One Giant Step for Beef Trade Resumption

Prices move higher move higher after weekend announcement, however it will be December before any beef begins to move. Jacqui Fatka

Published on: Oct 25, 2004

United States and Japanese officials in Tokyo Saturday reached a framework agreement that will permit the resumption of beef trade between the two countries following a 10-month interruption.

On Oct. 21, 22 and 23 the governments of the United States and Japan held director-general level consultations in Tokyo on the resumption of beef trade between the two countries. During the meetings, the Japanese officials explained the review process of domestic measures against bovine spongiform encephalopathy (BSE). Meanwhile, Americans explained domestic measures taken against BSE and presented basic ideas for the resumption of two-way beef trade.

Packers increased their bids about $2 per cwt Friday which resulted in good cattle movement. A few cattle moved in early week this week at $86 per cwt. However, by mid-week the cattle that moved were in the $83 to 84 level.

Trade expected by end of calendar year

National Cattlemen's Beef Association (NCBA) Chief Economist Gregg Doud explains the approved framework is expected to help facilitate trade before the end of the year. Japan started its regulatory process in mid-October to drop the 100% BSE testing and instead requiring testing for only animals 21 months and older. Japan's 60-day review period should end by mid-December.

At that point the U.S. will need to have all of their "ducks in a row" to accelerate the beginning of two-way trade. Currently only animals that can be age verified by USDA standards can be approved for export. At least four companies, including Creekstone and Swift, have source verification systems already in place.

Terry Stokes, NCBA Chief Executive Officer, explains that through research, physiological maturity is found to be more reliable in determining age than dentition. Animals may be classified as less than 20 months depending on their meat grade. He adds that 75% of animals slaughtered would be less than 20 months of age. Establishing the physiological test on top of age verification documentation would allow more meat to be marketed, Stokes explains.

A special study of the correlation between chronological and physiological age, defined in the Agreement, must be completed within 45 days. This study will be conducted by USDA/AMS in close collaboration with Japanese experts to determine the details of the grading criteria to be used.

Japan's government is very methodical and needs a step-by-step process, explains NCBA Vice President for Governmental Affairs Chandler Keys. "We needed an agreement to get towards normalization," he says, adding that Japan is not the type that wants an instantaneous change. However, the Japanese are honorable people who have agreed in principle on the framework guidelines. "Once they agree to that process, they move through it methodically and smoothly," Keys says.

Asia markets hoped to follow

Many of the Asian countries are looking to Japan to see how to proceed with trade resumption decisions. In respect to getting other countries to follow suit, Doud saw the agreement as a "major tipping point" with many other markets including Taiwan, Hong Kong, China and South Korea.

When U.S. lead negotiator J.B. Penn left Japan he headed to lucrative beef export destination South Korea. Keys says that Taiwan is "on the cusp of doing something and would like to be ahead of China" in resuming beef trade with the U.S.

The specifics of Taiwan and Hong Kong's regulatory systems are different than Japan, but Doud says the two countries are "very close" to also reaching an agreement.