Photo from usdagov on Flickr.
During President Donald Trump’s recent trip to China, Montana Senator Steve Daines (R-MT) negotiated a $300 million beef cattle deal between the Montana Stockgrowers Association and the Chinese e-retailer JD.com. The deal calls for the retailer to buy $200 million of cattle between 2018 and 2020, and invest $100 million in a new feedlot and packing plant in Montana. Some ranchers are concerned that this unusual deal will favor certain ranchers over others, and further concentrate power over the American livestock sector in the hands of Chinese companies.
The deal calls for JD.com to buy between 80,000 and 90,000 cattle over the course of three years. The company plans to sell the beef directly to Chinese consumers via the e-commerce platform. According to the agreement signed by the two parties, the deal will represent a 40% increase in Montana’s beef export sales.
Mike Callicrate, a Colorado rancher and president of the Organization for Competitive Markets (OCM), says it’s important to view this deal in tandem with Smithfield’s acquisition by a Chinese company, WH Group, in 2014. The $4.7 billion deal means that a Chinese company controls the largest pork processor in the U.S.
On October 4, OCM and over 200 other farm and rural advocacy groups signed a letter to members of the Senate and House Committees on Agriculture, arguing for greater antitrust enforcement in the agriculture sector and detailing the groups’ concerns about rising foreign ownership and investment in U.S. agriculture.
JD.com is China’s second largest e-commerce company. Recently, the company has been working with Walmart to combine the companies’ product offerings in China.
Bill Bullard, CEO of the Ranchers-Cattlemen Association Legal Action Fund, says that “this novel effort runs counter to the typical marketing efforts of the industry.” He said it was unfair that the deal will only benefit ranchers who are members of the Stockgrowers Association. “There are thousands of cattle producers in Montana who produce high quality cattle,” he says. “But now the market…is restricted unless they join” that group.
Specifics of who will own and control the new packing plant and feedlot have not been released. Peter Carstensen, a professor at the University of Wisconsin and expert on livestock markets, said there could be some benefit to Montana ranchers to having a new packing plant in the region that isn’t controlled by one of the existing dominant cattle processors—JBS, Cargill, and Tyson. He says if the plant has “some capacity to be used for other kinds of marketing,” it could benefit the U.S. market. But, he says, “the devil is all in the details, and we don’t have the details.”
There hasn’t been a major meatpacking plant in Montana for over 30 years, since Pierce Packing Co. in Billings closed in 1984, driven out of business by consolidation in the meatpacking sector.
The deal marks the first return of Chinese buyers to the U.S. beef market since a case of mad cow disease found in Washington state in 2003 ended the countries’ beef trade relationship. As a condition of the recent renewal of the two countries’ beef trade relationship, China requires, among other things, that its beef imports be traceable to a birth farm or port of entry.
American ranchers have long fought for domestic tracking and labeling processes that would allow consumers to know the country and region of origin for beef products. Country of Origin Labeling was approved for beef and other agricultural products as part of the 2002 and 2008 Farm Bills, but was later struck down by the World Trade Organization in 2015 after China and Mexico argued the labeling practice put their products at a disadvantage.
The beef deal was part of a $2 billion agricultural export agreement. During the trip, President Trump also negotiated a $1.6 billion purchase of soybeans by Chinese importers in 2017 and 2018. COFCO, a Chinese state-owned food processing company, signed the deal with ADM, a Chicago-based commodity trading and food processing company. ADM is the world’s third-largest processor of corn, wheat, oilseed, and cocoa.
What We’re Reading
- Dozens of groups representing farmers, ranchers, and rural communities signed a November 7 letter to President Trump asking that he reconsider USDA’s recent withdrawal of the GIPSA rules. For more background on the GIPSA rules, read our coverage here and here.
- JAB Holding Company, a German business group, bought Au Bon Pain on November 8 for an undisclosed sum. JAB has become dominant in the coffee sector, and now owns Keurig Green Mountain, Krispy Kreme, Caribou Coffee, Peet’s, Stumptown, Bruegger’s Bagels, and others. The holding company bought Panera in April for $7.5 billion.