July 16, 2013

China's beef prices surged 28% in June compared with the same month in 2012 and have risen 30% every month for the past year.

The rise in beef prices has dissipated slightly since its February 2013 peak of 35%. Around that time, demand for beef imports began rising sharply in response. China imported 75,000 tonnes (82,000 tonnes) of beef from January to April-a tenfold increase compared with the same period in 2012. The import surge has taken a slight edge off rising prices, but not much.

Rising demand due to improving living standards is one reason behind China's hyper-inflating beef. Chinese consumers generally don't cook beef at home, but it's a popular choice for eating out, particularly in hotpot and Korean barbecue.

Beef has become particularly popular among Chinese in their early 30s and younger (link in Chinese), as Zhao Hang, the deputy director of the China Animal Husbandry Association Cattle Industry Branch, said. Zhao says he expects Chinese consumption to continue to surge as a result.

Beef exporters stand to benefit for several reasons. Foreign beef is becoming more affordable thanks to the rising value of the yuan, which has strengthened nearly 4% over the last year. Also, highly publicised food safety disasters have left Chinese consumers favouring foreign meat, which they perceive to be of higher quality.

Meanwhile, Chinese beef supplies have fallen as the country's herd has steadily declined. In 2000, there were 97 million heads of beef cattle in China; in 2010, there were only 67 million, according to official data. Making a decent living raising beef cattle in China is difficult given skyrocketing real estate and animal feed prices, according to Zhao.

But more farmers are entering the business again now that beef prices are rising, which drives up calf prices, too. Those have leapt from US$234 per head two years ago to as much as US$979. Since it takes several years before cattle can be brought to slaughter, beef prices and imports will remain high for a while.