December 30, 2010

 

China set for more beef, pork imports in 2011

 

 

China's appearance in a commodities market can send prices soaring as suppliers scramble to meet demand, and beef and pork could get the jolt in 2011.    

 

Pound for pound, cattle consume more feedmeal than pigs or chickens, making beef production a disproportionate drain on hard-pressed supplies of corn and soy. China's policy makers may have decided it's better to buy beef than to ship in grains for cattle fodder.

 

A further potential boon for demand came from Commerce Minister Chen Deming's statement last week that China needs to build up its reserves of meat, sugar and other commodities next year.

 

A USDA report in September estimated China's beef production will fall 2% in 2011 to 5.45 million tonnes, resulting in imports growing 20% to 30,000 tonnes. Live cattle imports are expected to double this year to 90,000 head and keep rising in 2011 due to dairy demand.

 

With China agreeing to resume imports of beef from the US and Argentina this month and Cattlemen's Association in Canada expecting to resume exports soon, shipments can only go higher.

 

Analysts said beef demand will likely increase to 7.4 million tonnes in 2015, up 30% from 5.7 million tonnes in 2009, which is 10% of the world beef output of 56.7 million tonnes.

 

"The meat supply is currently sufficient, but the long term target for the government is to increase the imports to meet local demand," experts said, adding that the government would also be cautious about buying meat overseas in large volume.

 

Another potential winner in China's next import spree could be pork, the staple meat for China's huge population.

 

"An increase in pork imports could ease the pressure of China's feed grain supply," an analyst said. "If China imports several million tonnes of pork, it could help save imports of a million tonnes of soy."

 

China is a much bigger pork consumer, accounting for half of the global production of 101.5 million tonnes.

 

China imported a net 71,000 tonnes of pork in the first 11 months of 2010 and has surged as a buyer of US pork, becoming the fourth biggest export destination.

 

The government could buy some frozen pork for its reserves but not on a large scale, since the meat needed to be rotated out every six months to keep it fresh, analysts said.

 

Buying pork also offered more diverse sources of supply than grains, experts believed. "The US, Denmark and Canada are exporting pork. But for grains, only the US and South America can provide and the situation is unlikely to change in the short term."

 

China, which has been selling large volumes of corn, cotton and sugar from state reserves to ease tight domestic markets and rising food prices, will be in the market to replenish stockpiles for these and other agricultural commodities.

 

"I think they will start importing more and signing more contracts by early January because stocks are running thin and US farmers are keen to sell before the South American supplies come into the market from March," said an analyst at Phillip Futures in Singapore.