September 30, 2019

China potentially Australia's biggest beef market as Chinese meat supply tightens

The African swine fever outbreak in China has forced the country to look to more imports and this could lead to China becoming  Australia's biggest beef export market this year, Rabobank reported.

Due to ASF, Chinese consumers have shunned pork in recent times. The disease has already caused the demise of half of China's pig herd to 200 million pigs last year. The shortage sparked a rise in demand and prices for other meats like beef, said Chenjun Pan, Rabobank's senior animal proteins analyst for China. Chinese pork prices have spiked by 50% to 80%.

China is the world's largest animal protein importer with 27% of the world's pork imports and 24% of global beef imports.

"Chinese beef imports have risen by 53% so far this year, while imports from Australia have increased by 65% in the year-to-date (July) – with China overtaking the US and Japan to become Australia's largest export market for beef," Pan said.

"This is a total turnaround from just 10 years ago when China was a net exporter of beef and an increase on last year, when 20% of the country's beef was imported."

Since it was first confirmed in China in August 2018, ASF severely disrupted the country's pork production, resulting in "a serious shortage in animal protein," Pan noted. The animal protein market declined "by eight million tonnes - even with the considerable increase in imports this year."

Most consumers who are turning to other proteins like ground beef and keeping clear from pork come from the middle and upper classes, Pan said. She added: "...from a price point of view, poultry has been the key substitute."

As for recovery, China's pig herd and pork production could rebound slightly by 2021. However, Pan warned it could take three to five years for the swine/pork sector to get back near pre-ASF levels.

As such, beef and poultry imports would likely stay high at least until 2025.

Beef takes up around 9% of Chinese total meat consumption – with pork at around 65% and poultry at 20% before the outbreak.

"While there has been a lot of talk about the slowing Chinese economy, the consumer market appears to be resilient, particularly among the middle, aspirant and lower affluent classes," Pan said.

"In these segments of the market, price is no longer the single most important factor driving demand, rather convenience, taste, nutrition and value-added snacking. And with an increase in demand for 'ready to cook' meals, this supports greater consumption of beef at home – as beef is [predominantly] consumed in food service, such as restaurants."

Although beef is double the price of pork, local productions are not able to meet the swelling demand.

"China has absorbed much of the increased slaughter that has been going through the system at the moment. and if they weren't there, prices would be softer than where they are currently," Australian-based senior animal proteins analyst Angus Gidley-Baird said.

Gidley-Baird added that, while ASF paves way for more opportunities for Australia in the next few years, "our competitiveness will fall once we get rain and cattle prices increase".

"The Chinese market is very sensitive to price, and while we are competitive with the likes of South America at the moment, once our prices increase – and they are coming off a high base – they are likely to remain high. This means the risk is that when our own supply comes back on board, it could be at a time when there is a lot of supply from South America and the US on the global market," he explained.

- Inside FMCG