US senator, ranchers hail multi-million-dollar beef deal with Chinese commerce giant

WASHINGTON - US Senator Steve Daines and ranchers from the northwestern state of Montana on Wednesday applauded a $300 million beef deal between Chinese commerce giant JD.com and the Montana Stockgrowers Association (MSGA).

"This landmark agreement has the potential to substantially increase Montana opportunity and agricultural exports to the fastest growing overseas market for beef," Daines said in a statement.

JD signed the agreement with Errol Rice, executive vice president of MSGA, on Wednesday in Beijing as US President Donald Trump began his three-day state visit to China.

According to the terms in the memorandum of agreement (MOA), JD intends to import Montana-sourced beef from member companies of MSGA to China and directly sell to Chinese consumers through its e-commerce platform. Bank of China will provide financial services to facilitate these imports and settlement process.

The procurement agreement is for an initial three years starting from Jan 1, 2018, with a minimum commitment of $200 million in beef to be imported by JD from MSGA members. It is estimated that JD's purchase will increase Montana beef export sales by as much as 40 percent in 2018.

JD also intends to invest up to another $100 million to build a brand-new slaughter house and feedlot infrastructure in Montana to help set up its supply chain there, with construction beginning as early as the spring of 2018.

Following reopening Chinese markets to US beef earlier this year, ranchers in Montana are eager to tap the huge potential of Chinese markets, which have around 300 million middle class consumers.

"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 US beef in China and developing productive relationships between Montana ranchers and Chinese consumers," said Rice.

The agreement follows an agricultural roundtable meeting in early September between a Chinese delegation and Montana farmers and ranchers, hosted by Daines at the Morgan Ranch House, near downtown Bozeman, Montana.

Fred Wacker, owner of Cross Four Ranch in Miles City, Montana, said at the meeting that it would cost him about $80 a head to send cattle to feedlots and processing plants in the Midwest, so as to ship beef products to China and other overseas markets. He would like to seek partnership with Chinese companies to build a world-class processing plant in Montana.

"It's a really smart place for China to put in investment and to partner with Montana to have a really good packing industry and processing plant here," Wacker said, arguing that would help bring down logistic costs and guarantee stable supply of high quality beef to China, a win-win deal for both sides.

Officials and staff from China's embassy in the United States, China General Chamber of Commerce - USA, and Bank of China (USA) all offered advice for identifying potential Chinese companies to partner with Montana on the processing plant and build brand awareness.

"The MOA shows how much interest there is in China for high quality cattle and beef from Montana," said Wacker, adding "China's market has the potential to be a game-changer for Cross Four Ranch and Montana ranchers more broadly."

"If we're going to grow our economy in Montana, we need to grow our agricultural community. China is the second largest beef import market in the world. This is a tremendous opportunity for Montana," echoed Danies.

The agreement is also a part of an overall commitment by JD to purchase $2 billion of goods across a wide range of categories, including pork from Smithfield Foods, over three years.

"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 US producers and Chinese consumers," said Richard Liu, chairman and CEO of JD.com.

The beef and pork will be cold-chain transported from the United States and stored in JD's own warehouses in China, according to the commerce giant. JD's extensive cold chain logistics capabilities will ensure the US meat products arrive at customers' doors safely and rapidly.

Chinese consumers have a mounting appetite for fresh and high-quality meat products. In the first half of 2017, volume from direct sales of meat on JD increased more than 780 percent year-over-year, with imported meat accounting for more than 30 percent of those sales. The beef agreement reflected that economic cooperation between China and the United States could bring win-win results to companies and peoples of the two countries, experts said.

"As long as both sides have the intention of creating a win-win solution, respect the issues each is facing, and proactively and constructively resolve them, this will push the US-China trade relation to be more fair, balanced, and mutually beneficial," said Dominic Ng, chairman and CEO of East West Bank.

China has become the largest trade partner of the United States, while the US is China's second largest. Bilateral trade surged to $519.6 billion in 2016 from $2.5 billion in 1979 when the two countries established diplomatic ties.