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China’s Beef Demands Wholly Unsatisfied

Published: Aug 31, 2012
By Joel Haggard, USMEF senior vice president, Asia-Pacific

A softening of the world economy may be tempering China’s roaring economic growth and inflation rates, but the nation's beef prices are still moving up, up, up and have been for the last several years.

Current retail prices of pasture-fed lean beef from the hindquarter are hovering near historical highs at $6.14/kg. ($2.79/lb.), 20 percent higher than a year ago. And while high prices and producer profitability are encouraging new investor interest in this sector, the long cycles of cattle production suggests that shortages will continue for the next few years.

In China, beef is widely considered a healthy, premium alternative to pork and chicken, and restaurants and hotels across the country have been scrambling to add beef items to their menus. But there is a particularly acute shortage of high quality beef in China, according to Beijing Orient Agribusiness Consultants Limited (BOAC). BOAC estimates that domestic Chinese "high quality" beef production (loins from grain-fattened cattle) is less than 7,000 metric tons (15.4 million pounds) per year, while demand by starred hotels alone is 70,000 metric tons (154.3 million pounds). The high quality beef shortage is much more acute when one figures in growing demand from independent restaurants, including Chinese, Western and ethnic (e.g. Japanese and Korean).

According to official Chinese statistics, China’s cattle herd has actually decreased, peaking in 2007 at 106 million head but slipping to 100 million head at the end of 2011 because of low margins and high startup costs in the domestic industry. Slaughter cattle are currently priced at approximately $142/cwt (live weight), but prices keep rising as supply fails to keep pace with demand. Several new large-scale beef projects have been announced this year, and intense competition in the hog and poultry sectors is attracting more investor attention to the ruminant sector, including for ruminant feed. Dairy herds also are increasing, which could offer more live cattle supply down the road.

Beef imports through July, mostly from Uruguay, Australia and New Zealand, were up approximately 30 percent over last year’s pace to about 13,000 metric tons (28.7 million pounds), but are still a relative drop in the bucket compared to total consumption.

China's high beef prices are making news in Hong Kong as well. The territory's fresh beef monopoly supplier announced this week that prices of lean beef derived from locally slaughtered cattle imported into Hong Kong from China would increase 10 percent, the third price rise this year and the 11th since the beginning of 2010. Lean cuts of Chinese beef sold at wet markets from this Saturday (Sept. 1) will cost consumers $22.70/kg ($10.32/lb.), a new record and, increasingly, record prices are what Chinese consumers are willing to pay.

Prices for the king of Chinese meats, pork, also have shown a modest upturn in recent weeks. Despite media stories about large-scale liquidations, margins for medium and larger scale hog operations are still in the black, albeit slightly. However, Chinese corn prices this week were in the range of RMB 2,525/ton ($10.10/bushel), and further increases could nudge more producers into the red, setting up another pork cycle of lower production and high prices next year. If pork prices continue to rise, consumers may be forced to look at other proteins.

China does have a growing appetite for beef, but without U.S. beef in the market, it is unlikely that it will be able to meet that demand anytime soon.