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Proposed tariffs could affect the beef industry

By Staff | May 4, 2018




Less than a year after China opened its borders and refrigerators to U.S. steaks and other beef products, a government spat just might cost producers that market.

Agriculture leaders say the potential impact on cattle producers from the proposed tariffs implemented by China would be a sizable setback after the work they have done to gain access to that market.

President Donald Trump’s administration rolled out sizable tariffs imposed on a number of Chinese goods and the country retaliated with its own $50 billion list of U.S. goods at risk of a possible 25 percent tariff hike.

That list includes beef.

When the Chinese market reopened to beef late in 2017, trade data from the U.S. Department of Agriculture’s foreign agriculture service projected that China would import 2.26 billion pounds of beef this year. While U.S. beef exports to China represent only approximately 1 percent of Chinese beef imports, ag leaders consider it a step in the right direction, since its borders had been closed to U.S. beef for nearly 14 years.

According to USMEF data, in the second half of 2017 – after China was receptive to U.S. beef – exports of the red meat to China totaled 3,020 metric tons valued at $31 million. In January 2018, exports reached the highest monthly volume to date at 819 metric tons, which is valued at $7.5 million.

Lee Schultz, agriculture economist at Iowa State University, said that while the tariffs are merely proposed and “much remains to be worked out in this trade conflict,” the markets responded immediately to the news.

“Markets loathe uncertainty and we have seen the markets react negatively,” he said.

Schultz noted that cattle feeders enjoyed profitable returns in 2017, the second-highest levels since 2003 and “not much lower than the phenomenal level in 2014.”

Steers were estimated to be sold in the first three months of 2018 at a $66.87, $103.46 and $42.03 per head profit, respectively.

“Currently, net returns projected for yearling to finish closeouts in April are for losses of $138 per head and the 2018 annual average return is forecasted at a loss of $100 per head,” he said.

Kent Baucus, director of international trade and market access for the National Cattlemen’s Beef Association, said it is “unsettling” that beef has been targeted for retaliation.

“Sadly, we are not surprised, as this is an inevitable outcome of any trade war,” Baucus said in a statement. “This is a battle between two governments, and the unfortunate casualties will be America’s cattlemen and women and our consumers in China. The Trump administration has until the end of May to resolve this issue.”

“We believe in trade enforcement, but endless retaliation is not a good path forward for either side.”

Matt Deppe, chief executive officer of the Iowa Cattlemen’s Association, said an additional 25 percent tariff on top of the 12 percent tariff currently in place “definitely has the potential to slow growth and ultimately hurt our Iowa cattle producers.”

“The Chinese export market for beef has been growing since 2017, when U.S. beef was allowed into China for the first time since 2003,” he said.

JanLee Rowlett, government relations manager for the Iowa Cattlemen’s Association, said she wasn’t surprised that China retaliated by zoning in on agricultural tariffs.

“The U.S. truly feeds the world, and exports are an important market for farmers, especially in Iowa,” she said. “These proposed tariffs have already affected corn, soybean and cattle futures, and our top priority now is ensuring that they do not go into effect.”

“We are hopeful that the Trump administration can resolve this trade war before farmers are hurt anymore.”

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