US beef is going to face many rivals for China’s hot pots

Bad meat?
Bad meat?
Image: Reuters/Kim Kyung-Hoon
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After years of waiting, the US is set to sell beef to China again from the middle of July, thanks to a trade deal announced by the two countries last week. There’s a lot of potential for US ranchers in China, where beef is seen as a better meat than the more common pork, and consumption among China’s affluent urban middle class has been  steadily rising.

The country consumed an average of 5.4 kilograms (11.9 lbs) of beef per person a year in 2015, often in the form of hot pot, steaks or Korean barbecue, compared with 4.8 kilograms (10.5 lbs) five years earlier. Growing consumption has driven beef prices to “historical highs” in some recent years, according to research company Meat and Livestock Australia. In 2014, the wholesale price of beef reached about 65 yuan ($9.4) per kilogram (link in Chinese), or about $4.3 a pound, at one point; more recently it was at 63.54 yuan ($9.22) (link in Chinese) per kilogram in January.

The current plan, if carried out, is expected to bring the US into a $2.5 billion market, Secretary of Commerce Wilbur Ross said when announcing the trade deal.

However, the US shouldn’t expect an easy ride—there are likely to be a lot of ups and downs ahead, judging by Brazil’s experience.

China banned US beef in 2003 , as did several other countries, after the country’s first case of mad cow disease. Last September it began partially lifting the ban, allowing imports of bone-in beef and boneless beef for livestock under 30 months (pdf link in Chinese). But few purchases have been made since.

Right now the biggest foreign players in China’s beef market are Australia and New Zealand, which have the advantage of geographical proximity, but have fallen behind South American sellers, like Brazil and Uruguay.

Brazil overtook Australia to become biggest beef seller to China in August last year, despite regulatory setbacks in recent years. Brazil’s global beef exports were at around $5.52 billion last year—a third of which went to China.

China resumed importing beef from Brazil in the middle of 2015 after a ban over mad cow disease put in place in late 2012. During the ban, Brazil’s beef exports to China dropped from 18,331 tons in 2012 to almost nothing, according to Meat and Livestock Australia. They rebounded to 181,610 tons last year.

More recently, on March 20, China temporarily suspended imports of all meat product, including beef from Brazil after the country announced an investigation into the alleged bribery of health officials by meat processing companies to forego inspections. China lifted the ban on March 25, after clarifications from Brazil.