February 23, 2004

China's 2004 Beef Production Seen At 6.6 Million MT

China suspended imports of live cattle and bovine products from the United States on Dec. 25, 2003, due to a single case of bovine spongiform encephalopathy in Washington State.
 
The official import suspension impacts annual U.S. exports to China totaling $10 million for beef and $30 million for offals. China also suspended, unofficially, imports of U.S. non-bovine products such as poultry product-containing pet foods, porcine solubles and poultry meals, in addition to OIE guideline-based "non-risk" bovine products such as protein-free tallow, semen and embryos.
 
APHIS and FAS China continue to request that the Chinese Government clarify its BSE regulatory actions and adhere to international standards set forth by OIE guidelines. China's overall beef imports in 2004 are forecast to remain the same as last year, despite BSE cases in both Canada and the U.S. in 2003, because China is expected to shift import sources to Australia, New Zealand and Brazil, the press release said. Higher international beef prices and restrictive quarantine inspections in China may restrict growth of the country's imports during the year.
 
During December 2003, FSIS and FAS successfully negotiated a revision of the Export
 
Health Certificate (FSIS 9535-I) with Chinese quarantine authorities, AQSIQ, for meat exports to China. From March 1, 2004, China will no longer accept any previous versions of the certificate. The new certificate was implemented to reduce the use of false certificates.
 
Production
 
As a result of the Ministry of Agriculture increasing China's total cattle inventories (January to September 2003) by 1.5%, post increased the forecast of cattle numbers for 2004 by 1.7% to 181 million head. Dairy cows numbers are forecast at 9 million head, an increase of 30% over 2003, while beef cow numbers are forecast at 59.4 million head, up about 1%. Strong demand for dairy products continues to drive production in China's dairy industry.
 
According to MOA, 14.5 million small family farms raise beef cattle in China, accounting for 83% of total cattle output with annual slaughter of less than 50 head. The top three cattle producing provinces are Henan (6.1 million head slaughter), Sichuan (1.3 million) and Hebei (1 million). Only about 900 farms in China are considered large-sized with annual slaughter of 500-999 head, accounting for 1.6 percent of total production, mainly located in the Northeast or Hebei.
 
China's beef production is estimated to reach 6.6 MMT in 2004, an increase of 6.4% from 2003 based on MOA's recent forecasts for last year. China is expected to slaughter 47.2 million beef and dairy cattle, up 5%. The beef share of China's total meat production rose to 9 percent in 2003, while pork's share remained stable.
 
China's annual GDP is expected to grow at 8% annually in the next couple of years. As a result, meat demand is forecast to continue rising during 2004 and beyond. More disposable income will lead to a more diverse diet and alternatives to eating pork, particularly since beef is considered a healthier food in China.
 
The Chinese Government continues to focus policy efforts on the livestock structural adjustment to stabilize grain-fed animal size and faster grass-fed animal size. Based on post's visits to beef production areas, farmers in traditional grain areas are permitted to convert 20% of farmland, while farmers in suburbs are allowed to convert 30% of farmland to feed grain or forage grass.
 
Feed and beef prices rise in 2003 "post-SARS", while in 2004 the pace will slow
 
As a result of the "post-SARS" recovery in beef consumption in China, demand for beef and grain was strong. As a result, beef prices remained higher through the later half of 2003.
 
The average increase in beef prices was 8%. Although feed prices increased rapidly due to higher grain prices, the beef price increases were above that of feed. Fattened beef cattle can bring about RMB 500 ($60.00) profit for cattle farmers. The forecast for 2004 is a slowing of price increases for feed and beef. The outbreak of avian influenza in China, depending on the number of culled birds, will likely impact overall feed prices during the spring.
 
The detection of BSE cases in both Canada and the United States is not forecast to impact China's beef consumption levels. China's overall beef self- sufficiency is about 99.5% China's ban on US beef, implemented last December, will only impact beef sales at high-end hotels and restaurants where the overall volume is still quite limited.
 
Trade
 
Because China is expected to shift imported beef sources to Australia, New Zealand and Brazil, post forecasts China's beef imports will reach 29,000 MT in 2004, about the same as last year. China's imports of dairy cattle are forecast to rise to 50,000 head, an increase of 25%. China will also shift live cattle imports to Australia and New Zealand. China officially suspended imports of all U.S. beef and beef products last Dec. 25, including meat, semen and embryos and meat and bone meal. An unofficial ban appears to also be in place for non-bovine products such as pet foods and porcine solubles. China excluded from its import suspension dairy products, hides/skins and bovine gelatin for photo use.
 
Despite efforts by FAS China to convince Chinese authorities that U.S. beef that had already cleared Customs and entered China should be excluded from any regulatory actions, China also suspended quarantine clearances of all "pipeline" U.S. beef products. These are shipments, already certified by FSIS, which arrived at a port without Customs clearance or are on the water en route to China. China's actions also impacted containers of U.S. beef at Hong Kong ports originally destined for Mainland China. As a result, traders report that U.S. beef supplies continue to accumulate at Hong Kong warehouses and ports.
 
It is uncertain how long China's U.S. beef and product import suspension will remain in place. As evidence, China has not yet lifted its import ban on any BSE countries including the EU, Japan and Canada. The U.S. Government continues to work with Chinese authorities, providing information about the USDA BSE investigation, new BSE-prevention measures and efforts to re-open international markets including China.
 
Pork
 
Summary
 
China, the world's largest swine producer, is forecast to produce 44.9 MMT of pork in 2004, an increase of 3% from last year, the press release said. China's expanding economy and disposable consumer income continues to benefit livestock producers. During 2003, China's swine and pork production rapidly recovered from the SARS outbreak impact on consumption because both were only affected for about two months. By the time the SARS situation stabilized in June 2003, pork consumption and production rapidly recovered to normal levels. As a result, the year's total production level steadily increased.
 
Although pork prices fell during the first half of 2003, lower feed prices helped compensate farmers. Additionally, China's larger-scale swine farmers, i.e., those slaughtering over 50 head per year, are increasing in number.
 
China's pork imports in 2004 are forecast to increase by 3% to 153,000 MT due to continued growth in consumer demand for feet products. China's pork exports are estimated to increase 30% up to 367,000 MT. Although China's exports to Russia have decreased due to Russia's import quota restriction, increased exports to other Asian countries have filled up the gap.
 
Post revised upwards China's pork import numbers for 2002 to 2004 based on China
 
Customs data provided to the World Trade Atlas.
 
Production
 
China is forecast to slaughter 580 million swine in 2004 due to strong pork prices and the continued expansion of China's economy and disposable income. Pork price increases will likely slow down after March 2004 in part due to lower feed prices resulting from lackluster feed demand from the Chinese poultry industry now facing an outbreak of Avian Influenza.
 
According to MOA, China has about 99 million small family farms raising over 300 million pigs with an annual slaughter rate of less than 10 head (59% of the total slaughtered).
 
The top three swine producing provinces in China are Sichuan, Henan and Hunan, all located in traditional grain production areas. Swine farmers may also raise cattle, pigs and poultry.
 
Large-sized farms, typically located along the coastal areas of Guangdong, Zhejiang and Fujian, represent only 5% of China's total slaughter. These farms have between 3,000 and 10,000 head. Swine production, like cattle and poultry, is highly dispersed throughout the country. This production dispersion complicates China's efforts to implement a complete and effective veterinary system.
 
During 2004 the growth of China's per capita pork consumption will continue to lag behind the growth of beef.
 
Trade
 
According to trade contacts, China's reported world import figures are more accurate than the individual country numbers. China Customs no longer breaks-out China's imports from Hong Kong.
 
China's imports of pork are forecast at 153,000 MT during 2004, about 3% above last year. U.S. pork exports to China account for over 50 percent of both pork and offal trade to Mainland China, and the US share of China's pork imports via Hong Kong is even greater.
 
Denmark is the other major pork supplier to China. Canada supplies China some pork as well.
 
In December 2003, USDA and Chinese meat safety officials held technical talks in Beijing to discuss China's increasingly stringent application of pathogen standards on raw meat products. The meeting focused on understanding each other's food safety laws and regulations, regulatory procedures, standards, tests, monitoring system and enforcement methods.
 
Source: USDA