August 28, 2013

China's beef, sheep and chicken prices surge due to drought

China's price rise for beef, sheep and chicken have been intensified by drought in parts of central China, including Hunan and neighbouring Guizhou and Hubei provinces since mid-June.

About four million hectares of agricultural land and 1.7 million head of livestock, including 860,000 cattle, have also been affected in Hunan Province alone, according to government authorities. The drought is expected to continue as the province continues to experience high temperatures but little precipitation, according to the Government's meteorological department.

Latest Chinese red meat retail prices, released by the Ministry of Agriculture, indicated a continued shortage of red meat supplies. The rising retail price  has been exacerbated by drought. The Chinese Government reportedly has allocated RMB1.65 billion (US$270 million), in an aim to provide support for producers impacted by the drought.

Chinese boneless beef retail prices during July hit an all-time high, averaging RMB59.38/kilogramme (US$9.70), with bone-in sheep meat prices registering the second highest prices, at RMB61.87/kilogramme (US$10.11), according to Meat & Livestock Australia (MLA). Chicken carcase and boneless pork prices continued to rise for the second consecutive month, at RMB16.85/kilogramme (US$2.75) and RMB23.75/kilogramme (US$3.88), respectively.

Beef prices in June were 32% higher than the same time last year. Sheep meat was 22% higher, while pork and chicken were also marginally higher. The rise in price for beef appears to have triggered some liquidation of the domestic cattle herd, as livestock owners to cash in on the buoyant market for beef.  

For the fiscal year ended June 30, China imported 92,300 tonnes of Australian beef, compared with just 7,700 tonnes for the previous 12-month period,  a 1,098% increase in volume. Two of the key drivers for the strong demand for imported Australian red meat from China in recent months have reportedly been the stricter food safety management and a decline in domestic cattle and sheep numbers in China.