Hong Kong. Livestock and Products Annual. Sep 2014 Oct. 9, 2014
Weakening demand and high prices lower total import expectations for pork products to 340,000 MT and 350,000 MT in 2014 and 2015, respectively, from 399,000 MT in 2013. Taking re-exports into consideration, Hong Kong imported $87 million or 29,538 MT (product weight) of U.S. pork products in 2013. Offal imports continue to show a strong growth trend topping $146 million in 2013 and expected to grow over 30 percent in 2014.
Economic indicators, including GDP forecasts and restaurant receipts, forecast weaker domestic demand in 2014 compared to 2013, resulting in a 15 percent year on year decline in total pork imports. Economic recovery over the next twelve months might see trade recover to 350,000MT but fall short of the 399,000MT achieved in 2013.
In 2013, Hong Kong imported $87 million of U.S. pork products, which, taking re-exports into account, made it the 7th largest market, by both value and volume, for U.S. pork. Hong Kong imported $146 million of pork offals in 2013.
Competitive pricing from Chinese and Brazilian sources lowers prospects for U.S. imports in the future. In terms of carcass weight with re-exports excluded, U.S. pork products will probably drop to 22,000 MT in 2014, down 21 percent from 2013, as China’s price advantage erodes U.S. market share.
Similarly, weakening catering activity and reduced domestic demand draw forecast predictions for pork consumption down to 478,000 MT and 490,000 MT in 2014 and 2015 respectively, from a consumption level of 534,000 MT in 2013.
About 31 percent of pork consumed in Hong Kong is freshly slaughtered and destined for home consumption. Although consumption of chilled/frozen pork is expected to decline due to sluggish demand in restaurant and catering sectors, demand for fresh pork will remain strong due to plentiful supply of low-priced Chinese product and high-priced fresh chicken and beef.
Hong Kong’s pork production is projected to rise through 2014 and 2015 reaching 138,000 MT and 140,000 MT, respectively. China currently supplies over 93 percent of live pigs to Hong Kong and is expected to supply around 4,500 pigs to Hong Kong daily for the next several years.
The abundant supply of live pigs to Hong Kong is keeping wholesale prices low. In the first five months of 2014, wholesale prices of live pigs bottomed at $2,460/MT from a record high of $3,149/MT in 2011.
Approximately 40 pig farms in Hong Kong maintain a steady supply of 260 pigs daily, representing 7 percent of total production, to the local market. Pigs raised locally are comparatively heavier than Chinese-raised pigs, averaging about 96 kg versus 80 kg. Due to environmental and land use considerations, the Hong Kong government is not prepared to permit the expansion of pig farm operations, leaving the future vitality of livestock production uncertain.
Each consignment of imported animals for human consumption is tested for chemical and veterinary drug residues. The Hong Kong Food Safety Authority monitors products for 44 drugs, including seven prohibited1, and 37 restricted veterinary chemicals which are listed on Public Health (Animals and Birds) (Chemical Residues) Regulation (Cap. 139N). About 51,500 samples of urine, serum and other tissues from pigs, cattle, goats and chickens were tested in 2013. No prohibited chemicals were detected.
Paylean is a registered drug in Hong Kong (approved in 2007) and is allowed for use in swine feeds.
Pork consumption in 2014 and 2015 is forecast lower than 2013 at 478,000 MT and 490,000 MT, respectively, as demand growth slows. According to government statistics, restaurant receipts in real terms declined 0.7 and 0.9 percent, year on year, for the first and second quarter of 2014 respectively.
Fresh pork consumption is expected to benefit from low prices compared to more expensive chicken and beef. Contributing to this situation are the following factors:
• Plentiful supply of live pigs from China has lowered local fresh pork prices. For the first five months in 2014, the price of fresh pork has dropped between 3 to 5 percent.
• Reduced supplies of poultry following Hong Kong’s ban of live chicken imports from China from January to August 2014 due to H7 flu virus concerns have raised prices. China previously supplied almost half of Hong Kong’s live chicken supply. Although the ban was lifted in early September 2014, the daily supply of live chickens, currently around 4,000 head, remains well below the previous level of 7000 head.
• Reduced supplies of live cattle from China have also raised prices. For example, the average retail price of beef has risen from $13.74/kg in 2011 to $19.99/kg in 2014. There is no
indication when live cattle supplies from China to Hong Kong will increase and reduce pressure on prices.
Given these price influences, the substitution between pork and other expensive meats is expected to support increased consumption of freshly slaughtered pork over the next few years.
Pork imports are expected to fall due to slower demand. Forecasts for 2014 and 2015 pork import volumes fall to 340,000 MT and 350,000 MT respectively.
Hong Kong’s 2013 pork import value topped $1,260 million, including re-exports. Hong Kong’s major pork suppliers include China (34%), Brazil (19%), and the U.S. (8%).
On the other hand, offal imports show a strong growth trend. Hong Kong imported $738 million in offals in 2013 and this value is expected to grow over 30 percent in 2014. While about 42 percent of Hong Kong’s pork imports are re-exported, as much as 79 percent of offals are re-exported.
Due to slowing demand and competitive pricing from alternative sources, U.S. pork exports to Hong Kong in 2014 will likely decline 28 percent to 22,000 MT (carcass weight with re-exports excluded) compared to 28,000 MT in 2013. In the first six months of 2014, U.S. pork CIF prices jumped 35 percent to $3,604/MT compared to $2,659/MT in the corresponding period in 2013 following the Porcine Epidemic Diarrhea virus (PEDv) cases. As a result of rising prices, sales of U.S. chilled pork to Hong Kong declined 6 percent in volume between January – June 2013 and 2014.
Given high U.S. pork prices in early 2014, local traders are procuring less expensive pork supplies from China, European countries and Brazil. Popular U.S. commodities cuts, such as brisket bones, spareribs and collar, have close competitor substitutes. For instance, European soft bone cuts can readily replace American brisket cuts which are widely used in Chinese restaurants. While U.S. premium pork has a very niche market in high-end restaurants and supermarkets, substitutes from Australia are also available. For instance, Australian chilled pork exports to Hong Kong jumped 15 percent between January – June 2013 and 2014 when U.S. chilled pork prices went high.
Hong Kong was the 7th largest export market for U.S. pork supplies in 2013, accounting for 3 percent of total U.S. pork export volume. Hong Kong imported a total of 29,538 MT of U.S. pork products valued at $87 million last year when re-exports are taken into account.
In 2013, Hong Kong imported $146 million of U.S. offals. Between January – June 2013 and 2014, U.S. offal exports to Hong Kong continued to grow by 34 percent by value and 11 percent by volume.
China’s pork exports to Hong Kong have been performing well since 2013 and are expected to continue strong in 2014 and 2015, given competitive pricing. Between January – June 2013 and 2014, the CIF prices of pork from China declined 4 percent resulting in a 22 percent increase in import volume and a rise in market share from 24 percent to 27 percent. Given the prevailing high prices of Brazilian pork, China’s pork will continue to be in demand in the Hong Kong market.
China exported $387 million worth of pork to Hong Kong in 2013, $30 million of which was chilled pork. China accounts over 93 percent of Hong Kong’s total chilled pork imports, but to a different market segment than that of the U.S. and Australia. Chilled pork from China is primarily for household consumption and use in Chinese restaurants.
For frozen pork products, China is the second largest supplier to Hong Kong after Brazil, with sales of $163 million to Hong Kong in 2013. Popular cuts include fillet, loin, and butt which are widely used in Chinese restaurants and fast food chains.
Processed pork accounts for the largest share of export value of Chinese pork to Hong Kong, compared to chilled and frozen pork. The export value and volume amounted to $194 million and 49,519 MT respectively in 2013. The bulk of the processed products are half or fully-cooked products for the catering industries. To reduce operation costs, fast food chains and Chinese restaurants have established pork processing operations in Chinese cities adjacent to Hong Kong for processing dim-sum and dumplings that are exported to Hong Kong. These processed pork products are difficult to replace with supplies from other countries, thus, Hong Kong has continued to buy Chinese processed pork products in the past few years even when China’s pork prices were high.
Brazil is the second largest pork supplier to Hong Kong, with an export value of $259 million last year. Hong Kong is forecast to import less pork from Brazil in 2014 and 2015 due to higher prices. Although, Hong Kong importers increased inventory in late 2013 and early 2014 to avoid price rises, Brazilian pork exports to Hong Kong declined 7 percent in January – June 2014 year-on-year. Hong Kong traders expect that the Russian market will increase demand for Brazilian pork, particularly for primal cuts such as loins and belly. Thus, Brazilian pork prices will remain high. Hong Kong, therefore, is expected to reduce Brazilian imports in the near future. However, parts not in strong demand by Russia, such as spareribs, will continue to flow into Hong Kong.
Hong Kong’s first ever pesticide regulation became effective in August 2014. This measure provides a list of MRLs (maximum residue level) regulating over 7,000 pesticide-food pairs. The Regulation adopts a “modified positive list” approach. If a food is found to contain pesticide residues for which no MRLs have been specified in the Regulation, except for exempted pesticides, the import and sale of the concerned food is only allowed if the consumption of the food is not dangerous or prejudicial to health. The Hong Kong Center for Food Safety (CFS) will conduct risk assessments taking into account the local food consumption patterns and other factors.
The CFS indicates that they will update the MRLs by making reference from the latest international developments. Also, they will provide a mechanism that allows the trade to make suggestions for adding or revising MRLs/EMRLs to the existing pesticides list. All applications have to be accompanied by supporting documentation. No application fee is required. A guide to making proposals is provided at the CFS website.
The CFS has prepared a User Guidelines for Pesticide Residues in Food Regulation which also contains some “Frequently Asked Questions”.
Detailed information on the pesticide regulation is available on the CFS webpage, which also contains a quick search engine on MRLs of specific food types