U.S. frozen beef exports to China increase, adding to Canberra-Beijing tensions but strengthening trade deal

The United States has edged Australia as the top exporter of frozen beef to China, with Chinese trade data further highlighting the fallout from lingering tensions between Canberra and Beijing while helping to advance the phase one trade deal.

Australia has traditionally exported more frozen beef to China, but since April its exports have fallen, with the gap between the two rapidly widening in favor of the United States.

In April, the United States shipped US $ 68 million worth of frozen beef to China, compared to US $ 80 million from Australia, according to Chinese customs. In May, the pattern of trade reversed and the United States shipped US $ 90 million in frozen beef to China, compared to US $ 47 million for Australia.

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US exports continued to increase and reached US $ 107 million last month, with Australian shipments falling to US $ 35 million, reversing the trade structure seen a year ago.

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Australia still dominates chilled beef exports – another popular export to China – but the gap is also narrowing, although experts have said chilled beef from the United States remains more expensive than imports from Australia. and New Zealand.

U.S. exports of goods to China, traditionally dominated by Australia, such as coal and now beef, have increased in the past year since the political dispute between China and Australia and the associated trade disruptions. between the two countries have unfolded over the past 18 years. month.

Since China unofficially banned a range of goods from Australia, including charcoal, lumber and wine last year, US exports have increased.

Sino-Australian observers have suggested Washington is prioritizing its own economic interests over its ally, despite repeated promises by US politicians, including Secretary of State Antony Blinken offering to stand by Australia’s side. against Beijing’s economic coercion.

US coal exports, for example, have been the big winners in the Sino-Australian fallout, as they have increased since China banned Australian coal late last year.

Beef exports appear to follow the same pattern as coal, with the China-US Phase 1 trade deal also giving the US a boost to replace Australia, the analyst said. Rural Bank Agricultural Michael Curtis in a note in June.

But unlike coal, there are other supply-side economics driving Australia to cut back on exports, namely reducing beef production locally.

“It was a perfect storm for American beef: as their exports to China increased, Australian exports fell,” Curtis said.

Australia has long capitalized on China’s huge appetite for overseas beef – China is the world’s largest beef importer – but the United States, one of the largest beef producers in the world, had been “notably absent from the Chinese market” in previous years until the signing of the trade agreement. dealing with China in January of last year, Curtis said.

“Perhaps most importantly though, [Australia] benefited from a lack of competition from the United States, “he added.

“But that all changed in 2020 with the introduction of the phase one trade agreement between the United States and China. It opened the door for American beef to enter China in greater volumes.”

The Phase 1 agreement reached requires China to purchase US $ 80 billion worth of agricultural products from the United States in 2020 and 2021, effectively giving preference to American products over other suppliers, Curtis said.

The values ​​of frozen beef exports from the United States to China between April and July of this year were between eight and 18 times higher than the corresponding months of last year.

The American Meat Export Federation confirmed earlier this month that even after beef and pork export volumes declined from record April and May figures, exports in June hit their highest level ever recorded.

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Australia’s absence from the trade this year has been the main factor giving the United States and other countries an advantage in beef exports, said Pan Chenjun, senior analyst at Rabobank.

The slowdown in Australian beef exports to China is the result of Beijing’s suspension of exports from several Australian slaughterhouses last year at the height of its conflict with Canberra, and lower beef production in Australia due to a seasonal herd rebuilding which reduced the number of animals slaughtered, Pan added.

According to Rural Bank’s mid-year agricultural outlook last month, Australian beef production is expected to remain limited for the remainder of the year, although it will increase steadily.

Production in the first half of the year fell 25.9% from 2020 due to years of herd exhaustion and the start of rebuilding in wetter conditions.

China’s ban on beef exports from six major Australian slaughterhouses last year had an instant impact on declining Australian exports. As a result, late last year, China unofficially banned a range of products, including coal, barley, and wine, which manifested themselves in customs clearance delays or failures in the Chinese ports, which devastated shipments and deterred trade.

“And due to the delay in ports, some [Chinese beef] importers have temporarily reduced imports from Australia, ”said Pan.

Australian beef processors still shipping to China, like Bindaree Beef, said despite tensions between China and Australia, its sales have improved this year.

Bindaree Asia Commercial Director Ambrose Cheung said that although beef production was still low, Chinese demand for beef was still plentiful.

But Cheung is more concerned about new headwinds such as the latest coronavirus outbreak in China, which could hamper the clearance of shipments and reduce the throughput of containers and shipments. These headwinds could slow the pace of exports to China from Australia and other parts of the world.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice on China and Asia for over a century. For more SCMP stories, please explore the SCMP app or visit the SCMP Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.

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