July 19, 2013

 

China's demand for beef increases

 

 

China's beef imports have risen to record levels due to increased local demand, a developement which has encouraged Chinese meat firms to scout for potential acquisitions among foreign beef farmers and processors.

 

The need to feed the world's most populous nation has seen Chinese firms taking over foreign dairy, sugar and cereal producers, and Shuanghui International's US$4.7 billion bid last week for top US pork producer, Smithfield Foods, is the country's latest food 'land grab'.

 

Beef could be next on the menu as Chinese consumers prefer the protein-rich meat, which is seen as a higher quality product than pork, the nation's staple. While pork and poultry remain China's meats of choice, beef consumption is growing rapidly as hot-pot restaurants, Korean barbecue joints and burger bars set up across the country.

 

Chinese consumers are also more wary about cheaper local meat products after a series of recent food safety scandals - from bird flu to pig carcasses dumping in Chinese rivers. This has tightened beef supplies and pushed up local prices by almost a third last year. Prices in February hit a record US$8.31/kilogramme.

 

All of these is making imports more affordable, a positive developement for major beef producers such as Australia and New Zealand.

 

"There are many companies closely following this market and looking for the right time to come in. One of the major reasons is food safety," said a consultant who advises on Chinese agribusinesses.

 

According to the consultant, a state-owned agribusiness firm is in talks with a foreign beef supplier and looking at future overseas production. "They want to start importing beef as a first step," he said.

 

Chongqing Grain Group, a state-owned business that has expanded aggressively overseas in recent years, plans to invest in breeding beef cattle in Australia, its president Hu Junlie said, without giving further details. Tianjin Dawnrun Beef has also been buying up rivals to expand its business and is looking to breed cattle in Australia, said a company official.

 

Australia and New Zealand are the two leading beef exporters to China, and are likely to be where Chinese firms will look first to invest, industry experts said.

 

Major beef suppliers in Australia include Australian Agricultural Company and the local unit of Japan's Nippon Meat Packers. Alliance Group and Silver Fern Farms are two of New Zealand's largest meat processors.

 

China's beef imports soared in January-April to more than 75,000 tonnes, more than 10 times those in the same year-earlier period, and look set to far outpace initial forecasts.

 

The figure is just a fraction of China's total consumption of around 5.6 million tonnes/year, but the proportion is set to expand. For now, Chinese consumers eat about 4-5 kilogrammes of beef/head each year, around a fifth of the global average.

 

The USDA predicts China's beef cow stocks will slip below 2011 levels this year to 46.3 million head - that's around one beast for every 28 people, compared with a ratio of 1:11 in the US. Beef production has been steady at 5.5-5.6 million tonnes in recent years.

 

China currently only allows beef imports from Australia, New Zealand, Argentina, Uruguay and Costa Rica, but recently added four Canadian firms to its list of approved exporters. It has also signed a framework deal with India to import buffalo meat.