Report Highlights: 

Post forecasts that China’s 2014 beef production will reach 5.7 million tons, a two percent increase from the updated 2013 figure. China’s 2013 beef demand is attributed to food safety incidents in other meat products (poultry and pork), which pushed consumers to beef. Post estimates that China’s beef imports will expand by 20 percent to 420,000 tons based on increased demand, favorable import prices, and additional imports from Australia. Live cow imports are estimated at 125,000 head to help improve dairy and beef cow genetics. Higher export prices are expected to cause China’s live cattle and beef exports to decline eight and ten percent to 23,000 head and 27,000 tons, respectively. Post forecasts that China’s 2014 pork production will expand by two percent to 54.7 million tons, and that pork imports will decline by three percent to 680,000 tons. Live swine imports are estimated to expand by 10 percent to 22,000 head to help improve domestic genetics. Post forecast that China’s 2014 live swine exports will increase by four percent to 1.7 million head due to ongoing demand from slaughter facilities in Hong Kong.

Executive Summary 

China’s rising beef demand is mainly attributed to this year’s reported food safety and public health incidents in China’s poultry and pork supplies. Regarding poultry, sources note that the H7N9 outbreak in China (between March and May 2013) infected 134 humans, led to 44 mortalities and losses of more than RMB60 billion ($9.8 billion) in China’s poultry industry. In terms of pork, public health concerns resulted from ‘the floating dead pig’ incident, when over 10,000 head of swine were found dead and floating in Shanghai’s Huangpu River. 

In the interim, larger-than-normal beef demand has tightened both domestic and exportable prospects for live cattle and beef. Post estimates that China’s 2014 beef imports are expected to increase by 20 percent to 420,000 tons from its updated 2013 estimate. This 2013 estimate doubled to 350,000 tons because of rising consumer demand, low import prices, and additional imports from Australia. 

China’s 2014 pork production is forecast to increase nearly two percent to 54.7 million tons from the unchanged 2013 figure. Higher production costs and lower swine profit, due to oversupplies in the first half of 2013, are expected to slow down the production growth of swine and pork. China’s oversupply will likely lead to a three percent reduction in pork imports to 680,000 tons.

Cattle and Beef Production 

Post forecasts that China’s 2014 cattle production will increase by two percent to 42.3 million head due to China’s continued dairy cow purchases to help rebuild its domestic milk supplies. [Note: Post’s assessment of China’s dairy prospects will be released in Post’s Annual Dairy Report (in mid October 2013).] 

Post estimates that China’s 2014 beef production will reach 5.7 million tons, a two percent increase from the updated 2013 figure. Rising beef demand is mainly attributed to this year’s reported food safety and public health incidents in China’s poultry and pork supplies. Regarding poultry, sources note that the H7N9 outbreak in China (between March and May 2013) infected 134 humans, led to 44 mortalities, and losses of more than RMB60 billion ($9.8 billion) in China’s poultry industry. Separately, for pork, consumer demand continues to linger over public health concerns from ‘the floating dead pig’ incident, where reportedly over 10,000 heads of swine were found dead and floating between Zhejiang province and Shanghai’s Huangpu River. 

Policies: 

As of September 1, 2013, China’s Ministry of Agriculture (MoA) implemented its new FMD compulsory vaccination standard to help protect animals from foot and mouth disease, by increasing the strength of the vaccine. Post will monitor key producing provinces for ongoing detections of foot and mouth disease (FMD), mainly Type A and Type O. 

China’s State Council continues to provide financial support for beef production by subsidizing animal genetics and productive beef cows (at RMB120 million -- $19.4 million) and improvements to major grazing areas throughout China (total $2.4 billion).

Beef Prices

China’s average retail beef price (between January and June 2013) is more than 25 percent higher than that reported for same period in 2012. Record profit margins are attracting large-sized investments from cattle and beef companies. For example, in Inner Mongolia, Kerchin Cattle Industry Co. built a new facility to slaughter 200,000 head of cattle and produce 40,000 tons of meat on a yearly basis. All equipment (from automatic deboning, trimming, cutting and packaging) is imported from abroad. According to sources, the facility’s production methods are based on European food safety standards. Backyard producers continue to withdraw from cattle operations, reportedly due to their lack of building more efficient cattle farms, feed lots, and modern slaughter and processing facilities. 

Droughts and floods in China’s southern and northeastern provinces may further impact feed grain production and prices. To date, there have been no reported concerns in major cattle producing areas. Reportedly, grain stocks are at sufficient levels based on 2012/13 harvests, but China will continue to purchase global supplies, if wheat and corn prices remain low. 

Beef Consumption 

Post estimates that China’s 2014 beef consumption will reach 6.1 million tons, close to a three percent increase from the updated 2013 figure. This year, consumer meat preference changed drastically. China’s two traditional substitutes (pork and poultry) faced food safety and public health incidents. In terms of poultry, there were H7N9 outbreaks in Shanghai, Beijing, and Guangzhou. And, for pork, more than 10,000 pigs were found dead and floating down rivers between Zhejiang Province and Shanghai. These events caused consumers to shift to beef products. There are other factors related to China’s growing beef consumption, which include, but are not limited to, the following: 

• China’s food culture continues to be influenced by western fast food restaurants; 

• Ready-to-cook beef products are consumed more in households and made available in first-tier and second-tier supermarkets; and 

• High-end restaurants lowered prices to make private banquets/dinners more cost effective. 

Imports 

Post estimates that China’s 2014 live cattle imports will increase by four percent to 125,000 head due to China’s continued efforts to improve its dairy and beef cow genetics. Traders noted that additional inspection and quarantine stations are needed to meet the expected import growth over the next few years. For example, reportedly for the first time, China imported an entire shipment of breeding beef cows, which totaled 3,442 head of Angus breeding beef cows. [Note: Based on newly reported data from Uruguay, Post finalized its estimate of China’s 2012 live cattle imports.] 

Post forecasts that China’s 2014 beef imports will grow by 20 percent to 420,000 tons from the updated 2013 figure. This figure is expected to double to 350,000 tons, largely attributed to the shift in China’s 2013 meat demand (from pork and poultry) and weakening import prices. China’s local demand has been undersupplied by domestic beef production. For example, China’s 2011 imports were equivalent to a mere two percent of local production; however, sources predict that China’s 2013/14 imports will equal to six and seven percent of China’s domestic supplies, respectively. 

China’s imports of Australian beef exports increased by 47 percent during January – June 2013, as compared to the same time in 2012. This expansion of 15 percent is reportedly attributed to Chinese importers’ decision to source more Branham beef (which is cheaper than Angus beef), in addition to a stronger Chinese currency against the Australian dollar. These two factors have also contributed to the 36 percent reduction in Australia’s export prices.

China granted beef market access to Canada in 2011, and, since then, Canadian exports expanded from 460 tons (between January-June 2012) to 11,371 tons during the same period in 2013. 

On May 31, 2013, the World Organization for Animal Health (OIE) formally recognized the United States as having a negligible risk status for bovine spongiform encephalopathy (BSE). An official statement from Agriculture Secretary Tom Vilsack noted that “With our negligible risk classification from the OIE, we have a strong foundation in place to continue increasing exports of U.S.-origin beef and beef products. In doing so, we will continue to press trading partners to base their decisions on science, consistent with international standards.” 

Exports 

Post forecasts that China’s 2014 beef exports will decrease by 32 percent to 27,000 tons from the official 2013 figure. China’s beef exports in 2013 and 2014 will likely be constrained by rising local beef demand, strengthening currency (RMB) against Hong Kong Dollars (HKD), and increasing beef export price. China’s number one export market, Hong Kong, has sourced alternative suppliers for beef imports. For example, this year, Hong Kong changed its import policy to allow U.S. boneless beef from cattle of any age and allow bone-in beef from cattle below 30 months. Prior to this policy change, Hong Kong only allowed U.S. boneless beef from cattle below 30 months. In contrast to China, Hong Kong also imports Brazilian beef, despite Brazil’s confirmed BSE case in December 2012. 

Post estimates that China’s 2014 live cattle exports will decline by eight percent to 23,000 head from Post’s revised 2013 figure, due to rising export prices and weakened demand in Hong Kong. China’s export price in the first half of 2013 is 42 percent higher than the same period in 2012. Similar to beef supplies, Hong Kong is reportedly sourcing live cattle from other suppliers.

Swine and Pork Production 

Post forecasts that China’s 2014 swine and pork production will reach 723 million head and 54.7 million tons (CWE), a two percent increase from the unchanged 2013 estimates. Although pork production is expected to improve, the current pace of growth will likely slow down due to oversupplies and continued concerns over ‘the floating dead pig’ incident in Zhejiang Province. 

To avoid farmers from slaughtering their productive sows due to unprofitable prices, the central government is subsidizing productive sows per head at RMB100 ($16.20). As a result, China’s 2014 beginning stocks for productive sows are expected to reach 11 percent of China’s total swine inventory, which is higher than the normal nine to ten percent. 

Prices 

When the ‘floating dead pig’ incident occurred during the first half of 2013, China’s six-month average of swine/corn price ratio was 5.8, which is low as compared to the same period in 2011 (at 7.4) and 2012 (at 6.1). [Note: In China, a swine and corn price ratio of 6.1 is considered too low.] To improve this ratio, the central government held two rounds of domestic pork purchases in April and May 2013. By July 2013, both swine and pork prices returned to normal levels. 

In August, China’s reported swine and corn price ratio was 6.75, so farmers are now reluctant to sell their hogs in anticipation of higher market prices during the upcoming October holiday. 

Consumption 

Post reports that China’s 2014 pork consumption will reach 55 million tons, a moderate two percent increase from the updated 2013 figure. Post lowered its 2013 consumption figure to 54.1 million tons due to the ‘floating dead pig’ incident, which caused consumers to shift to beef and aquatic products. 

Imports 

Post estimates that China’s 2014 pork imports will decline to 680,000 tons, a three percent decrease from the unchanged 2013 figure, due to higher domestic production and stocks. Sources report that fewer pork imports are expected to be offset by additional purchases of beef, mutton, and poultry products from overseas suppliers. 

Germany surpassed the United States to become China’s largest pork supplier in the first half of 2013, due to Germany’s price competitiveness and China’s import requirement of providing a ractopamine-free test report for imported pork. (See Import Policies) [Note: Germany’s export market share in the first half of 2013 increased from 13 to 23 percent. In the interim, the U.S. export market share dropped from 48 to 18 percent.] 

Post forecasts that China’s 2014 live swine imports will increase by 10 percent to 22,000 head, largely due to continued demand to improve swine genetics. Post lowered its 2013 figure to 20,000 head due to reduced imports from the United States, the largest live swine supplier to China. U.S. live swine exports to China were limited by China’s low profit margin in the first half of 2013, combined with a seven percent increase in U.S. export prices. 

China granted market access for Mexican pork in September 2012, but shipments have yet to start.

Exports: 

Post estimates that China’s 2014 live swine exports will increase by four percent to 177,000 head because of continued demand by slaughter facilities in Hong Kong. Post forecasts that China’s pork exports will rise by six percent to 265,000 tons due to China’s competitive export prices to Hong Kong, China’s largest live swine and pork export market. 

Import Policies: 

As of May 1, 2013, China’s General Administration of Quality Supervision, Import Quarantine (AQSIQ) said that imported pork shipments must be accompanied by ractopamine-free testing reports. Qualified laboratories must complete these test reports, and, without proper documentation, China’s local Entry and Exit Inspection and Quarantine Bureaus will not accept any importer application to conduct entry inspection and quarantine