Canadian producers of beef and pork had cause to celebrate in the early days of this month when China dropped its ban on these meats. It had suspended imports from Canada in late June pending an investigation into a forged health certificate attached to a pork shipment.
According to the Canadian Meat Council, the ban resulted in C$100 million (US$75.2 million) in lost sales for Canadian producers after two months.
US pork exporters have hurt even more, as the tariffs Beijing had imposed on their meat severely undermined their ability to compete. The National Pork Producers Council claimed that American pork producers were losing US$1 billion a year in sales because of Washington’s trade wars.
The news of a rapprochement between Beijing and Washington leading to the withdrawal of tariffs on US pork has sparked hopes of resurgence in US shipments to China. According to the US Department of Agriculture’s Cold Storage Report, stockpiles of pork are at the highest level since 1971.
But the tariffs did not stop US meat exports to China altogether. Owing to an African Swine Fever epidemic, which has halved China’s pork herd from previously 400 million to about 200 million heads, the country is on course to import record volumes of meat this year. Some pundits predict import levels to rise even higher next year, although domestic pork production is expected to stabilize.
Also in November, China lifted a nearly five-year ban on imports of US poultry to help cope with the pork shortage. Jim Sumner, president of the USA Poultry & Egg Export Council, told Reuters that he expects China to buy all types of U.S. chicken, turkey and duck. “We’re in a state of euphoria,” he said. “At this point, if it’s meat protein, they’ll eat it.”
Exports from the Port of Oakland give an indication of China’s appetite for US meat despite tariffs. The port’s reefer exports were up 20% year-on-year in August, and beef and pork were the fastest growing commodities.
Overall, however, the tariffs have been devastating for US farmers who used to send their produce to China.
“When it gets to produce tariffs are the one item that’s restricting exports,” said Chris Connell, senior vice-president North America of Commodity Forwarders, a subsidiary of Kuehne + Nagel. “Until the tariffs are down, US produce is not competitive.”
He is optimistic that the more conciliatory climate between Beijing and Washington will boost perishables flows across the Pacific, but cautions against overly optimistic expectations.
“If the tariffs go away it doesn’t mean every fruit and vegetable from the US can be sold in China,” he noted, pointing to the need to come to agreements about every type of produce added in terms of regulatory issues like crop spraying and invasive species.
Moreover, US farmers cannot sell directly to any retailer in China. Only companies with the proper import licenses can buy perishables from overseas, Connell said. “How many import licenses are awarded?” he wondered.
Another question mark hangs over supply chains to handle a surge in perishables. According to some reports, China’s cold chain infrastructure has been stretched already.
“The supply chain within China was an issue pre-tariffs and it will be an issue post-tariffs,” said Connell, but added that China has shown it can quickly build infrastructure.
Gateways could be bottlenecks. “If everything goes to one airport, then you’re going to have a strain on the supply chains,” Connell warned. “The number of Chinese airports with international connections has grown, but do they have adequate cool chain facilities and can they clear customs?”
Finding capacity across the Pacific – by air or ocean – has not been an issue so far, he reported.
Some observers in the US have questioned if a surge in farm exports to China could run into capacity constraints on the inland sector to the West Coast ports, such as equipment shortages.
This question looms large over big exporters, notably soybean shippers. China took about 25% of the US soybean crop before the tariffs were introduced. In 2016, 34 million tons of soybeans was shipped from the US to China, but this dropped to 14 million tons last year.
US soybean producers have diversified to other markets, but these have been too small to fill the gap left by the loss of the Chinese market, so they are likely to ship large quantities across the Pacific again. It is unclear, however, how big demand in China for the crop is, as it is chiefly used to feed pigs, so the drastic decimation of China’s pig stock is bound to have a dramatic effect on demand.
Like soybean farmers, US cherry exporters arealso looking to regain lost ground in China, as the Chinese market has been simply too large to replace, noted Connell. He added that China has since looked to alternative sources. It set the stage to begin importing cherries from Turkey next year, so US farmers will face competition as they turn back to China.
Likewise, US seafood exporters are eager to recover their China business but are facing an uphill battle. Seafood shipments from Canada to China, especially lobster exports, have gone through the roof since the tariffs were introduced and prompted new 747 freighter services across the Pacific to Halifax.
“Will US lobster exporters jump back into the market? Yes, but they are going to face more of a tug of war with Canadian competitors,” said Connell.
By Ian Putzger
Air Freight Correspondent | Toronto