An agreement between the Montana Stockgrowers Association (MSGA), and Chinese eCommerce retailer JD.com secured $300 million to promote Montana-sourced beef in China. The memorandum of agreement (MOA), signed Nov. 8 in Beijing, was part of an overall commitment by JD to purchase $2 billion of U.S. goods across a wide range of categories over three years, including pork from Smithfield Foods, Inc.
The beef-related MOA was signed by MSGA Executive Vice President Errol Rice, JD.com Chairman and CEO Richard Liu, and Bank of China’s Chen Xu, who serves as president and CEO of Bank of China USA. It is intended to facilitate collaboration on beef from Montana as well as China’s potential investment in Montana and calls for JD.com to purchase in excess of $1.2 billion in beef from Montana producers including the Cross Four Ranch at Miles City, MT.
Also on hand for the signing were Fred Wacker, owner of the Cross Four Ranch, U.S. Secretary of Commerce Wilbur Ross, Jr., and Chinese Vice Premier Wang Yang.
Meat products are a fast-growing category for JD.com, the company said in making the announcement. In the first half of 2017, volume from direct sales of meat on JD.com increased more than 780 percent year-over-year, with imported meat accounting for more than 30 percent of those sales. Online orders for fresh and frozen meat come chiefly from first and second-tier cities, leaving huge potential for growth in online sales from the rest of the country.
“These groundbreaking agreements bring together two of America’s most trusted and in-demand meat suppliers with China’s leading e-commerce platform, to the benefit of both U.S. producers and Chinese consumers,” said Liu.
“China’s shoppers will rest assured knowing that they are able to purchase safe, high-quality meat products imported from the U.S., with the fast delivery and ironclad assurance of authenticity that they have come to expect from JD. We look forward to expanding our long-term cooperation with high-quality U.S. meat producers like Smithfield and MSGA,” added Liu.
MSGA said in a press release that the agreement transpired after U.S. Sen. Steve Daines (R-MT) hosted an agricultural round table in September 2017 where Chinese Ambassador Cui Tiankai and Chinese business executives discussed opportunities to ship Montana beef to China.
The Chinese market was reopened to U.S. beef in May 2017 after a 14-year ban stemming from a case of bovine spongiform encephalopathy detected in a dairy cow in Washington state.
Rice commented on the agreement, “The Montana Stockgrowers Association thanks Senator Daines for his work on expanding opportunities and access to overseas markets for Montana ranchers, particularly in lifting the ban on U.S. beef in China earlier this year. While there’s a lot of work that needs to be done, this MOA represents a great step in the right direction for selling more U.S. beef in China and developing productive relationships between Montana ranchers and Chinese consumers.”
Wacker had this to say: “China’s market has the potential to be a game-changer for Cross Four Ranch and Montana ranchers more broadly. The MOA shows how much interest there is in China for high quality cattle and beef from Montana and the U.S. and I appreciate Senator Steve Daines’ efforts to help connect me with potential Chinese buyers.”
The MOA explained, “Beef is the fastest growing sector in China and the world’s fastest growing overseas market for beef.”
The agreement is proposed for an initial three years, with a minimum commitment of $200 million in Montana beef to be imported by JD.com from MSGA members, including Cross Four Ranch, which has already exported beef to China through Tyson Foods, Inc. Kori Anderson, MSGA manager of communications, confirmed that Tyson would be the slaughter and fabricating company initially used to fulfill the MOA. Currently the only Tyson plant approved to export beef to China is in Lexington, NE.
The MOA shows a three-year breakdown by estimated minimum purchase commitment (subject to change) as:
• 2018 —$50 million;
• 2019 — $70 million;
• 2020 — $80 million.
In addition to the $200 million proposed procurement, JD.com intends to invest up to another $100 million to build a new processing facility in Montana to support Montana beef production. According to the Billings Gazette, Montana has not had a large-scale meat packing plant since Pierce Packing Co. in Billings closed its doors in 1984.
Anderson told WLJ that a location for the meat processing plant has not been identified. “We’re still very much in the research and development phase of where it could go, and what is feasible.”
Daines has long supported reopening the Chinese market to U.S. beef and other Montana agricultural products. In May 2016, he led a congressional delegation fact-finding mission to China where he pressed the Chairman of the Standing Committee of the National People’s Congress Zhang Dejiang on ending the ban on U.S. beef.
During that visit, he hand-delivered a letter to Zhang from the MSGA indicating a desire to formally engage in talks to reestablish beef trade with China. In that letter, Rice wrote, “MSGA is highly regarded in the global beef complex and with the international business experience of U.S. Senator Steve Daines we believe that a protocol can be reached between China and Montana to export superior beef products into your dynamic economy.”
No stranger to working with Chinese markets, Daines spent almost six years in China working for Procter & Gamble, expanding markets for American brands and products to Chinese consumers.
While the U.S. Meat Export Federation (USMEF) was not directly involved in the negotiations, Joe Schuele, vice president, communications, told WLJ, “We congratulate the participants and stand ready to assist them in any way we can. USMEF views e-commerce as a very promising way of growing demand for U.S. beef in China, where the product has been well-received but sales are limited by the supply of beef eligible for the market.”
According to the company website (http://corporate.jd.com/), JD.com is China’s largest online retailer and its biggest overall retailer, as well as the country’s biggest internet company by revenue. JD.com has a vast product offering covering everything from fresh food and apparel to electronics and cosmetics. Its unrivaled nationwide fulfillment network provides standard same-and next-day delivery covering a population of more than 1 billion—a level of service and speed that is unmatched globally.
“This landmark agreement has the potential to substantially increase Montana opportunity and agricultural exports to the fastest growing overseas market for beef,” Daines said. “This is a win for Montana’s hardworking ranchers.” — Rae Price, WLJ editor