There was a lot of buzz in Montana on Nov. 8 with the announcement of a $300 million agreement with a Chinese company for Montana beef. The Montana Stockgrowers Association (MSGA), Cross Four Ranch, and Chinese eCommerce retailer JD.com signed a memorandum of agreement (MOA) to collaborate to source Montana beef to Chinese consumers.
Obviously, with the Chinese market opening back up to U.S. beef earlier this year, the market for beef expanded dramatically. There is no doubt that the quality of product produced by Montana, and all U.S. cattlemen, is gaining the attention of the world’s growing middle class.
Focusing on beef demand domestically is very important. However, looking at a broader scale—a global scale—is important to our future in this industry. In considering why the MSGA would take such a bold step as making an agreement such as this, I did not have to look much further than their mission statement. It reads: “To protect and enhance Montana ranch families’ ability to grow and deliver safe, healthy, environmentally-wholesome beef to the world.”
It was very insightful of MSGA to include that last word, “world.” By going beyond the border of Montana, MSGA has effectively opened the state’s 2.6 million head of cattle to the +1.3 billion population of China; over four times the population of the United States.
According to the MOA, Montana’s export sales were approximately $132 million (ranked 13th among all states) in 2015. This agreement would increase Montana-sourced beef export sales by 40 percent in 2018. That is a huge jump in a short period of time.
Speaking with Kori Anderson, Manager of Communications at MSGA, she emphasized that this agreement will not only benefit the cattlemen of Montana, but also the local economies as well. The MOA provides the grounds for a $100 million investment in the cattle feeding and harvesting infrastructure needed to meet these demands. Those infrastructures will provide jobs to local economies, provide a demand for feedstuffs, as well as the other economic drivers that go along with such businesses. You can understand why Montana’s Sen. Steve Daines worked to help not only MSGA but all U.S. beef producers to get beef back into China.
So, who is JD.com? From my research, they are basically the Amazon of the Chinese market. They are the largest online retailer and the biggest overall retailer, as well as China’s biggest internet company by revenue; some pretty impressive accolades. If the buzz around this agreement is true, it may be difficult for Montana to keep up with the potential demand. I asked Anderson about this and, granted that there are a lot of aspects of this agreement that are going to be ironed out as it goes, JD.com thinks highly of the quality of product in Montana beef and that there may be potential for other states to take advantage of this opportunity in the future.
There has been some negative talk around this deal. One group that publicly criticized the agreement was R-CALF USA. They bring up concerns of doing business with a Chinese company, which does cause some hesitation to those with very conservative principles. They are also concerned that this “invitation helps China capture even more of the United States’ critical livestock infrastructure.”
While those are some valid concerns, I think the potential opportunities far outweigh them. The market will make sure that consumers domestically will be able to pay ranchers the fair market value for their product. This may cause it to be a touch higher with more demand, but what would be wrong with that? Domestic consumers will also have the advantage of freight; it will be a lot cheaper to haul a box of beef to Denver, CO, than it will be to Beijing.
My last question for the critics is: Who, domestically, is investing in these markets? China has the population, the demand, and the capital to make these investments, so why not let them make these improvements on U.S. soil?
There is still a lot to learn as this agreement begins on Jan. 1, 2018. Montana ranchers will likely have to enroll in verification programs by third-party auditors to comply with China’s requirements, and especially for their demand for traceability. Anderson emphasized that the Chinese consumer wants to know where their beef came from, including every step of production. It’s no doubt that there will be growing pains and some headaches to comply with, but what a world of opportunity for the cattle business to offer our beef to so many more consumers! — DEVIN MURNIN
