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USDA GAIN: Livestock and Products


25 February 2014

USDA GAIN: China Livestock and Products Semi-annual 2014USDA GAIN: China Livestock and Products Semi-annual 2014

Due to poultry safety concerns, consumer’s rising substitution to beef will support a slight increase in 2014 beef production to 5.76 million tons and result in imports up to 550,000 tons on favorable prices. Live cattle and beef exports are both expected to decline by 10 percent due to tight domestic supplies and high prices.

USDA GAIN: Livestock and Products

Commodities:

Meat, Beef and Veal

Production

Post’s 2014 forecast for China’s beef production is 5.76 million tons, slightly higher than USDA’s official estimate of 5.75 million tons. Post’s two percent increase over the 2013 figure is largely due to growing demand as consumers switch from poultry to beef following China’s recent avian influenza outbreak.

Producers are utilizing abundant corn and alfalfa supplies to support their expanding beef production. China’s 2013/14 corn production is estimated at a record high of 217.7 million tons, and imports, many of them from the United States, provide an additional 3.3 million tons to domestic supply. With sufficient corn supplies, China is subsidizing domestic companies that purchase corn from the Northeast (a major grain/livestock production region). China’s alfalfa supply of 1.5 million tons consists of record high production at 700,000 tons and imported alfalfa at 800,000 tons. The United States accounts for nearly 94 percent of China’s total alfalfa imports.

Furthermore, China’s investment in domestic beef production is also helping expand production. The Central Government provided RMB8.26 million ($1.35 million) to a Modern Agriculture Beef Development Project in Yunnan. The Fengdu County in Chongqing is subsidizing RMB20.77 (nearly $3.4 million) for backyard farmers to build larger-scale companies. Private companies are also increasing investment. China’s breeding beef cattle imports reached a record high last year of over 9,000 head.

Prices:

China’s 2014 domestic beef prices are expected to remain strong due to short supplies of domestic cattle and beef. Reportedly, backyard dairy cattle producers, unable to comply with China’s strict dairy regulations, are exiting the business by sending dairy cattle to slaughter to profit from current beef prices. The Ministry of Agriculture’s (MoA) national retail beef price for December 2013 has yet to be released, but the average 2013 January to November price is at least 30 percent higher than the same period in 2012.

Consumption:

Post forecast for China’s 2014 beef consumption of 6.26 million tons is two percent higher than USDA’s official estimate of 6.19 million tons. China’s continued avian influenza outbreak is influencing consumers to seek alternative protein sources, such as red meat and fish.

Imports

Post forecasts China’s 2014 beef imports at 550,000 tons, an additional 75,000 tons above USDA’s 2014 estimate, because of rising consumer demand and competitive import prices. Australia, Uruguay and New Zealand are China’s three top suppliers. Australian exports account for 53 percent of China’s 2013 total imports. Reportedly, upon request by China’s importers, Australian exporters now provide larger –sized carcass pieces in simpler packages, and offer export prices that are nearly two percent cheaper over last year. Of interest in 2013, Canadian exports rose sharply to 24,373 tons, more than six times higher than the previous year, because of competitive prices compared with major suppliers. China continues to negotiate beef market access terms with other countries, including the United States, which could further increase total imports. China’s average 2013 beef import price was $4,313 per ton, an astounding 55 percent discount from its average domestic price (from January to November) of $9,585. Sources note that this price difference will continue in 2014, given tight beef supplies.

Post forecasts that China’s 2014 live cattle imports will reach 20,000 head, which is 3,000 head lower than USDA’s official forecast, due to fewer imports of breeding dairy cows. Small-scale dairy cattle producers may import less breeding cows due to China’s strict dairy production requirements.

Import Policy Change

In December 2013, China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) approved Chongqing, a municipality directly under the Central Government, to be China’s first inland meat entry port. This means that all imported meat products can be directly shipped to Chongqing and not transported through coastal ports. Reduced transportation costs will further strengthen the price competitiveness of imported meat products. Sources note that Chongqing’s meat terminal priced imported bovine tails per kilogram at RMB90 ($14.75), compared to local bovine tails at RMB100 ($16.39).

Exports

Post forecasts China’s 2014 beef exports at 27,000 tons, largely due to limited domestic beef supply and record high prices in the local market. Leading export markets currently offer uncompetitive prices, compared to China’s 2013 average domestic beef price of $9,585 per ton. China’s 2013 export price per ton was $4,844 to Hong Kong, $8,743 to Japan, and $7,652 to Kyrgyzstan. Post estimates a nine percent decline in China’s 2014 live cattle exports to 19,000 head compared to the revised 2013 figure of 21,000 head. Short domestic cattle supplies make exports less competitive. The average 2013 live cattle export price increased by 34 percent to nearly $2,898 per head.

February 2014

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