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China Livestock and Products Annual - September 2005

by 5m Editor
4 September 2005, at 12:00am

By the USDA, Foreign Agricultural Service - This article provides the pork industry data from the USDA FAS Livestock and Products Annual 2005 report for China. A link to the full report is also provided. The full report includes all the tabular data which we have ommited from this article.

Report Highlights

During July 2005, China announced that 52 U.S. facilities are approved to export bovine semen and embryos, though the December 2003 import suspension remains on U.S. beef, live cattle and other beef products. USDA is coordinating an October visit to the U.S. by a Chinese expert team to further study the BSE situation and beef safety. China's beef production in 2006 is forecast to increase 6 percent to 7 MMT, and pork production will increase 4 percent to 50 MMT.

Effective on July 1, 2005, China will not longer issue import quarantine permits for processing meats, and export plants in all other countries, except the U.S., must be audited and registered. However, meat from approved plants in these other countries will now directly compete with U.S. products in China's retail meat market. The pre-inspection in Hong Kong for transshipped meat to China will also lead to a higher volume of direct shipments to China.

Executive Summary

In July 2005, China announced approval of 52 U.S. facilities to export bovine semen and embryos to China, though China agreed to lift the ban on these BSE low risk products at the technical bilateral meetings back in November 2004. The final step is U.S.-China agreement on language for the USDA health certificate. This marks the first market access for U.S. bovine products since China suspended all U.S. live cattle and beef products in December 2003. The Chinese Government and USDA officials are also coordinating a visit to the U.S. by Chinese experts to study the BSE situation in October 2005. On July 11, 2005, USDA’s Secretary Johanns and AQSIQ Minister Li initialed a bilateral Memorandum of Understanding (MOU) regarding food safety and animal and plant health cooperation. This agreement will also foster U.S.-China discussions on resolving meat trade issues. Post forecasts China’s beef production in 2006 at 7.6 million MT, a 6.4 percent increase from 2005. Strong demand and lagging production, combined with reduced imports due to BSE restrictions, will drive expansion of China’s cattle and beef industry in 2006. Foot and mouth disease (FMD) will not significantly impact China’s beef production due to the government’s apparent efforts to stem any spread. Beef prices are forecast at high levels for the remainder of the year. Beef consumption for 2006 is forecast to increase over 6 percent to 7.6 MMT due to slaughter increases and the slower pace of export growth.

Post forecasts China’s pork production during 2006 at 50.9 MMT, a 4-percent increase from 2005. Pork production will continue growing due to steady domestic consumption and export increases. The pork and beef production increases have offset the slower pace of broiler meat production because of avian influenza (AI) outbreaks in China. Pork prices are forecast from steady to weak due to lower feed grain prices. Pork consumption is forecast to increase 4 percent to 50.4 million MT mainly due to steady population growth.

Post forecasts China’s beef imports will drop 40 percent to 6,000 MT in 2005, and during 2006 imports will remain flat because of continued BSE restrictions, domestic production increases, higher international prices and import policy changes. China’s live cattle imports for are forecast to decrease 20 percent to 80,000 head. Higher international prices and domestic import policy change reversed China’s import picture.

Australia and New Zealand have captured almost all China’s cattle and beef import market. The pace of growth in China’s beef exports is forecast smaller, at 20 percent, to 90,000 MT in 2006. The slightly appreciated RMB will make China’s exports less competitive. Post forecasts China’s pork imports to decrease 28.5 percent to 50,000 MT also due to domestic production increase, higher international prices and import policy change. China’s pork exports in 2006 are forecast to increase 4.8 percent to 584,000 MT due to export market demand increase, especially Japan and Russia. China is a net live swine exporter to Hong Kong and Macao accounting for 99 percent of its total exports.

China’s pork production during 2006 forecast to increase 4 percent to 509 MMT

China is the world’s largest pork producer and consumer. Post forecasts China’s end-of-year swine inventory in 2006 at 519 million head, a 3.7 percent increase from the estimated 500 million head in 2005. Slaughtered swine in 2006 are forecast at 692 million head, a 5.9 percent increase from the estimated 653 million head in 2005. Pork production for 2006 is forecast to increase 4 percent to 509 million MT from the estimated 489 MMT in 2005 due to slaughter increase driven by high prices.

China’s swine production has benefited from efficiency gains due to improved breeds and feed. This is reflected by increased imports of breeding swine. Regarding China’s feed improvements, please refer to the poultry annual report (CH5064). The sow ratio in 2006 is forecast at 8.8 percent of the total beginning swine stock, slightly higher than 2005. In main swine production areas like Hunan, Henan, Shandong and Hebei provinces, the sow ratio reached 10, 11.8, 11.6 and 11.4 percent respectively in the first quarter of 2005, far above the normal ratio of 8 percent. This will translate into a continued strong swine production in both 2005 and 2006.

The steady growth in pork production is driven by China’s population growth and by slight average consumption increases due to continued urbanization and wealth. Also, pork is the cheapest meat among all red meats. It is still the first choice of many lower-income consumers for animal protein.

Improved processing has contributed to pork production and consumption as well. There were 2,232 meat-processing plants till the end of 2004, each with an annual sales’ value above RMB 5 million. Most of them are pork-processing plants. Investment in slaughter and processing sector has increased considerably. Foreign investment through joint ventures using international health standards and HACCP management has helped improve pork quality. Commercial sales of domestic pork inside China in 2004 reached 20.8 MMT accounting for 44 percent of the total pork production, a 2.5 percent increase over the previous year.

Like the broiler industry, China’s swine and pork production is mainly constrained by limited feed resources, water and energy (please refer to poultry annual report CH5064 for more details). Disease control is a huge challenge, but China is making huge efforts to strengthen its veterinary system—supported by significant USDA collaboration.

Pig-born disease, Streptococcus suis

During May to August, a pig-borne bacterial disease, Streptococcus suis, spread to 32 counties and 10 cities in Sichuan Province, killing 40 humans and sickening over 200 people. Over 600 pigs died of the disease. Streptococcus suis is not an unusual disease in swine, though the rapid infection of humans has surprised world health experts. Insufficient management of swine on small-scale, family farms in Sichuan would explain the spread of the bacterium in the swine population.

The last outbreak of Streptococcus in swine occurred in China in 1998. This incident demonstrates the critical importance of timely, public information and education on destroying sick animals, in addition to the need for proper management of swine. Sichuan is the largest swine producing province and a swine and pork exporter to Hong Kong. Hong Kong market accounts for one-third of China’s total pork export markets. Trade was suspended for a short period, but shipments started moving again after the disease is under control. As a result, China’s pork exports will not significantly impacted.

Pork consumption for 2006 forecast to grow 4 percent to 50.4 million MT

China’s pork consumption in 2006 is forecast at 50.4 MMT, a 4 percent increase from the estimated 48.4 MMT in 2005. The pace of growth in consumption for 2006 is forecast slightly higher compared with 2005 due to the above-mentioned reasons (see production). Pork is consumed widely in China, especially in northern and central China (such as Sichuan), while beef and sheep and goat meat is heavily consumed in West, Southwest and Northwest China due to religious and food cultures. Northern consumers like fresh or frozen pork, while southern consumers eat a lot of prepared pork salted or smoked. Pork fillet is popular for making all kinds of fried dishes at home or in restaurants. Pork offal is popularly used for soup, hot pot or cold dishes. Pork ears and tongues and other offal are for cold dishes. Consumers particularly like pork feet, especially front feet, because front feet are shorter with more meaty, and feet tendons are not destroyed by hooking on trails like rear feet during slaughter.

Pork prices forecast from steady to weak in the second half of 2005

In the first half of 2005, China’s average retail pork price was $1.63, a 7 percent increase over the same period of 2004. Average retail prices in the first quarter increased 13.5 percent. Overall production costs rose for feed grains, water, electricity, transportation and animal disease control, putting upwards pressure on prices. Seasonal demand for pork during the calendar New Year and the traditional Chinese Spring Festival contributed to higher prices. The prices started falling during the second quarter, and the average retail price in June almost dropped to the same level in June 2004. Increased domestic swine slaughter, driven by high profit and increased poultry imports after China lifted its ban on U.S. poultry, combined with decreasing feed grain prices due to domestic grain production increase and large imports of soy bean for soy meal in feed, pushed prices downwards. Pork prices are forecast to remain steady in the second half of 2005.

Pork imports in 2006 forecast to decrease 28.5 percent to 50,000 MT due to domestic production increases, higher international prices and import policy changes

China’s pork imports for 2006 are forecast at 50,000 MT, a 28.5 percent decrease from the estimated 70,000 MT in 2005, and pork offal imports for 2006 are forecast to decrease 20 percent to 145,000 MT. Pork and pork offal imports in 2005 are estimated to decrease considerably as well. Imports are falling, instead of rising as forecast in the previous semiannual report (CH5010), due to domestic production increases, higher international prices and import policy changes.

In the first half of 2005, China’s average imported pork price increased 34 percent over the same period of 2004, while the price for most popular unboned hams and shoulders increased 48 percent from $0.71 to $1.04 per kilogram. The average price for China’s imported popular pork offal from world went up 16 percent, while U.S. origin pork offal increased 23.5 percent from $0.81 to $1.00 per kilogram. U.S. direct pork shipments to China decreased 79.8 percent from 20,616 MT to 4,217 MT and indirect shipments through Hong Kong decreased 96 percent from 7,390 MT to 266 MT during the same period. U.S. direct pork offal shipments to China decreased 41.7 percent from 64,408 MT to 37,564 MT and indirect shipments decreased 82.9 percent from 20,343 MT to 3,482 MT during the same period. When HK re-export numbers are available for 2004, post revised the import number in the PSD table for 2004 up to 155,000 MT multiplied by 1.3, except carcass and bone-in products, to convert from product weight to carcass weight.

Import policy change impact China’s imports and challenge U.S. exports

Effective on July 1, 2005, China no longer issues import quarantine permit for imported meat used for processing. Exporting plants in origin countries must be audited and registered upon their application before July 1 in order to be eligible (except the U.S.). The alreadyissued permits for processing are valid until the end of the year. Once registered, plants in third countries will also be eligible to export meat to China’s retail market, which was not allowed in the past when processing was permitted.

The U.S. is the only national meat safety system accepted by China. As long as U.S. plants comply with USDA’s health requirements, they are eligible to export to China. Plants in other countries have to be audited and registered one by one (see list below). The new regulation permitting a plant-by-plant approval in these third countries will lead to less gray channel trade through Hong Kong. In the past, meat from other countries was often smuggled into China under forged USDA health certificates or mixed with U.S. products to enter China’s retail market. The new policy will result in new competition for U.S. suppliers in China’s retail meat sector.

As of May 2005, all meat transshipments to the mainland through Hong Kong are subject to pre-inspection in Hong Kong. The additional cost of pre-inspection, costing $300-500 per container, has made China’s indirect imports less competitive. This will further encourage direct shipments to China in the future.

China’s pork exports during 2006 forecast at 584,000 MT, a 4.8 percent increase from 2005

Post forecasts China’s pork exports for 2006 at 584,000 MT, a 4.8 percent increase from the estimated 557,000 MT in 2005, mainly due to export market demand increases, especially Japan and Russia. Exports are forecast to increase for 7 years’ running from 73,000 NT in 2000 to 584,000 MT in 2006. Asian countries are China’s main export markets. Most of the export increases lies in cooked or prepared pork. Frozen carcass or frozen carcass of sucking pigs decreased considerably due to Russia TRQ Regime. Russia’s imports of processed pork are not subject to TRQ limit, and Russia’s importers have shifted to more boneless meat from other countries to maximize the use of their import licenses for better profit.

Live cattle exports in 2006 are forecast to increase 5 percent to 2.2 million head

Post forecast China’s live swine exports for 2006 at 2.2 million head, a 5 percent increase from the estimated 2.1 million head, due to Hong Kong and Macao demand increases. Hong Kong and Macao account for 99 percent of China’s total live swine exports. This trend will continue into the next couple of years, as long as China can control pig-born diseases.

Further Information

To read the full report please click here

Source: USDA Foreign Agricultural Service - September 2005