Cattle prices were losing value faster than autumn sheds daylight when the unexpected happened. China announced it was lifting its 13-year ban on U.S. beef.
If you don’t think a cowboy or two cried with joy, think again. China is the second largest beef customer in the world. It’s expected to import 825,000 tons of beef this year. That’s the kind of shopper that could turn current prices around.
“The beef industry has suffered huge losses in the last 12 to 14 months,” said Jim Peterson, who ranches near Buffalo. “There are a lot of ag producers in both cattle production and farming who are looking for a light at the end of the tunnel. Calves are selling for almost half or less than half of what they were selling for last year.”
Calves selling for $700 to $800 now would have sold for $1,500 last fall.
Peterson knows the China dilemma like few ranchers do. A former chairman of the U.S. Meat Export Foundation, he’s traveled to China twice trying to undo the damage of a 2003 incident that’s become known as “the cow who stole Christmas.”
In late December 2003, a Washington dairy cow turned up with mad cow disease, or bovine spongiform encephalopathy, BSE for short. Overnight, countries shut their doors to U.S. beef.
America’s cattle market crashed, from $3 billion a year to $1 billion. Over the years many key markets returned. By 2011, exports had returned to pre-2003 volumes. But China was a holdout.
“It’s been 13 years since our BSE incident closed that market,” said Jim Peterson. “It’s taken forever to get beyond that Christmas cow.”
No one knows for sure why China announced it would lift its ban last week, said Kent Bacus, international director of trade and market access for the National Cattlemen’s Beef Association. However, demand for beef in China has never been higher.
Last year, China imported $2.5 billion worth of beef, an amount just shy of all U.S. beef export sales before 2003, according to the U.S. Department of Agriculture. Compare that to the $10 million in beef China imported the last year U.S. sales were permitted, and the excitement among American ranchers is understandable.
China’s middle class is booming, and so is its appetite for beef.
“This product is going to fly off the shelves,” Bacus said. “I think we’re going to have a great opportunity there. There’s still a lot of technical details that have to be ironed out. We don’t have beef on China’s shelves yet. When we do, we’ll still have to promote the product and gain their trust.”
Peterson and other U.S. representatives who have met with Chinese officials over the years have always insisted American beef is safe. Persistence about U.S. beef safety, more than anything, is behind the proposed lifting of the ban, said U.S. Ambassador to China Max Baucus, a former U.S. senator from Montana.
“You’ve got to be patient. You’ve got to be positive. You’ve got to be be persistent over here. Just stick with it, stick with it,” Baucus said. “It’s hard to know when you’re going to succeed because this country is so opaque. They just don’t let you know when they are going to make a decision or not make a decision.”
Peterson said he thought China was close to lifting the ban two years ago, after he met Chinese officials during a trade mission with Montana Gov. Steve Bullock.
The rancher wasn’t sure how the meeting would go. A couple years earlier on a Beijing trip, Peterson had called out Chinese trade officials on what’s known as the “grey door” or “grey box” route of U.S. beef to China. Peterson said the U.S. Meat Export Federation estimates that despite the ban, China has continued to import U.S. beef by acquiring it from Hong Kong or countries like Vietnam where U.S. beef is welcome.
Peterson angered the Chinese so badly, they filed a complaint with the U.S. Embassy. Before the day was over, he was contacted by U.S. officials in Washington, D.C., and told to cool it.
On his trip with Bullock, Peterson played it calm and left thinking the ban was about to be lifted.
“I came back pretty optimistic. Looking back at it, maybe I was too naïve,” Peterson said. “Later, I was kind of disappointed and got to thinking ‘I sure hope I get to see this in my lifetime.”
The pressure from Montana ranchers for a solution has been conveyed to Montana politicians.
U.S. Sen. Steve Daines, R-Mont., met with Chinese leaders in May to discuss many issues, including territorial conflicts in the South China sea as well as other trade issues. But when he got to the table, the only thing that filled his thoughts was the beef ban. It might be his only chance to raise the issue.
“They were the first words out of my mouth. ‘When are you going to remove the ban on beef exports?’” Daines recalled Friday. “It sort of shot out of my mouth.”
China still hasn’t said exactly when the ban will be lifted, which has Melville rancher Bill Donald skeptical. Donald is a past chairman of the National Cattlemen’s Beef Association.
He noticed that live cattle prices didn’t increase when the news broke Thursday. There are still plenty of conditions to meet to get U.S. beef into the country, including an age cap of 30 months, a restriction Japan imposed on U.S beef until just a couple years ago.
Given that U.S. beef is entering China through trade backdoors now, Donald said he’s curious to see whether demand improves if sales are normalized.
Like others, Donald sees a huge middle class in China that has money and want’s to eat. He’s excited.
“Their middle class has just really blossomed in the last 10 years or 12 years. It’s bigger than the population of the United States,” Donald said. “And the one thing people want when they have more money is high protein. That fuels the body.”