China. Livestock and Products Semi-annual. Feb 2014 Feb. 27, 2014
Due to poultry safety concerns, consumer’s rising substitution to beef will support a slight increase in 2014 beef production to 5.76 million tons and result in imports up to 550,000 tons on favorable prices. Live cattle and beef exports are both expected to decline by 10 percent due to tight domestic supplies and high prices. China’s 2014 pork production will continue its growth trend by rising two percent to 55.8 million tons. China’s pork imports will expand by three percent to 790,000 tons based on competitive import prices, and live swine imports will rise by 5 percent due to strong demand for swine genetic improvement. In December 2013, China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) approved Chongqing, a municipality directly under the Central Government, to be China’s first inland meat entry port.
Larger-than-normal beef demand has tightened both domestic and exportable prospects for live cattle and beef. Reportedly, small scale dairy cattle producers are unable to comply with China’s newly imposed dairy regulations, so producers are slaughtering dairy cattle to profit from current beef market prices. Rising beef demand is mainly attributed to the food safety repercussions following China’s recent H7N9 poultry outbreak. Post forecasts China’s 2014 beef imports at 550,000 tons, an increase of 75,000 tons over USDA’s official estimate.
With regards to pork, despite higher-than-expected production and imports, China’s 2014 pork consumption may only increase by one percent to 41 kilograms per capita. Public health concerns continue to linger over last year’s ‘floating dead pig’ incident, when over 10,000 head of swine were found dead and floating in Shanghai’s Huangpu River. These concerns continue to have a negative impact on consumer purchase decisions related to pork.
Meat, Beef and Veal
Post’s 2014 forecast for China’s beef production is 5.76 million tons, slightly higher than USDA’s official estimate of 5.75 million tons. Post’s two percent increase over the 2013 figure is largely due to growing demand as consumers switch from poultry to beef following China’s recent avian influenza outbreak.
Producers are utilizing abundant corn and alfalfa supplies to support their expanding beef production. China’s 2013/14 corn production is estimated at a record high of 217.7 million tons, and imports, many of them from the United States, provide an additional 3.3 million tons to domestic supply. With sufficient corn supplies, China is subsidizing domestic companies that purchase corn from the Northeast (a major grain/livestock production region). China’s alfalfa supply of 1.5 million tons consists of record high production at 700,000 tons and imported alfalfa at 800,000 tons. The United States accounts for nearly 94 percent of China’s total alfalfa imports.
Furthermore, China’s investment in domestic beef production is also helping expand production. The Central Government provided RMB8.26 million ($1.35 million) to a Modern Agriculture Beef Development Project in Yunnan. The Fengdu County in Chongqing is subsidizing RMB20.77 (nearly $3.4 million) for backyard farmers to build larger-scale companies. Private companies are also increasing investment. China’s breeding beef cattle imports reached a record high last year of over 9,000 head.
China’s 2014 domestic beef prices are expected to remain strong due to short supplies of domestic cattle and beef. Reportedly, backyard dairy cattle producers, unable to comply with China’s strict dairy regulations, are exiting the business by sending dairy cattle to slaughter to profit from current beef prices. The Ministry of Agriculture’s (MoA) national retail beef price for December 2013 has yet to be released, but the average 2013 January to November price is at least 30 percent higher than the same period in 2012.
Post forecast for China’s 2014 beef consumption of 6.26 million tons is two percent higher than USDA’s official estimate of 6.19 million tons. China’s continued avian influenza outbreak is influencing consumers to seek alternative protein sources, such as red meat and fish.
Post forecasts China’s 2014 beef imports at 550,000 tons, an additional 75,000 tons above USDA’s 2014 estimate, because of rising consumer demand and competitive import prices. Australia, Uruguay and New Zealand are China’s three top suppliers. Australian exports account for 53 percent of China’s 2013 total imports. Reportedly, upon request by China’s importers, Australian exporters now provide larger –sized carcass pieces in simpler packages, and offer export prices that are nearly two percent cheaper over last year. Of interest in 2013, Canadian exports rose sharply to 24,373 tons, more than six times higher than the previous year, because of competitive prices compared with major suppliers. China continues to negotiate beef market access terms with other countries, including the United States, which could further increase total imports. China’s average 2013 beef import price was $4,313 per ton, an astounding 55 percent discount from its average domestic price (from January to November) of $9,585. Sources note that this price difference will continue in 2014, given tight beef supplies.
Post forecasts that China’s 2014 live cattle imports will reach 20,000 head, which is 3,000 head lower than USDA’s official forecast, due to fewer imports of breeding dairy cows. Small-scale dairy cattle producers may import less breeding cows due to China’s strict dairy production requirements.
Import Policy Change
In December 2013, China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) approved Chongqing, a municipality directly under the Central Government, to be China’s first inland meat entry port. This means that all imported meat products can be directly shipped to Chongqing and not transported through coastal ports. Reduced transportation costs will further strengthen the price competitiveness of imported meat products. Sources note that Chongqing’s meat terminal priced imported bovine tails per kilogram at RMB90 ($14.75), compared to local bovine tails at RMB100 ($16.39).
Post forecasts China’s 2014 beef exports at 27,000 tons, largely due to limited domestic beef supply and record high prices in the local market. Leading export markets currently offer uncompetitive prices, compared to China’s 2013 average domestic beef price of $9,585 per ton. China’s 2013 export price per ton was $4,844 to Hong Kong, $8,743 to Japan, and $7,652 to Kyrgyzstan. Post estimates a nine percent decline in China’s 2014 live cattle exports to 19,000 head compared to the revised 2013 figure of 21,000 head. Short domestic cattle supplies make exports less competitive. The average 2013 live cattle export price increased by 34 percent to nearly $2,898 per head.
Post forecasts China’s 2014 pork production at 55.8 million tons, two percent higher than USDA’s official 2014 estimate of 54.7 million tons. Fewer swine disease outbreaks and better animal nutrition continue to improve hog slaughter weights and pork production.
China’s 2014 productive sow inventory is expected to account for 11 percent of total swine inventory, an amount which is higher than the government’s required level of 9-10 percent. China’s swine surplus has pressed hog prices downward since October 2013. With no significant disease outbreak during the winter months and an abundant supply, sources note that hog prices should remain at relatively low levels during the first half of 2014. The government is monitoring the hog and grain price ratio to decide if domestic pork purchases for government-held reserves are required.
To prevent significant fluctuations in swine production, some provinces or cities have started to implement hog subsidy trials. As of January 2014, the Guangdong provincial government offered fattening farms that have swine (weighted at or above 10 kilograms) an insurance subsidy. The insurance fee per animal is RMB20 ($3.28) with the highest claim of RMB500 ($82.00). The Guangdong local government will pay 75 percent, and the farmer covers the remaining 25 percent. If a hog’s cause of death is based on a natural disaster or disease, the farmer can file a full claim if the hog weight is more than 80 kilograms. The first trial was implemented in Gaozhou City, Guangdong. In Chongqing’s Rongchang County, an insurance subsidy program is being developed for piglets with a highest claim of RMB300 ($49.20). This two month insurance period is for piglets less than 60 kilograms.
In December 2013, supervision of hog slaughter was transferred from the Ministry of Commerce (MOFCOM) to the Ministry of Agriculture (MOA). This responsibility includes drafting relevant laws and regulations; contributing to swine industry development plans and swine industry statistics; and supervising the quality and safety process of slaughtered products through audits and technical training. Sources note that the National Statistics Bureau will report swine inventory and pork production numbers on a half year and end of year basis, and MOA will report percentage changes of productive sow inventory monthly.
Post forecasts that China’s 2014 pork consumption will increase by two percent to 56.2 million tons, partly due to continued demand in urban cities and cheaper prices compared to other meats. As noted in the beef section, China’s recent avian influenza outbreak influences consumers away from poultry towards red meats and fish. Despite higher-than-expected pork production and imports, Post forecasts that China’s 2014 per capita pork consumption will only increase by one percent to 41 kilograms mainly for the following reasons:
• China’s slow economic growth will likely stabilize per capita income and consumption;
• The reported 2013 incident on the dead pigs floating from Zhejiang Province to Shanghai Huangpu River continues to have a negative impact on consumer purchase decisions; and
• China’s tightened ban on government banquets reduces consumption.
Despite record pork production, Post estimates that China’s 2014 imports will increase by two percent to 790,000 tons, largely due to competitive import prices. From January to November, the average 2013 domestic pork price was $3,977 per ton, while imported pork price was more than 50 percent cheaper at $1,899 during the same period in 2012.
The United States is China’s largest pork supplier; however, U.S. market share faces serious competition from Germany, China’s second largest supplier. The U.S. export market share dropped from 54 percent in 2011 to 36 percent in 2012 and continued downward to 21 percent in 2013. Meanwhile, Germany’s export market share increased from five percent to 20 percent over the last three years. This is partly due to Germany’s competitive pork prices and China’s ractopamine restrictions on U.S. pork exports.
Post estimates that China’s 2014 live breeding swine imports will increase by 10 percent to 23,000 head due to continued demand for improving local swine genetics. Breeding animal imports will continue upward as China continues to modernize its farming practices. The United States is China’s largest live swine supplier, accounting for over 50 percent of imports.
Post estimates China’s 2014 pork exports at 250,000 tons, slightly lower than USDA’s official estimate and largely due to few shipments to Japan, China’s second largest export market. Post forecasts China’s 2014 live hog exports at 1.71 million head due to reduced slaughter demand in Hong Kong and Macau