Harrington's Sort & Cull
John Harrington DTN Livestock Analyst

Friday 06/18/10

Painfully Cautious Optimism Concerning China

(agriculture.com) -- China is now willing to begin negotiations to lift a six-year Chinese ban on U.S. beef, U.S. Department of Agriculture Under Secretary Jim Miller said Wednesday.

U.S. and Chinese government officials have discussed resuming beef trade several times over the past year, but it was after the recent U.S.-China Strategic and Economic Dialogue held in Beijing that Miller said he received a letter from Chinese Vice Minister Wei Chuanzhong that showed "a willingness to further engage" on China's beef ban.

"We are now trying to figure out an appropriate time and venue to get our technical people here at USDA together with the appropriate folks from China to initiate those discussions with a goal toward creating market access for U.S. beef," Miller told Dow Jones Newswires.

China banned U.S. beef in December 2003 after the first case of bovine spongiform encephalopathy, or mad-cow disease, was discovered in the U.S. Back then, U.S. beef exports to China were relatively small--about $23 million worth in 2003. The potential market China represents now, though, is much larger and growing, according to Miller and U.S. industry representatives.

"We think that the potential, in terms of the beef market, in China is very, very significant," Miller said. "They have an economy that is growing faster than any other economy in the world even during the global economic recession. They have a rising middle class in China that has an increasing amount of personal disposal income."

Gregg Doud, chief economist for the U.S.-based National Cattlemen's Beef Association, said the Chinese beef market could be worth $200 million a year now to U.S. exporters if the ban was lifted.

Sort & Cull Comments: The rhetorical sport of saying nothing with as many words as possible continues to expand.

Of course, the Olympic champions of empty blathering typically come from the locker rooms of Congress, the diplomatic corps and global bureaucracy. But in all fairness, facile athletes of free enterprise have proven to be equally impressive in this regard, especially when obscure generalities best serve the corporate bottom line (e.g., BP executives).

Several phrases in this article just jump off the page and scream "READ ME, IF YOU HAVE TIME TO WASTE, I MEAN ABSOLUTELY NOTHING." For example, how do you suppose the Chinese Vice Minister showed "a willingness to further engage?"

If the letter implies the same sad level of focus and motivation as "preparing to consider," "anticipating possible interest," or "imagining the full range of preliminaries," Under Secretary Miller may be well advised to postpone packing his suitcase and just plan on attending the White House Christmas party.

You probably think I sound as jaded as a Chinese dragon. Maybe I've seen one too many versions of this meat-trading strip tease. U.S. beef producers have been salivating over the potential of Chinese demand for decades. While we can all think of a billion and a half reasons why these indefinite stories sizzle, there is still little concrete evidence to suggest that Chinese beef buying will explode anytime soon.

Are we closer to the "possibility of firmer language" (heck, two can play at this game)? Without a doubt.

The amazing growth of China's middle class is a clear indication the country is eating higher and higher on the food chain. And with most economists assuming that China's economy will keep growing at an annual rate of 8-10 percent over the foreseeable future, growing consumer incomes and appetites will increasingly look toward quality imports.

And then there's the serious problem of China's labor storage. Rapid economic growth and the country's one-child-per-family policy were bound to collide at some point in time. Recent news of striking workers at several auto plants across China testifies to the difficulty of attracting rural-based workers to urban-based jobs.

In order to sustain and grow its manufacturing juggernaut, China must find ways (e.g., higher wages, better living conditions, etc.) to pull sufficient workers from the country in order to operate its sprawling cities.

One unintended consequence of such maneuvering (i.e., depopulation areas of agricultural production) could be further erosion in China's ability to satisfy its own meat appetite.

For more Harrington comments check out

www.feelofthemarket.com

(KM)

Posted at 3:24PM CDT 06/18/10 by John Harrington
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