Saudi Arabia reopens market to U.S. beef
July 29, 2016
Good news for U.S. beef producers — Saudi Arabia recently reopened the market to receive U.S. beef and beef products following a four-year ban.
"On June 28, 2016, Saudi Arabia issued a decree that lifted BSE-related restrictions and allows imports of U.S. beef and beef products," said Sam Jones-Ellard, USDA Agricultural Marketing Service (AMS) public affairs specialist.
In a joint statement, USDA Secretary Tom Vilsack and U.S. Trade Representative Ambassador Michael Froman said, "This agreement is yet another example of the Obama Administration's commitment to addressing barriers blocking U.S. exports. Reopening Saudi Arabia's market will create additional export opportunities for American ranchers. The United States exported over $31 million of US beef and beef products in 2011, prior to the ban. Saudi Arabia consumers will now have the opportunity to enjoy high quality American beef."
Currently, USDA's AMS is developing a program to certify U.S. beef to meet Saudi Arabia's import market specifications. Although the specific conditions of that market are not yet available to the public, Jones-Ellard says details of the certification program will be available in the next few weeks.
"USDA's AMS is developing an export verification program to address specific conditions in that market," said Jones-Ellard. "Saudi Arabia will allow imports of beef and beef products from U.S. cattle less than 30 months of age, with access expanded for products from U.S. cattle under 48 months after a phase-in period. Products eligible for export include bone-in and de-boned beef, offal, ground and processed beef."
AMS export verification programs support American exporters by ensuring products meet specific export requirements for countries around the world. These programs are negotiated with foreign countries and cover export requirements for a variety of products, including beef. Through voluntary audit-based services, AMS verifies that companies are consistently applying production and processing practices that comply with export agreements.
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While the Saudi Arabian business will expand the U.S. beef industry's current export market portfolio, it's still a very small piece of the pie.
"Exporting beef to Saudi Arabia represents a relatively small amount of business, but any increase in the export business is good. However, our largest beef (and pork) export markets are still largely in Asia and the Pacific Rim, and that's where we tend to put our focus on. At the same time, you don't turn away any opportunity for export business," said John Nalivka, owner of the Oregon-based economic advisory service, Sterling Marketing, Inc.
In the competitive global export business, Nalivka says the U.S. only captures 11 percent of the 10-million metric ton market, compared to Brazil at 18 percent; Australia, 19 percent; India, 19 percent, Canada, 4 percent; and New Zealand, 7 percent.
"I'm a big proponent of more export business, but we need to do it carefully and do it right," he said, referring to the negotiations made in multi-country trade agreements. "The U.S. shouldn't be giving away too much in order to get something in return. As far as the Saudi Arabian market being reopened, I'm highly suspicious of what's going on over there and how this export agreement comes into play. When we think about our export market, the high-end, high-quality beef we send overseas is being consumed by tourists dining in hotels and restaurants. Taking that into consideration, how many Americans are taking vacations to Saudi Arabia right now?
"Exporting beef is largely what supports prices back here in the U.S., so adding another market is good for the industry," he added. "However, I don't like to sound like I'm a naysayer on trade, but we need to do what's best, not just for the beef cattle industry, but with all aspects of our nation in mind. Considering what's currently happening in that corner of the world right now, it's hard not to be a little wary of the deal."
"Having another export market open is always good news for the U.S. beef industry because it's good for demand," said Bill Bullard, R-CALF USA CEO. "The problem is back at home our U.S. domestic market is so saturated, the trickle down effect doesn't happen. The packers continue to capture the lion's share of any of these benefits. Producers' share of the consumer beef dollar has fallen to about 43.4 cents, which is close to a historic low that we haven't seen since around 2009."
Bullard pointed out that the Saudi Arabian consumer is ranked extremely low in per capita beef consumption.
"The Saudi Arabians eat less than 10 pounds of beef per person; it's considered a luxury item," said Bullard. "It's also interesting to note that two of the four cases of variant CJD (the human form of BSE or mad cow disease) were traced back to people who had lived in Saudi Arabia."
While Bullard stressed that any new export business is good for the industry, Bullard agreed with Navlika that politics more than likely came into play in securing the Saudi Arabian market.
"Food is often used as a political bargaining chip, and it's very likely it could have been quid pro quo in negotiations with Saudi Arabia," he said. "While our industry continues to focus on exports, we are ignoring the larger volume of imports entering this country that contribute to depress our prices. It is inappropriate and irresponsible when talking trade to only talk about one side of the equation. Our beef and cattle industry continues to experience a huge trade deficit in the trade of cattle, beef, beef variety meats and processed beef. If we look at NAFTA, we have accumulated a deficit of $29 billion. Our industry for too long has ignored the impacts that net imports have on our industry, and we should be striving for net exports; however, that has not been the goal of the multi-national beef packers and the USDA."
Bullard added, "The big overreaching problem is the meat packers are capturing the most benefits due to their dominant market position. Cattle producers don't typically export beef; it's the packers who do that. As a result, they have far more leverage to keep the profits vs. allowing it to trickle back to the cow-calf producer. We are very pleased that for the first time the issue of national trade and U.S. trade policy has been elevated to a prominent national campaign issue. This shows us that there is an increased awareness of the promises that free trade proponents made to citizens which have not materialized. Instead, we continue to accumulate a burgeoning trade deficit that suppresses the vitality of our industry. We have contacted both camps urging them to oppose the TPP free trade agreement because it would work against independent livestock producers while benefiting multi-national packers. Virtually all major commodity groups support TPP, but these groups also have packers on their governing boards."
"No matter what happens in the November 2016 elections, I don't think we'll see NAFTA redone right away or any major shifts to happen," added Navlika. "Without some serious negotiations, I don't think we'll get the TPP agreement signed, although the election will certainly have a big impact on the final agreements of these trade negotiations."