Highlights

In 2016, U.S. pork exports to Hong Kong have shown a positive upward trend due to competitive pricing. Domestic pork consumption is expected to remain strong into 2017. Hong Kong pork production in 2016 is expected to fall from last year's level as sourcing live pigs from China, its main supplier, encounters challenges and reduces inventory for domestic processing. In response, pork imports are forecast to rise to 420,000 MT and 440,000 MT in 2016 and 2017, respectively.

Summary

Hong Kong pork production in 2016 is expected to decline to 125,000 MT in response to tight supplies and high prices of live pigs imported from China and China's voluntary suspension of live pigs from Jiangxi province. In August 2016, Hong Kong authorities detected pigs imported from Jiangxi with traces of illegal drug residues, including salbutamol and clenbuterol.

Despite a decline in total retail sales in Hong Kong, retail food sales rose 2.2 percent during the first eight months of 2016. About 25% of Hong Kong's protein consumption is from pork and consumption in Hong Kong in 2016 and 2017 is expected to rise by 2 and 4.5 percent at a level of 545,000 MT and 570,000 MT, respectively. To meet this increased demand, pork imports will rise 6 percent to 420,000 MT in 2016 and by 5 percent to 440,000 MT in 2017. U.S. pork exports to Hong Kong in 2016 jumped 75 percent, by value, between January – July 2016 ($42 million) and January – July 2016 ($74 million) due to competitive prices with Chinese pork products.

Production, Supply and Demand Data Statistics:

Meat, Swine

Market Begin Year

Hong Kong

2015

2016

2017

Jan 2015

Jan 2016

Jan 2017

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Slaughter (Reference)

0

0

0

0

0

0

Beginning Stocks

0

0

0

0

0

0

Production

135

135

130

125

0

130

Total Imports

397

397

410

420

0

440

Total Supply

532

532

540

545

0

570

Total Exports

0

0

0

0

0

0

Human Dom. Consumption

532

0

540

545

0

570

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

532

0

540

545

0

570

Ending Stocks

0

0

0

0

0

0

Total Distribution

532

0

540

545

0

570

PS&D production figures include local and imported pigs slaughtered in Hong Kong. All numbers used in the PS&D table are in carcass-weight equivalent, using a conversion factor of 1.30. Imports are calculated as Imports minus Re-exports. Exports are calculated as Exports minus Re-exports.

Production

Hong Kong has 43 pig farms producing about 86,000 head annually, accounting for 6 percent of total supply. China provides the remaining 94 percent of live pigs for processing. The pigs are sourced from more than 200 registered farms in mainland China via three agents.

For 2016, Hong Kong's pork production is forecast to decline over 7 percent to 125,000 MT given the anticipated drop in live pig supplies from China. In the second half of 2016, industry sources expect that live pig inventory in China will increase which will help stabilize prices and may see live pig supplies to Hong Kong rebound. If so, Hong Kong's pork production in 2017 could rise to 130,000 MT.

China's live pig inventory declined sharply in 2016 leaving Hong Kong with a 10 percent decline in live pigs from China, to date. The market has responded to tight supplies with higher prices in the first 7 months of 2016. The average wholesale price of live pigs January – June 2016 rose 8 percent to $3,499/MT compared to the same period in 2015. Retail prices of freshly slaughtered pork rose even higher, ranging from 16 to 18 percent.

Detection of Prohibited Veterinary Drug Residues

In November 2015, the Hong Kong government confirmed that chloramphenicol, a prohibited chemical in food animals according to the Public Health (Animals and Birds) (Chemical Residues) Regulation, was detected in 20 locally produced pigs that were subsequently destroyed.

In early August 2016, beta-agonist residue (Salbutamol) was found in urine samples from 319 pigs imported from two Jiangxi Province farms in southeast China. AQSIQ, China's inspection authority, has voluntarily suspended exports of all live pigs from Jiangxi Province to Hong Kong. Reportedly, Jiangxi accounts for about 20 percent of live pig supplies to Hong Kong. The last time beta-agonist residues were detected in live pigs imported from Mainland China was in 2012.

Consumption

Despite a downturn in the overall economy and softening retail sales, Hong Kong food sales remain on a positive trend. In the first eight months of 2016, the value of food retail sales rose by 2.2 percent and the year-on-year figure for August rose even higher to 8.8 percent.

Pork remains a stable food item compared to other meats, such as beef and chicken, and Hong Kong's pork consumption in 2016 is expected to rise by 2 percent over last year to reach 5450,00 MT. If the economy rebounds, pork consumption in 2017 could rise to 5700,000 MT, given stable prices.

Hong Kong consumers are extremely sensitive to pork prices and fluctuations can influence consumer choices. For example, in 2015, when wholesale prices of live pigs rose eight percent from $2,678/MT to $2,899/MT, the substitution from fresh to chilled/frozen in market share was evident. Between 2014 and 2015, chilled/frozen pork increased from 66 to 69 percent while freshly slaughtered pork decreased from 34 to 31percent. A similar substitution effect took place in 2011 as well when wholesale live pig prices rose to a record high of $3,149/MT.

Trade

In terms of carcass weight, pork imports in 2016 and 2017 (excluding re-exports) are expected to rise six percent to 420,000 MT and five percent to 440,000 MT, respectively, in response to rising pork demand and lower live pig inventory for fresh pork production.

Imports and Re-exports

Hong Kong imported a total of $1.12 billion in pork products in 2015. (Tables 4 & 5) In the first seven months of 2016, Hong Kong pork imports, in terms of product weight, surged 28 and 12 percent in terms of volume and value, respectively, due to increased shipments for re-export to China. As trade conditions improved over 2015, pork re-exports to China rocketed by 242 percent while pork re-exports to Vietnam declined by 61 percent, resulting in an overall 56 percent increase in re-exports to all markets between January – July 2015 and January – July 2016. China has regained its position in 2016 as Hong Kong's largest re-export market for pork products with a market share of 46 percent.

Change of Market Share resulting from Price Fluctuation

Price fluctuations in pork exporting countries have influenced market share in 2016. As the average price of Chinese pork imports rose 13 percent and Brazilian and U.S. pork declined 22 and 37 percent, respectively, in the first seven months in 2016 (table 6), Brazil is currently the largest pork supplier to Hong Kong, by volume, with a market share of 31 percent compared to 19 percent in 2015. In terms of value, China remains the largest supplier exporting $212 million in pork products to Hong Kong from January – July 2016, accounting for 30 percent market share.

Despite the spike in China's pork prices in 2016, China remains the largest supplier of chilled pork to Hong Kong, accounting for 82 percent, by volume, although it held 92 percent in 2015.

U.S. Pork

From January – July 2016, U.S. pork exports to Hong Kong reached $74 million, representing a 75 percent increase by value and 177 percent by volume during this period (table 4 & 5). A 37 percent drop in the average price (table 6) influenced the purchasing surge such that the market share of U.S. pork rose from 6 to 13 percent by volume and from 7 to 10 percent by value, respectively, compared to January – July 2015 and January – July 2016. In addition, the U.S. was the largest supplier of swine offals to Hong Kong, reaching $134 million from January – July 2016.

Policy

Hong Kong has not established a maximum residue level for ractopamine in food products. In lieu of its own standard, Hong Kong utilizes the Codex standard for veterinary drug residues of 10 ppb for beef versus the U.S. standard of 30 ppb. Recently, random testing of beef from several retail outlets by Hong Kong authorities revealed U.S. beef samples with ractopamine residues above 10 ppb which resulted in a press release announcing the results with language that the levels did not pose a public health risk. The situation remains under review and discussion.

Paylean was approved for use in swine feeds in 2007 in Hong Kong.

In response to complaints that Hong Kong cold storage facilities are insufficient for capacity, the Hong Kong Food and Environmental Hygiene Department (FEHD) and mainland China's Shenzhen Entry-Exit Inspection and Quarantine Bureau (CIQ) agreed in April 2016 to a plan to allow frozen meat products exported to Hong Kong to be delivered to cold storage facilities in the Qianhai Bonded Area of Shenzhen, China, located just over the Hong Kong/China border, and then shipped back to Hong Kong as needed. The Hong Kong government officials pointed out that the agreement is aimed at alleviating the shortage of cold storage space in Hong Kong without compromising food safety. While the effective date is not yet announced, Chinese media reported that this new measure will be ready to roll out by the end of 2016.

At this stage, the agreement only applies to frozen meats and not to other food products, such as seafood and chilled meat products. Frozen meat products under this program must meet import requirements, not only for Hong Kong, but also for China. For example, pending the resolution of import protocols to China, U.S. beef products would not be allowed into the Qianhai Bonded Area, despite their final destination being Hong Kong, until the China import protocols are in place.

The Chinese authorities will monitor the facilities and temperatures where frozen meat is stored to ensure the safety of food products during storage. Upon shipment to Hong Kong via a specific point of entry, shipments must be accompanied by a transshipment certificate and stock list (document showing the volume already exported to Hong Kong and the stock still remaining in Qianhai) issued by the Qianhai authority, in addition to the existing requirements including bill of lading, health certificates and Hong Kong's import license and/or permit, as appropriate.

Hong Kong: Pork Imports in Volume, MT

Partner Country

Year To Date

2013

2014

2015

15-Jul

16-Jul

% 16/15

Market share

2016

Total

443,712

442,016

399,675

211,670

271,796

28.41

100%

China

102,942

115,168

104,850

65,476

46,942

-28.31

17%

Brazil

91,997

77,661

79,938

41,190

83,117

101.79

31%

Germany

28,467

38,263

33,635

15,063

17,309

14.91

6%

U.S.

29,538

28,059

28,133

12,887

35,737

177.32

13%

Poland

19,528

29,504

25,953

15,023

12,810

-14.73

5%

Netherlands

32,491

23,743

24,463

10,671

14,067

31.82

5%

Spain

43,020

31,808

20,332

9,650

15,963

65.42

6%

Hong Kong: Frozen Pork Imports in Value, US $million

Partner Country

Year To Date

2013

2014

2015

15

.16

%Change

Market

share 2016

World

643

665

672

377

477

26.52

100%

China

163

193

218

140

94

-32.64

20%

Brazil

228

196

180

99

166

67.99

35%

U.S.

43

50

54

28

61

115.52

13%

Vietnam

32

35

49

24

40

66.57

8%

Netherlands

67

50

44

22

24

Сер.32

5%

Germany

42

57

40

19

22

13.11

5%

Spain

20

22

20

11

22

103.52

5%

Poland

2

14

16

9

15

71.1

3%

Canada

9

12

13

7

5

-36.87

1%

Hong Kong: Swine Offal Imports in Value, US$ million

Partner Country

2013

2014

2015

07.2015

07.2016

%Change

Market Share 2016

World

738

1,032

749

441

470

6.41

100%

U.S.

146

243

223

146

134

-8.25

29%

Germany

162

219

108

63

61

-2.93

13%

Brazil

86

109

78

50

53

5.37

11%

Netherlands

117

113

69

36

41

14.3

9%

Poland

14

66

54

33

40

23.07

9%

Spain

37

57

51

23

43

87.5

9%

Canada

22

30

34

25

10

-60.31

2%

U.K.

32

38

25

15

17

17.36

4%

Belgium

38

38

25

13

15

16.47

3%

Italy

17

29

23

10

22

121.56

5%