South American beef still sizzles on Chinese market

Chinese beef and veal imports grew a further 15% on year earlier levels during the first quarter of 2017, exceeding 160,000 tonnes. This follows from the 22% growth in shipments seen during 2016 as a whole, when China overtook Japan to become the second largest global beef importer. While the UK does not currently have access to China, it is important to follow developments there, as they could impact on the global marketplace that we form part of.

Chinese beef consumption has been increasing in recent years, reaching 7.98 million tonnes in 2016 according to USDA figures. The latest forecasts anticipate further growth in 2017, exceeding 8 million tonnes. This has been influenced by changing tastes associated with the growing Chinese middle class, alongside elevated pork prices encouraging middle-high income consumers to switch into beef consumption. Chinese beef production is expected to expand in 2017, however with the industry still dominated by small inefficient operations, imports will be required to meet demand.

Chinese beef and veal imports

The majority of the import growth seen this year and last is due to higher frozen shipments from the South American suppliers Brazil, Uruguay, and to a lesser extent Argentina. After regaining access to China the previous year, Brazil assumed its position as the largest supplier during 2016. However, no further growth was seen during Q1 this year, following a year-on-year decline in shipments in January. Conversely there was strong volume growth of 63% from Uruguay, leading its market share to increase by eight percentage points.

Strong price competitiveness is likely to mean South America will continue to dominate Chinese beef imports throughout 2017. However, in light of the Brazilian meat scandal earlier this year, the strong position held by Brazil could be somewhat uncertain. Imports of meat from Brazil were temporarily suspended in March. However due to the journey time, it is too early to see the impact of this in the Chinese import figures. As Chinese consumers are extremely health conscious, it will also be interesting to see whether the weakened image of Brazilian product has any longer-term negative impact on shipments.

Conversely, Australian imports declined during 2016 and this continued into Q1 2017. At just over 25,000 tonnes, volumes were back 13% on year earlier levels in the first quarter of 2017. Shipments from Australia have been limited by supply constraints, with herd rebuilding currently underway following on from previous drought periods. However, reports suggest that niche imports of Australian grain-fed beef, allegedly favoured by Chinese consumers, are on the rise. This, coupled with tariff reductions on imports of Australian beef this year and more plants gaining permits to ship valuable chilled product to China, may minimise the extent of the decline.