September 19, 2003
Outlook For China's Swine and Pork Industry
Swine production in China is forecast to be flat during 2003 and 2004 due to weak consumer demand for pork stemming from rising popularity of other meats.
Official statistics showed a smaller pace of growth in both swine inventory and pork production in 2002 over the previous year. The past nine months, hog prices were at low levels. However, low feed prices have helped the swine industry gain some marginal profits. Given these realities, the Chinese Government has started discouraging expansion of the swine industry. When the Ministry of Agriculture recently announced the national strategic "Advantageous Production Area Development Program," swine was not included like beef and dairy cattle.
Increasingly health conscious Chinese consumers, especially urban residents, prefer leaner pork. As a result, the swine industry has adjusted the swine production structure from expanding animal size to improving quality of the finished product. But even with an increase of about five percent in the number of three-way crossbred, lean hogs on the main production farms, these efforts are not enough. Compared with western countries, the lean meat per hog in China is only 50%, on average.
Pork consumption has fallen from 80% in 1980s of all meat consumed to a new low of 62.23% in the first five months of 2003. But China's pork consumption still commands the largest share of all meats consumed.
According to NSB China's per capita consumption was 1.78 kilograms in the first five months in 2003, accounting for 62.23% of all meat. However, any growth in total volume consumed reflects the steady pace of population growth and not per capita consumption gains. Chinese consumers, especially women and the older generation in urban cities, consider pork too fatty compared with others meats, a factor which is not good for health.
According to the industry, most pork consumption increases stem from residents of newly urbanized towns and farmers who do manual labour in cities. Wealthier Chinese consumers are looking for greater diversity in their meat consumption such as beef, mutton and poultry.
This trend will continue in the next couple of years as a strong economy and rising incomes makes purchases of other meats more affordable.
Prices for pork remain dull
According to data from the Ministry of Agriculture, pork prices on average for June 2003 were decreasing against the same month of the previous year. With consumption growing slowly due mainly to population increases and supply outstripping demand, prices will not rise to the high levels seen in the early 1990s. Prices will fluctuate as normal during the high consumption season.
Fraud prevention efforts strengthening in China-USDA/FSIS certificates should improve sales opportunities for imported U.S. pork products.
The past year USDA and China's AQSIQ officials made progress on several beef and pork trade issues. Both sides agreed to use a new FSIS export health certificate that utilizes a watermark to show authenticity. The other success was that China accepted the U.S. suggestion to use stick-on labelling marks on outer boxes instead of print-on labelling marks.
This change will reduce export costs for U.S. traders. Both procedures were originally raised by China as a means to deal with fraud of products. There have been no reports of trade disruptions since the new labelling became effective. However, significant issues such as China's zero tolerance levels for E. coli and Salmonella remain pending.
Chinese statistics of pork and offal imports inflate U.S. pork and offal exports to China. Some mislabelled pork products (normally lower quality products repackaged in Hong Kong) imported as U.S. origin are even accompanied by a fake U.S. health certificate. Recently, AQSIQ officials who claimed they found a drug residue forbidden in China rejected a shipment of pork offal. However, according to the industry, the supposed drug was never applied nor was that product even exported to China.
In response to these food safety and fraud concerns, during August 2003 the U.S. Meat Export Federation held technical seminars with the Ministry of Health, AQSIQ officials, and the meat trade on as wide range of meat trade issues. A better understanding of the U.S. Government and meat industry cooperation on export health certificates will hopefully help reduce these kinds of problems.
China continues practicing strict entry requirements for European products after the EU shut off most Chinese livestock and aquatic exports due to drug residue concerns. The EU's export share to China for both meat and offal dropped considerably in 2002 and in the first quarter of 2003. Simultaneously, the U.S. exports are increasing and cutting into the EU share because of stricter entry requirements from the EU and better quality U.S. pork products, according to traders.
During the first two quarters of 2003, U.S. offal exports to China more than doubled over the same period of the previous year. This pork market should remain stable, and imports in 2004 should be at or above this year's level. Offal imports in 2002 were lower than expected mainly because the decreased EU share of exports to China was so fast that the increased U.S. share could not compensate for it. Trade friction between the EU and China, coupled with competitive U.S. pork offal products, favors a shifting in the export share towards the United States.
Since Europe closed its market to most Chinese meat and aquatic products, China has shifted its strategy of focusing on pork exports to neighbouring countries or areas. Pork access to Russia, though not smooth, has made good process. Russia is now China's biggest export market. As the export volume to Russia in the first two quarters of 2003 already increased 7.6% of the total volume last year and the volume to Hong Kong is also growing, 25.4%, due to demand increases. China's total exports in 2003 are estimated to rise above last year's level and continue increasing in 2004.