Until recently, cattle production for beef consumption was a rarity in China. Farmers typically owned one to three cows, exclusively for draft purposes.
Opportunities ahead for ranchers
While China has gobbled up pork, including the top U.S. pork company, Smithfield Foods, beef is next on the menu, according to a recent Rabobank report.
China’s beef imports are expected to rise substantially during the next decade. Chinese beef consumption has risen steadily in recent years, which is driven by rising incomes, dietary shifts and urbanization.
While China’s demand for beef has been growing at a reasonable pace, production has been stagnant since 2006.
"The consumption of beef in China is expected to rise on a per capita basis by 24% in the coming decade," says Guilherme Melo, a Rabobank analyst. "This is actually below what it should be, as supply shortages and rising prices are restricting demand."
Adjusted for population growth, the report states that absolute volume will increase by roughly 25%.
"In the last 12 to 14 months, we have seen China’s beef demand blossom," says Joe Schuele, U.S. Meat Export Federation spokesperson. Beef demand has been growing rapidly in the region, most notably by Hong Kong and Taiwan. U.S. exports to Taiwan, for example, where USMEF has promotion efforts, will set a record this year, Schuele says.
While demand for beef has been growing at a reasonable pace, China’s production has stagnated since 2006. This is mainly attributed to a low economic return for beef production compared to other agricultural endeavors. Chinese farmers’ face high input costs, poor genetics, reduced government support and difficult access to farm credit.
The growing beef market provides a great opportunity for exporters from beef-producing countries because Chinese production can’t grow fast enough to keep up with demand, explains Melo. These key countries include Australia, New Zealand, Brazil, Uruguay, India and potentially the U.S., providing the suspension from the Chinese market in the aftermath of the 2003 BSE outbreak in the U.S. is lifted.
According to Melo, Australia is best positioned to take advantage of this opportunity. It is geographically closer and can supply a variety of beef products to meet different segments of China’s market.
To correct the market imbalance, Melo believes imports will remain on the rise. China is expected to provide or increase access to more countries wishing to enter its beef market.
Special Occasions. Despite major growth, at present, beef remains a niche product in China, accounting for only 8% of total per capita meat consumption, in contrast to 22% for poultry and 65% for pork.
"In China, beef is generally considered more of a special occasion item, rather than an everyday meal option," Melo notes. More than 60% of total beef consumption occurs outside the home, with the major options including ‘hot pot’, canteens at work, Western style and fast food restaurants.
- October 2013