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Exporting meat from St. Louis to China feasible, study finds

Saturday, August 6, 2011 | 12:01 p.m. CDT; updated 9:59 p.m. CDT, Wednesday, September 7, 2011

COLUMBIA — Exporting meat from the Midwest to China through an air cargo hub in St. Louis is feasible, said a board member of the National Center for Beef Excellence in Columbia.

The center was hired by the Midwest China Hub Commission to study whether meat would be a viable export through an international cargo hub proposed for Lambert-St. Louis International Airport. The commission was formed in 2009 to create freight opportunities between St. Louis and China, according to China Daily, the official English newspaper for China.

In September, Missouri lawmakers will vote on whether to allow $360 million in tax breaks for creation of the air cargo hub. Gov. Jay Nixon, who supports the plan, has called for a special session to make the decision, but he has yet to say when it will be.

If created, the hub at Lambert would be used to export several thousand tons of pork and beef. The target consumers in China would be luxury hotels and restaurants.

The plan is doable, said Rex Ricketts of the National Center for Beef Excellence.

Ricketts said the goal is that by the end of three years, as many as 5,000 metric tons of pork annually — about 11 million pounds — would be shipped by air from Lambert. That figure might increase in the future to between 7,000 and 10,000 metric tons of pork per year. (A metric ton is about 2,205 pounds.)

"Their economy is moving forward rapidly," Ricketts said. "As you get more money, and there's a shortage of protein, you want more protein, and you're able to afford it."

He said the feasibility study, which is being written, has focused on a high-end market because of the expense of air transport.

"Those cuts of meat are going to be primals and steak that goes to restaurants," Ricketts said. "We think that's where opportunity will be."

The Missouri Pork Association in Columbia is also involved in the feasibility study. Executive Vice President Don Nikodim said that though the focus right now is on exporting meat from the Midwest, the whole U.S. meat industry would benefit.

"If we're selling pork to China, it doesn't really matter where that pork comes from," Nikodim said. "The entire market benefits if you acquire an outlet for your product."

U.S. beef still banned

The $360 million in tax incentives would be used to attract Chinese cargo airlines, as well as freight forwarders and cargo facility builders.

One outspoken critic of that plan has been the Show-Me Institute, a Libertarian-leaning think tank. According to the institute, the legislation itself is flawed because it allows tax breaks for warehouse owners not involved in international cargo.

Show-Me Institute researcher Audrey Spalding has written several analyses criticizing the plan. Spalding said that while she supports more international trade, she is concerned about claims being made that U.S. beef could be sent to China, given that the U.S. Department of Agriculture lists it as ineligible for export there.

Championing the legislation in April, state Rep. Caleb Jones, R-California (Mo.), said, "Folks from my district are going to be able to load up cattle and drive it to St. Louis and have it in China the next day," according to an article in CBS St. Louis.com. Jones is a sponsor of an earlier version of the legislation.

China has banned beef from the U.S. since a 2003 outbreak of bovine spongiform encephalopathy, known as mad cow disease. Ricketts said the U.S. and China are talking about letting American beef back in.

China banned U.S. pork products in April 2009 over worries about the H1N1 virus, known as swine flu. That ban was lifted in May 2010.

Cost among other hurdles

Regulations in China are not the only hurdle. Transporting products by plane is extremely expensive, said Michael Webber,who has been an air cargo consultant for four main gateways: O'Hare International Airport in Chicago, John F. Kennedy International Airport in New York, Los Angeles International Airport and Miami International Airport.

"Air cargo accounts for about 1 percent of the weight but closer to 40 percent of the dollar value of all cargo movements," Webber said.

Another challenge for St. Louis is to attract freight forwarders who control the most routings for international air cargo shipments, Webber said. Forwarders currently trucking everything to other gateway airports, he said, are unlikely to support St. Louis for meat export a couple of times each week.

Ricketts said a cargo hub in St. Louis would have a price advantage over other airports because of the "backhaul situation": Chinese cargo planes carrying products from China to the U.S. would also carry goods back instead of flying with empty cargo bays.

An article last month in China Daily reported that, pending approval by Missouri lawmakers, China Cargo Airline of China Eastern would start with three flights a week between Shanghai and St. Louis.

"This backhaul to China is going to put us into a very competitive position to pull customers away from other places," Ricketts said.

Moreover, Lambert would have more free space and less congestion to build warehouses and facilities to store fresh meat, to meet requirements from meat processors and freight forwarders, Ricketts said.

"There has to be some infrastructure; there has to be refrigeration," Ricketts said. "When fresh meat is flown by air, it is super-chilled, probably below 32 degrees."

Market uncertainty persists

With the lift of the pork ban, China has seen a great influx of U.S. pork. In the eight-month period from June 2010 to February 2011, U.S. exports of pork to China reached 192,500 metric tons, valued at $169 million, according to a U.S. Department of Agriculture report.

Pork prices in China almost doubled this year due to a shortage of pork domestically, said Li Binglong, a professor at China Agricultural University.

"The price hike means that Chinese pork no longer has the price advantage against U.S. pork," Li said. "It's possible for U.S. meat to enter the high-end market in China."

Neither he nor Ricketts had a firm estimate on how big this high-end market would be. 

Ron Plain, an agricultural economist at MU who also participated in the feasibility study, said he expects only a "small amount" of meat to be moved through the new cargo hub. Most would still be transported by ship, he said.

Plain said fresh meat could be used to fill the cargo space left by other high-value products such as chemicals and pharmaceuticals.

"Meat at $3 a pound that has to be flown half-way around the world is not going to pay for those flights," Plain said.

One of the arguments in favor of the plan is that China is increasingly wealthy and thus would pay for air-shipped meat. But Plain said the logistics of getting meat to China are not that different than those for getting it to Japan. 

"Japan is a very wealthy country," he said. "We ship lots of meat to Japan, and we don't fly much of it."

Nikodim of the Missouri Pork Association acknowledged uncertainty exists.

"Information we've seen at this point looks extremely positive," he said. "It could work out good, and it might not work. ... That's just what any other business venture is."


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Comments

Harold Sutton September 8, 2011 | 8:35 a.m.

Sounds worthy of doing a few test runs. And the supporters and detractors could post their family jewels as security to support their position if they believe so strongly.
As for the tax breaks; why not? If there is not any tax money coming in from that which yet does not exist then it is a moot argument. And if that many jobs are created, that would still be a major windfall. The tax breaks can be set up on a upward sliding scale.

(Report Comment)
John Schultz September 8, 2011 | 11:21 a.m.

The problem is the proposed legislation doesn't have any tie to actual revenue increases. It's basically corporate welfare to anyone connected enough to build the warehouses (of which a plethora already exist near Lambert) and apply for the credit.

(Report Comment)
Harold Sutton September 8, 2011 | 2:19 p.m.

Don't we all exist from the revenue recieved in the form of either wages or investment income from corporations large and small as well as the small businesses that thrive as a result?

After all, we are already sending our money over there everyday to purchase their manufactured goods. So why not sell them some beef and pork ?

Adjust the details later as the problems become obvious.

(Report Comment)
Ellis Smith September 8, 2011 | 3:40 p.m.

In the Nineteenth and early Twentieth centuries (at least until the end of WWII) trade between a colonial power and its respective colonies was such that the colonies mainly sent raw materials (including agricultural goods) or partially finished goods to the colonial power; in turn, the colonial power sent finished products (value added) back to the colonies.

A case in point was the British colonial system. One reason for the Japanese aggression in 1941-1942 was an attempt to establish a similar group of colonies (Indochina, Indonesia, Malaysia, Australia, New Zealand, etc.).

So, what is our role in the current trade situation with China? We ship them foodstuffs and coal, etc., but who ships the other the most value added products?

I do agree that we should ship them agricultural products, and coal as well (after all, Sierra Club doesn't want the coal burned here), but who is in the driver's seat?

(Report Comment)
Harold Sutton September 8, 2011 | 8:29 p.m.

Ellis, Good question! Just who is in the driver's seat?

(Report Comment)
John Schultz September 9, 2011 | 12:04 a.m.

There's no problem with selling China beef or pork. The problem arises when the state picks winners and losers by giving the annointed our tax dollars for no good reason.

(Report Comment)

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