China – a closer look at meat protein demand and supply

// International Trade

Beef + Lamb New Zealand’s (B+LNZ) Economic Service team examines the key influences in China that are impacting, or have the potential to impact, demand for New Zealand sheepmeat and beef exports. Global red meat trade headlines are increasingly dominated by demand and supply patterns emerging from China, which has become a key driver of global trade flows and prices for meat protein.

image of meat packing

China imports nearly half of global beef and sheepmeat exports/trade

In 2020, China was the largest importer of both beef and sheepmeat, buying NZD36 billion of imported meat; 47 per cent of the global total. In New Zealand, an increasing proportion of our sheepmeat and beef export production is destined for China, with 50 per cent of sheepmeat and 36 per cent of beef exports shipped to this market in 2019-20. New Zealand sheepmeat and beef exports to China accounted for five per cent of total New Zealand merchandise export revenue in 2019-20.

The importance of China as an export destination for New Zealand sheepmeat and beef means that the supply chain, including farmers, processors, and the New Zealand domestic market, is sensitive to changing demand and supply patterns in this market. Interpreting China is challenging, as not only is it incredibly dynamic and developing rapidly, but information and data collection on market trends is scarce.  

A surge in protein demand and imports from China 

Chinese red meat imports surged in the first three months of 2021, reaching all-time highs in March. The Chinese National Bureau of Statistics revealed April retail prices for sheepmeat and beef were respectively 9.4 per cent and 4.1 per cent higher than in April 2020 and were at the highest level for April since 2010.  

The surge in demand for imported meat from China has been driven by several factors. The outbreak of African Swine Fever (ASF) has likely been the most significant, however the shift of more consumers into the middle-upper income brackets has also been a contributing factor as the increased wealth leads to greater consumption of higher quality meat proteins. In 2020 and 2021, demand has also been supported by the Chinese government’s focus on stimulus for economic growth following COVID-19 and the recovery of foodservice sector demand as the COVID-19 vaccination programme rolls-out.

The impacts of African Swine Fever (ASF)

ASF has been one of the most significant influences on global meat trade patterns since the first outbreak in China in mid-2018. The sharp contraction of the domestic pig population and subsequent impact on pork supplies has resulted in a shift in Chinese protein consumption towards sheepmeat, beef and poultry. The world’s meat-exporting countries are closely monitoring reports of recovery and further outbreaks, understanding the consequences of ASF to world red meat demand and prices.

China has made significant investment into ASF vaccine development, but there is nothing at the commercial stage yet. Signs of recovery began to emerge in late 2020. Hog inventories lifted rapidly, and forecasts indicate that Chinese pork production in 2021 is expected to lift 11 per cent on last year.  China’s maize and soybean imports grew rapidly as another indicator of demand for feed for livestock. It is important to note, however, that pork production still remains 25 per cent below pre-ASF levels. In 2021 there was a large setback to recovery with the emergence of a new strain of ASF. Reports indicate that northern China has lost 20 per cent of its breeding herd so far in 2021 due to ASF, representing nearly 8 per cent of the total Chinese breeding herd. The impact of this new strain has been quick to flow into demand for imported meat.

Strong 2021 demand helped by tightening of trade

On top of ASF, continuing economic growth and rising consumer incomes, and a tightening of global supplies of both beef and sheepmeat are contributing to the optimistic demand outlook in China and other key markets.

Limited supplies of both sheepmeat and beef from Australia were expected in 2021 as farmers rebuild breeding flocks and herds following th2018-19 What has been unexpected for global beef trade, is the drop in production from Brazil that has been evident in the first quarter of 2021 and the sudden 30-day suspension of Argentinian exports, including China, announced on the 18 May. Brazil and Argentina combined accounted for 61 per cent of China’s beef imports in the first quarter of 2021.

There is plenty of speculation regarding who can fill the emerging gap between global beef supply and Chinese demand in 2021. 

US beef exports to China experienced rapid growth in the first four months of 2021, however the US is constrained by the Chinese requirement for cattle to be free of ractopamine (a feed additive widely used in the US to support gain prior to finishing). Also, as a predominantly grain-fed supplier, US beef exports are at the higher quality end, and will not fill the gap left by the lower-cost South American beef. There are still some unanswered questions around the supply of South American beef that may minimise China’s emerging supply shortage. It is possible an increasing proportion of Brazilian beef will be exported as domestic demand remains adversely impacted by COVID-19. There are also reports that indicate Brazil is importing lower cost beef from Paraguay to meet its domestic market requirements, enabling Brazilian beef producers to continue to supply the higher value export market. It also looks likely that Argentinian beef exports will resume in the near future, but at lower levels than prior to the suspension. There are reports that Argentinian beef producers have negotiated with the government to allow a portion of beef exports to resume under a new quota system, but the timeframe and potential impact this will have on beef supply remains unclear at this time.

It is clear that the beef trading environment is becoming increasingly dynamic. Currently, the fundamentals of the market favour exporters, offering opportunity for New Zealand beef exporters and farmers.

Historic highs for New Zealand lamb and mutton farm-gate prices and optimism for beef farm-gate prices

This, combined with tight global supply of sheepmeat has driven winter farm-gate prices for lamb and mutton to historic highs. While beef farm-gate prices are yet to respond in similar pattern, the uncertainty around future supply for 2021 is expected to result in strengthening winter prices for beef farmers and a strong start to new season pricing. 

About B+LNZ’s Economic Service team

This information is collected by B+LNZ’s Economic Service who have been operating for 70 years. Its role is to provide Independent, Authoritative and Credible Information for the sector to help inform policy and trade decisions. In addition to its annual Sheep and Beef Farm Survey, which collects over 2000 pieces of data from a randomly selected group of volunteer farmers across the country, the Economic Service monitors trade policies and markets and market developments.

Last year, the Economic Service celebrated its 70th anniversary. Read news story