July 20, 2011

 

China's pork demand set to grow 2% yearly

 
 

Pork demand in China is expected to grow at 2% per year, bringing the nation's consumption to nearly 57 million tonnes in 2015, the USDA's Foreign Agriculture Service projected.

 

China, already the world's largest consumer and producer of pork, accounts for 50% of global production, or 51 million tonnes in 2010. Per capita consumption still has plenty of room to grow as the shift from carbohydrate-centric to protein-heavy diets continues.

 

The country may have increased its purchases of US pork to 130.5 million pounds this year, compared with 6.4 million pounds in 2010, according to reports.

 

Rather than becoming more dependent on imported meat, China is boosting domestic hog production to stabilise surging pork prices.

 

The shift from small-scale production toward commercial production will lead to an increase in the use of grain-based feed mix, said Jing Ulrich, managing director and chairman of global markets for China at JPMorgan.

 

This should lead to a greater reliance on imported corn for the growing livestock and poultry sectors, he added.

 

In fact, both the UN's Food & Agriculture Organisation and China's state-affiliated agricultural information service provider, estimate that corn imports will reach five million tonnes in 2011-12 from 1.5 million tonnes in the previous year.

 

As China urbanises and consumers demand higher quality meats with strict safety standards, Ulrich thinks the investment climate is ripe for industries that process pork into sausages, patties and cold cuts.

 

He highlighted revenue growth of 30% to 55% in 2010 for leading meat processors such as Yurun and Peoples Food. That compares with total consumption growth of about 5% and average price increases of roughly 2%.

 

The need to centralise slaughtering capacity (there are more than 20,000 licenses issued in China set to expire in the next three to four years) and improve safety standards should encourage the development of a cold chain industry in China.

 

Authorities are planning a major expansion to reduce the "decay rate" for fruit, vegetables, meat and aquatic products. These developments may help in controlling food inflation in the long run, potentially increasing supply by reducing wastage, Ulrich said.

 

The expansion of China's cold chain will benefit refrigerated vehicle, equipment, warehouse and logistics services providers, he added.

 

In March 2010, China Merchant Holdings and AmeriCold formed a joint venture to develop cold chain logistics in China. Earlier this year, Brazilian meat processing company Marfrig announced a US$250-million investment in a joint venture with COFCO to build six food distribution centres in China.

 

Global industrial product and services provider Ingersoll Rand, US-based Preferred Freezer Services and Ministry of Rail-affiliated China Railway Express are other market players.

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