovering and it's only a matter of time, Bacus told Agri-Pulse.

“We’re going to be in a much better situation,” Bacus said, looking to the future. “Unfortunately, China is not going to be a sugar rush. This is something that’ll be long-term growth, but we’re going to be in a much better position to capitalize on demand in China once this situation passes.”

And it’s not just the Chinese market that’s faltered from COVID-19. U.S. beef exports to other major customers like Japan and South Korea are taking a hit, but still remain strong.

A little over a week ago, Tokyo Governor Yuriko Koike asked “non-essential” businesses to shut down until May 6, according to a report from USDA’s Foreign Agricultural Service. That doesn’t include restaurants and hotels, but “Japan’s major foodservice chains have posted record low sales in the month of March, as people refrain from leaving their homes amidst the coronavirus outbreak.”

But fast food restaurants are only registering small losses, and retail sales are thriving as the country continues to eat beef and is expected to actually increase imports from the U.S.

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Japan imported 44,222 metric tons of U.S. beef in in January and February, up 13% from the first two months of 2019, according to USMEF data. Similarly, South Korea imported 38,783 tons in in January and February, an 18% increase from last year.

Japan’s overall beef imports will dip, Borror said, although not from the U.S., and he noted that USMEF is forecasting “growth in U.S. market share, sustaining record U.S. volumes into Korea and a rebound in Japan, capitalizing on the reduced tariffs in the Japan-U.S. trade agreement.”

Worldwide, U.S. beef exports will take a hit from the pandemic, but they will also be as much as 5% more than they were last year, USMEF President and CEO Dan Halstrom said in a recent interview with Mike Adams on the American Ag Network.

And the best is yet to come, Bacus stressed.

“No one has been able to avoid the economic downturn and the impact of COVID-19 on the global economy,” he explained. “With that said, I think that when everything settles down and we start to have some normal behavior return to society and people are able to go back to restaurants, I think that you’re going to see increased sales across the board. I think we’re going to be in a very positive position.”

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