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With each headline, cattlemen either applaud or jeer the latest development in trade.

The climax is expected to come in May when the World Organization for Animal Health (OIE) deems the U.S. at “Controlled Risk” for BSE. Under such designation, all beef and beef products, regardless of age, with specified risk materials (SRMs) removed, can be safely traded.

“It will be a huge step in getting a country to change its regulation,” says Gregg Doud, National Cattlemen's Beef Association (NCBA) chief economist.

In looking at Japan and South Korea, Doud sees promise, but he sees only frustration when it comes to China and Russia.

Japan

Only beef and beef products from animals 20 months of age or less (A40 carcasses) are currently allowed into Japan. In April, the two governments agreed to an audit of U.S. processing facilities. Once completed, it will eliminate the need for importers to inspect every box of U.S. beef, which is both costly and time-consuming.

Doud says another huge development is Japan's announcement that its domestic cases of BSE discovered in 21- and 23-month-old animals several years ago weren't infective.

“It will allow Japan to move off this 20-month-and-under restriction,” he says, which should help it implement OIE standards for trade.

Both Doud and Lynn Heinze, U.S. Meat Export Federation (USMEF) vice president, doubt the U.S. will be able to attain pre-BSE levels of trade with Japan anytime soon. During the U.S. absence, Australia was able to expand its market share to 88%, though not always supplying enough beef or sufficient quality.

“Australia won't give it up without a fight,” Heinze says, pointing out Aussie beef exports are competitors in South Korea as well.

South Korea

In late April, the first shipment of U.S. beef made its way to South Korean consumers after more than three years. Allowing only boneless imports over 30 months of age, Korea continues to be a picky trade partner. The first three shipments were rejected in late 2006 after inspectors found bone chips in them and traces of dioxin in one shipment.

The U.S.-South Korea Free Trade Agreement (FTA) was finalized in early April with no resolution to the beef question. Changing import inspection protocols wasn't part of the FTA, but South Korea did concede in late April to reject only the boxes that contain bone chips, not entire shipments. That encouraged exporters to try sending beef again, with Creekstone Farms product arriving in South Korea in late April. The U.S. hopes regulations will be further loosened following OIE's anticipated May announcement.

Heinze says a USMEF survey of South Korean restaurateurs indicates 65% of them are ready to purchase U.S. beef, primarily due to price and a desire to buy higher quality product.

“Price has gone through the roof,” Heinze says. “Consumers in Korea pay more per pound for beef than any advanced economy in the world.”

Earlier this year while in Seoul, Doud conducted an informal price comparison at a South Korean CostCo store (Table 1). Even with a 40% tariff, Australian beef was still cheaper than beef from highly subsidized domestic producers.

“The depreciation of the U.S. dollar has made U.S. beef worth about 29% less today than when U.S. beef was last there in 2003,” Doud says. Factoring in three years of Korean economic growth, the 40% tariff paid in 2003 is essentially zero today in terms of the Korean won. Doud believes the U.S. can hit the $1 billion mark in 2008.

Russia

“By most accounts, Russia is the fastest growing economy in the world,” Doud says. It's also the world's second-largest importer of beef, at 905,000 mt, roughly the same as Japan's pre-BSE total imports.

Unfortunately, Russia is still off limits to U.S. beef. A deal reached last November where Russia would accept all beef products under 30 months until the OIE's ruling, after which all product would be allowed has been sidelined by the failure of the Russian audit team to conduct a domestic audit to confirm the SRM removal process. The audit was expected early in 2007.

“That huge sucking sound is South American beef going into Russia and Europe,” Doud says, with Brazil, Argentina and Uruguay being the largest exporters.

China

A market with enormous potential, China continues to ban U.S. beef.

Negotiations between the two countries began in April 2006. Two months later, the Chinese government unilaterally announced it would allow only U.S. boneless beef from cattle less than 30 months of age, dependent upon 22 requirements, some with no scientific rational. Progress has stalemated since.

“We have some real work to do in our regulatory discussions with the Chinese,” Doud says. “We're all incredibly frustrated.”

NCBA, the American Meat Institute and the National Meat Association jointly sent a letter requesting to be on the agenda for the U.S.-China Strategic Economic Dialogue meeting scheduled last month.

Table 1. Cost comparison of beef in Korea
NY strips Ribeye Blade steaks
Australian grain-fed $20.57/lb. $23/lb. $9.57/lb.
Korean, domestic $30.98/lb. $32/lb. $15.30/lb.
Includes 40% tariff for imported product $US/lb.
Source: NCBA

Elsewhere in the world

  • European Union is a net-importer of 500,000 mt, but phytosanitary restrictions and hormones have stymied the U.S. regaining access. The U.S. process of using organic acid washes on carcasses to reduce E.coli isn't an allowable practice for Europeans. Meanwhile, a 20-year ban on the use of growth promotants in the EU continues.

  • Middle East. Egypt is a top destination for U.S. beef in this region, with liver exports being a hot-ticket item. The U.S. Meat Export Federation worked on revising Egypt's shelf-life standards that hearken back to the 1950s and '60s, and U.S. beef sales in Egypt have increased several hundred percent over 2003 levels.

  • Taiwan. Australia had a large amount of its grass-fed beef in Taiwan before the country reopened its borders to U.S. beef. Because of the “sweet” flavor of U.S. beef, the Taiwanese readopted the U.S. product over Aussie beef.

What's on the table

In 2003, Cattle-Fax estimated exports accounted for an average of an additional $180/head on U.S. cattle. In the BSE aftermath, Lynn Heinze, U.S. Meat Export Federation vice president, says $90-100 of that value has been recovered.

“The amount of product that is beginning to move is significant,” he says.

Last year, beef and beef variety meat exports eclipsed $2 billion, compared to $3.86 billion in 2003. Today, USDA lists 86 countries as fully or partially open to U.S. beef. Of these, 53 accept bone-in product, and 30 accept all beef, including beef over 30 months of age. Eighteen countries are still closed to U.S. beef.