Report Highlights:

Post forecasts China's 2016 pork consumption at 57 million tons, a slight decrease from USDA's 2015 official forecast. However, imports in 2016 are expected to play a larger role in meeting domestic demand. Imports are forecast at 830,000 tons, an increase of 4 percent over USDA's official estimate. Domestic producers remain hampered by high production costs and also must cope with more stringent environmental regulations introduced at the beginning of 2015. Post forecasts beef consumption at 7.4 million tons, slightly above 2015 levels. The Chinese market remains closed to U.S. beef but imports from other suppliers are forecast to reach 600,000 tons.

CATTLE

Production

Calf numbers up slightly in 2016.

Post forecasts 2016 calf crop at slightly above 49 million. Unlike the pork and poultry industries in China, which have seen small-scale operators replaced by larger scaled farms, cattle breeding remains dominated by small backyard operations. Despite high beef prices, high breeding costs are a constraint on herd expansion. A free trade agreement expanding access for live cattle from Australia will put additional competitive pressure on the Chinese beef breeding sector.

Import

Live cattle imports down sharply in 2015 but will increase in 2016

Post has adjusted 2015 live cattle imports to 100,000 head based tight global supplies, particularly from China's main suppliers, Australia, New Zealand and Uruguay. Imports are forecast to recover to 200,000 head in 2016. The rise is aided by the inclusion of Chile as a new supply source for China in 2015. Overall, growing demand for high quality beef, the need to improve herd productivity, and the fact that live cattle imports are cheaper than breeding domestically, will drive imports in 2016.

On November17th 2014, China and Australia announced a free trade agreement (FTA), which includes a provision for an annual quota for live cattle imports of 1 million head. Despite doubts expressed by some analysts that Australia will be able to meet the quota in the near future.

BEEF

Production

Production up slightly in 2016

2016 beef production is forecast at 6.785 million tons. Stable beef prices are attracting more investment in production and some backyard farmers are expanding. However, slaughter increases are still constrained by tight supply of beef animals. Culling of dairy cattle will help support overall slaughter numbers in 2016.

Consumption

Demand to remain firm in 2016

2016 consumption is forecast at 7.4 million tons, higher than USDA's 2015 official forecast. Beef consumption will remain firm in 2016, supported by increasing incomes, continued urbanization and increasing consumer preference over pork. However, high relative prices are expected to keep beef consumption roughly 15% that of pork in the Chinese diet.

Imports

2016 beef imports are forecast at 600,000 tons, 20 percent higher than USDA's 2015 official estimate. Despite increasing prices for its beef, Australia will remain the supplier, a position bolstered by the free trade agreement.

Imports from South American countries are forecast to increase, in part because China has lifted its 2012 BSE-related ban on Brazilian beef. Since 2003, China has banned U.S. beef, beef products, and live cattle, ostensibly due to BSE concerns. However, the OIE (World Organization for Animal Health) has recognized the United States as having 'negligible' BSE risk.

Key Players Comparison Summary

Export Country

Current situation

Australia

Exports mainly grass fed with small quantities of grain fed. Although prices are rising, generally cheaper than North American beef. .

Uruguay

Value for money choice in the market

New Zealand

Mainly grass fed, generally cheaper than Australian beef.

Argentina

Mid-priced compared to other imports. Exports mainly grass fed beef.

Canada

Price is relatively expensive and export quantity is limited.

Animal Numbers, Cattle

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

China

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Total Cattle Beg. Stks

103000

103000

100550

100450

0

100250

Dairy Cows Beg. Stocks

15000

15000

15300

15500

0

15600

Beef Cows Beg. Stocks

50500

50500

50500

50700

0

50800

Production (Calf Crop)

47900

47900

49000

49000

0

49050

Total Imports

326

230

500

100

0

200

Total Supply

151226

151130

150050

149550

0

149500

Total Exports

20

20

20

20

0

20

Cow Slaughter

0

0

0

0

0

0

Calf Slaughter

0

0

0

0

0

0

Other Slaughter

49215

49100

48500

48000

0

48200

Total Slaughter

49215

49100

48500

48000

0

48200

Loss

1441

1560

1280

1280

0

1280

Ending Inventories

100550

100450

100250

100250

0

100000

Total Distribution

151226

151130

150050

149550

0

149500

(1000 HEAD)

Meat, Beef and Veal

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

China

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Slaughter (Reference)

49215

49215

48500

48000

0

48200

Beginning Stocks

60

60

40

40

0

20

Production

6890

6890

6825

6750

0

6785

Total Imports

417

417

500

550

0

600

Total Supply

7367

7367

7365

7340

0

7405

Total Exports

30

30

30

20

0

25

Human Dom. Consumption

7297

7297

7305

7300

0

7350

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

7297

7297

7305

7300

0

7350

Ending Stocks

40

40

30

20

0

30

Total Distribution

7367

7367

7365

7340

0

7405

(1000 HEAD) ,(1000 MT CWE)

SWINE

Production

Post forecasts China's 2016 swine herd at 421.7 million head, a slight decrease from 2015 USDA's official estimate due to decreasing numbers of sows. Small farm operators continue to leave and stricter environmental laws are factor in reducing swine numbers. China's local governments are using tough new environmental rules to shut down or relocate pig farms, especially those located near densely populated areas. For example, more than half of the small farms in Guangdong were closed while the remaining farms reduced their herd. Also, in Fujian province, the government closed more than 13,000 backyard farms over pollution concerns. China's Environment Protection Act went into effect on January 1, 2015, and contains provisions for increased financial penalties for livestock breeders that mishandle waste.

Hog producers were hit hard by low pork prices. The hog to corn price ratio has remained below the profitability breakeven indicator of 6:1 for 18 months up to June 2015. The extended period of losses has drained farmers' cash reserves, forcing them to cull more 38 million sows. However, industry sources believe the swine herd will recover by the end of 2016 driven by high sow, piglet and hog prices.

Although the breeding herd is shrinking, its quality is improving due to imported genetics, industry consolidation and new investment. The central government is also encouraging the development of large scale swine farms. These farms usually have better technology and management skills, resulting in higher sow production ratio. Investors from other industries such as IT, steel, finance, and chemical have invested in the swine industry bringing the needed capital to buy new technology and equipment to make the sector more efficient.

PORK

Production

Production will be back to normal levels in 2016.

Post forecasts 2016 pork production at 56.2 million tons, a small decrease from USDA's 2015 official forecast. Higher body weight helped offset a decline in slaughter numbers. Better genetics, combined with expected lower feed prices and higher pork prices, will promote slaughter at heavier weights to maximize profitability. As a result, the estimated slaughtering weight is increased from 100kg to 120kg.

Pork prices started to rise upward from March 2015, encouraging farmers to increase sow herds. Reduced supply rather than demand spurred the price increases. Despite recent losses in the industry, Industry sources are cautiously optimistic that productions increases and prices will allow for the return to profitability.

Consumption

Post forecasts 2016 consumption at 57 million tons, a slight decrease from USDA's official forecast. China's economic slowdown, coupled with the fight against corruption reducing the number of official banquets, has weakened pork demand, particularly at high end hotels and restaurants. Pork prices are anticipated to remain high in 2016 and sustained high prices will drive consumers towards poultry and fish consumption. However, a population that is still growing and becoming more urbanized will support overall pork consumption. Pork is still the main protein sources for many Chinese consumers and consumption will continue to increase as the population continues to grow albeit a slower pace. Urban consumers are also paying more attention to feed safety, resulting in growing popularity of branded pork.

Imports

Imports are forecast at 830,000 tons, a 4 percent increase from 2015 USDA official forecast. Imports from European countries will continue to grow as more countries become eligible to export. In 2015, China added Romania and Austria to the list of countries eligible to export.

U.S. exports are hampered due to China's zero tolerance for ractopamine, a feed additive that promotes lean muscle growth in swine. China maintains this ban despite the establishment of a Codex standard, and scientific evidence indicating that ractopamine can be used safely. China inspects every shipment for ractopamine residue, which adds importers cost at the port and lengthens the customs clearance time.

Declining U.S. imports have allowed European Union countries to capture more than 70 percent import market (as of July, 2017). The price gap between domestically produced pork and imports can be as much as 50 percent reflecting the high cost of production as result of limited land and increasing labor costs. Although a depreciation of the Chinese currency will make imports more expensive, the high cost of local production will remain favorable for imports.

Exports

Post forecasts 2016 exports of pork at 150,000 tons, 25 percent lower than USDA 2015 official forecast. Aforementioned high cost of local production make Chinese pork uncompetitive in most export markets. Most of what is exported goes to Hong Kong and Macau with some exports to Russia.

Animal Numbers, Swine

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

China

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Total Beginning Stocks

474113

474113

465830

465830

0

420200

Sow Beginning Stocks

50000

50000

45750

44750

0

45500

Production (Pig Crop)

729927

729927

682300

667000

0

698000

Total Imports

7

7

7

2

0

2

Total Supply

1204047

1204047

1148137

1132832

0

1118202

Total Exports

1750

1750

1600

1600

0

1600

Sow Slaughter

0

0

0

0

0

0

Other Slaughter

735100

735100

721500

710000

0

694000

Total Slaughter

735100

735100

721500

710000

0

694000

Loss

1367

1367

1037

1032

0

902

Ending Inventories

465830

465830

424000

420200

0

421700

Total Distribution

1204047

1204047

1148137

1132832

0

1118202

(1000 HEAD)

Meat, Swine

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

China

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Slaughter (Reference)

735100

735100

721500

710000

0

698000

Beginning Stocks

350

350

375

375

0

145

Production

56710

56710

56600

56400

0

56225

Total Imports

761

761

800

800

0

830

Total Supply

57821

57821

57775

57575

0

57200

Total Exports

277

276

200

180

0

150

Human Dom. Consumption

57169

57170

57425

57250

0

57000

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

57169

57170

57425

57250

0

57000

Ending Stocks

375

375

150

145

0

50

Total Distribution

57821

57821

57775

57575

0

57200

(1000 HEAD) ,(1000 MT CWE)