Dive Brief:
- Chinese President Xi Jinping is prepared to fully lift his country’s ban on U.S. beef and purchase more U.S grain and agricultural products, according to Financial Times.
- The move would end the 13-year ban on U.S. beef, which began in 2003 after a U.S. outbreak of mad cow disease. China said in September it would open access to U.S. beef imports, but the government had not approved final rules on traceability and other issues.
- Officials interviewed by FT said both sides are eager to avoid a trade war — fears of which surfaced during President Trump’s campaign when he threatened to impose tariffs on Chinese goods and said the country manipulated its currency.
Dive Insight:
Opening Chinese markets to U.S. beef makes a lot of sense for both countries. The move would provide some much-needed income for the U.S. farm sector, which has recently struggled with deflation and lagging demand. According to the U.S. Department of Agriculture, net incomes for farmers, which hit a high of $124 billion in 2013, have fallen four straight years to $62 billion currently. Statistics posted by the National Cattlemen's Beef Association, there were 619,172 cattle and beef farms in the United States in 2012, with $88.25 billion in farm gate receipts in 2014.
The move would also benefit large-scale beef suppliers like Cargill that are eager to tap into China’s growing demand for beef. Between 2012 and 2016, according to Bloomberg, per capita beef consumption in China has increased 33%.
What’s driving this surge? A burgeoning Chinese middle class, mainly. Since 2012, disposable income in the country has increased 38%, and young consumers, in particular, are eager to spend on a wide range of goods. It certainly doesn’t hurt that Chinese consumers also tend to view imported beef more favorably than domestic.
Part of the reason it’s taken so long for China to lift its ban on U.S. beef is because producers in countries like Australia, Argentina and Uruguay have been able to meet the country’s demand. As beef consumption continues to climb, however, China needs the robust supply the U.S. offers. The American farm sector, meanwhile, is all too happy to comply.