July 6, 2010

Canadian beef allowed back in China

Canadian beef is once again welcome in China, seven years after a bovine spongiform encephalopathy (mad cow disease) outbreak in Canada closed markets in China, the country of 1.3 billion, and elsewhere around the world.

Local beef producers should benefit from higher prices for their product, experts said Monday (July 5).

Returning from a recent trade mission to China, Agriculture Minister Gerry Ritz announced Monday (July 5) that China has agreed to take a regulatory step to formally lift the ban on Canadian boneless beef from animals under 30-months of age, as well as beef tallow for industrial use. The lifting of the sanction took effect on Saturday (July 3).

"There's a world of opportunity for our producers in China, and that future is built on a history of strong trade partnership," Ritz said. "This is a vital step forward in the breakthrough agreement that will see Canada's safe, high quality beef back on Chinese store shelves and more black back on the bottom line for producers."

The move was the first in a staged approach to allow Canadian beef back into China. It followed an agreement reached last month during a visit to Canada by Chinese President Hu Jintao, who promised to fully open China to Canadian beef of all ages, in stages.

John Masswohl, director of government and international relations with the Canadian Cattlemen's Association, said the news is very positive for producers across Ontario and the country. He said the first stage of the deal is worth about CAD40 million (US$37.7 million) to CAD50 million (US$47.1 million) for beef tallow used for making a number of products, and CAD10 million (US$9.4 million) for boneless beef. The dollar value is a significant increase over previous export totals, he added.

"Just getting access for that tallow is huge," he said. "We think once the agreement is fully implemented, it is probably worth about CAD110 million (US$103.7 million) a year. And that really is a big change over what the Chinese market used to be worth to us."

Masswohl explained that before the ban on Canadian beef came into effect in mid-2003, Canada exported between CAD3 million (US$2.8 million) to CAD7 million (US$6.6 million) worth of beef to China between 2000 to 2002.

"So this is going to be a big jump," he said. "The Chinese market has evolved quite a bit just in those seven or eight years."

Bette Jean Crews, Ontario Federation of Agriculture president, said China allowing imports of Canadian beef is very positive for producers. "BSE was in 2003. Seven years ago our farmers lost that market," she said. "The export challenges for beef have been seven years in the fixing. That's pretty hard to absorb on the bottom-line of your farm. So, this is good news."

Whenever there are more markets for Canadian beef there is upward pressure on cattle prices, Masswohl said. "This is a positive factor for cattle prices," he said. "So it's going to mean improved prices."

Cattle prices have been depressed for years, he added, due partly to lack of access to markets. The exchange rate of the Canadian dollar is also tempering demand for the country's beef.

"The overall economic conditions in Canada, North America and the world seem to be improving this year, and that has resulted in the restaurant demand for beef increasing," he added.

The US, Japan, South Korea, Australia, China and other countries banned Canadian beef after mad cow disease was discovered. South Korea continues its ban, but has recently made overtures toward lifting it.

"We've had to drag (China) along on this one, and finally they have reached this agreement at long last," said Masswohl. "There is one other significant country out there that has given us no access and that is South Korea."

Canada launched a World Trade Organisation challenge against South Korea in the spring of 2009. The threat of losing that case may be spurring South Korea into a negotiated settlement, Masswohl said.