October 4, 2007

 

China beef imports to grow as local production fail to catch up

 

 

Imports are expected to rise because increased domestic beef and poultry production may not offset reduced pork production in 2007, analysts say.

 

Tight meat supplies are expected into 2008 with strong beef demand and lagging production driving Chinese beef imports. 

 

Traders indicate that higher domestic beef prices, border problems with official imports, and strong demand have pushed up the gray-channel trade via South China. Many beef transactions in China are often unreported and falls into the gray-channel category.

 

Estimates put the grey trade accounts for 20-30 percent of China's total beef imports.    

 

If China lifts its ban on US beef, the potential market for US beef could be about 8,000 tonnes via direct shipments and 6,000 tonnes via Hong Kong re-exports to the mainland.

 

The potential beef offal market for US shipments could be 6-8,000 tonnes via direct shipments and 13-14,000 tonnes via Hong Kong transshipments.      

 

Due to the absence of US beef, Australia has a disproportionately large market share in China. 

 

For the first seven months of 2007, Australia exported 1,792 tonnes via direct shipments to China, accounting for 80 percent of China's total imports. 

 

Exports via Hong Kong re-exports were 291 tonnes, accounting for 24 percent of Hong Kong total beef re-exports to China. 

 

While China's customs data shows very little beef offal imports from Brazil, Hong Kong re-export data shows that Brazil has remained the largest supplier via transshipments. 

 

Despite a ban on Brazilian imports since October 2005 because of Food and Mouth Disease (FMD), it is believed that some shipments were done through grey trade channel or traders in Hong Kong.  Improper labeling or falsification of customs documents may decline if China's customs implements a new regulation to match weights and quantities in trade.

 

As for exports, China mainly exports live beef cattle to traditional markets, with Hong Kong and Macau accounting for over 92 percent of China's total exports. 

 

This is expected to continue in 2008.

 

Export quotas to these regions are normally announced by the Ministry of Commerce (MOFCOM) at the beginning of each year, with the export quotas remaining generally the same every year. 

 

However, exports to Macau in 2007 may fall nine percent because of higher prices. This would be offset by increased exports to Hong Kong and new markets such as Malaysia and Mongolia.    

 

This forecast is based on the expectation of marginal increase in China's cattle slaughter in 2008.  China's beef export markets have seen few changes in the last four years. 

 

The top traditional markets are Hong Kong, South Korea, Japan, Jordan, and Kuwait. China's market share in Japan and South Korea may shrink after US beef trade with these countries resumes.   

 

Chinese demand for frozen bovine semen and embryo imports declined for the first six months of 2007. It has also reduced live breeding cow imports.  Imports of bovine semen and embryos fell by 58 and 78 percent in the first half of 2007.  The US was the only supplier (20 embryos valued at $40,703).  US bovine semen exports to China during the same period decreased 86 percent from to 101 kg. 

 

China only imports breeding cattle for dairy production. Live cattle imports have fallen by 93 percent from 132,446 head in 2004 to 9,790 head in July 2007. 

 

This flagging interest in genetics and breeding cattle stems from low prices offered by processing plants for raw milk -- combined with high beef prices, which encouraged dairy farms to slaughter dairy cows for beef. 

 

The government's embryo transfer subsidy program failed to change these trends while the bovine artificial insemination subsidy programme last year faced difficulties as it was limited to domestic bovine semen.