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China Livestock and Products Semi-Annual - March 2007

by 5m Editor
5 March 2007, at 12:00am

This article provides the pork industry data from the USDA FAS Livestock and Products Semi-Annual 2007 report for China. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.

Report Highlights

U.S. red meat exports (predominantly fresh/frozen pork, variety meat and offals) to Mainland China and transshipments through Hong Kong reached $94 million in CY 2006, a 15 percent decrease due to higher export prices. Demand for U.S. beef remains strong and "indirect shipments" to the Mainland may equal or exceed 2003 levels, but official trade will not resume until China and the United States reach agreement on the range of beef products and China's quarantine import conditions. China's beef production in 2007 is forecast to increase 5 percent to 7.9 MMT, while pork production will increase 4 percent to 54.4 MMT. China's beef imports in 2007 are forecast at only 2,000 MT due to the BSE-related trade restrictions. Pork imports are forecast to increase 4 percent to 55,000 MT. China's beef and pork exports in 2007 are forecast to increase by 3 percent, and Singapore recently agreed to import beef from 2 Chinese Provinces.

Executive Summary

U.S. pork shipments to China and Hong Kong (i.e., muscle meat, variety meal, offals and processed meat) reached $94 million (CIF) in CY 2006, a 15 percent decrease from the last year due to higher export prices. In 2006, the average price for U.S. direct pork shipments to China increased by 15 percent, while the average price for transshipments through Hong Kong increased 10 percent for pork and 188 percent for pork offal. Demand for U.S. beef remains strong in China, but trade resumption during 2007 remains uncertain. As evidence of the sales potential, the trade believes the annual flow of U.S. beef into China through “indirect channels” is probably equal to or greater than the pre-BSE ban 2003 import levels. China and the United States continue discussions on the range of beef products and on China’s quarantine import conditions. See CH6074 (dated September 7, 2006) for more background on the U.S.-China beef negotiations that took place during May to July 2006.

During December 2006, FAS Beijing organized the 2nd Sino-U.S. Food Safety Bilateral workshop in Beijing, and the ongoing objective is to smooth U.S.-China trade in meat and poultry products. At the meeting, agreement was reached in several areas aimed to minimize disruption of U.S. exports to China. China agreed to accept industry e-mailed information (i.e., dates of export certificates and the numbers) for meat and poultry shipments, in lieu of their original request that the U.S.-side implement complete electronic, export certification. China also agreed to cooperate in developing microbiological risk assessment and testing methodologies for food borne-pathogens. China did not agree to immediately resume imports of pork from two U.S. plants de-listed due to detections of Ractopamine residues; however, USDA, the U.S. meat industry and the manufacturer of Ractopamine are working to resolve the issue. Finally, as the result of USDA-AQSIQ food safety collaboration, China has not “delisted” any meat and poultry plants since early 2006.

During 2007, FAS Beijing forecasts China’s total meat production will increase 5 percent to 84.6 MMT from 2006, with beef accounting for 9 percent, pork accounting for 64 percent, sheep and goat meat accounting for 6 percent, and poultry meat accounting for 19 percent, based on the National Statistic Bureau’s newly announced figures for 2006.

China’s beef production in 2007 is forecast to increase by 5 percent to 7.9 MMT driven by strong domestic demand and lagging supply. China’s beef imports are forecast to remain flat in 2007 due to China’s bovine spongiform encephalopathy (BSE)-related restrictions. China’s beef exports in 2007 are forecast to increase by 3 percent to 102,000 MT. U.S., Canadian and Brazilian export recovering in world market will shrink China’s export share. China’s pork production in 2007 is forecast to increase by 4 percent to 54.4 MMT due to slow slaughter. China’s pork imports are forecast to increase by 4 percent, not only because of slow domestic slaughter, but also because of the strong RMB.

Swine and Pork

China’s pork production in 2007 is forecast to increase 4 percent to 54.4 MMT

Post adjusted China’s pork production in 2007 slightly down to 54.4 MMT from the previous estimation of 55.8 MMT in the last livestock annual report (CH6074) due to estimated slower slaughters in 2007.

China’s swine and pork production in 2006 experienced low prices in the first 3 quarters and high prices in the last quarter. Farmers expanded placements when swine and pork profits increased during 2003-2004 due to consumers’ switch from poultry to red meats due to fears of highly pathogenic influenza. As a result, sow inventory beginning stocks in 2005 increased considerably and year-on-year pig crop production increased by 8 percent to 45 million head. Over supply led to low pork prices from September 2005 to September 2006. Swine fever occurred in Anhui, Jiangxi, Zhejiang, Hunan, Hubei and Jiangsu Provinces, resulting in reduced pork consumption, which in turn further pushed down pork prices.

Recently, China’s hog production costs have been going up due to corn, soybean, soybean product, and petrol price increases. According to the industry, general pork production costs during the low price period were $0.28-29 (RMB 2.1-2.16) per kilogram. Under such prices, swine and grain conversion was 1:4.6-4.81, lower than the 1:5.5 critical profit point. Feed ingredients mainly include corn, soy meal and wheat, and corn accounts for 60-70 percent. Corn prices significantly impact China’s swine production.

During the low price period of 2006, farmers quickened swine and sow slaughters at the cost of lighter average carcass weights. As the swine disease came under control, pork consumption started picking up in October 2006. The reduced pork supplies, combined with strong demand during the New Year holiday and the traditional Chinese Spring Festival in February 2007, have pushed pork prices up again since October. The current swine and grain conversion is 1:5.72. Pork production is currently profitable.

Post forecasts China’s year-on-year pig crop production in 2007 to increase by 2 percent to 750 million head due to reduced sow stocks. However, the sow stocks are still higher than the normal 8 percent of the total stocks. As China’s beef, sheep and goat meat production increases steadily, and consumers gradually shift back to poultry meat after they become accustomed to HPAI outbreak news, pork demand will be relaxed. However, if farmers expand pig placements quickly again when seeing good profit, pork prices will be constrained.

Feed development benefits swine industry

China’s swine production has benefited significantly from feed development. The total feed production in 2006 was estimated at 109 MMT, about the 2 percent increase from 2005. While compound feed develops steadily, concentrated feed and additive premixed feed have been developing too. Large commercial farms usually use compound feeds, and small or backyard farms mainly use the other two feeds to mix with their own grain stuffs. According to the feed industry, feed quality improvement has increased the efficiency of swine production. Compared with the objectives of the 8th Five-Year-Plan (1990-1995), the current swine fattening period has been shortened about 40 days, reflecting that more and more back yard farms are using concentrated feed and premixed feeds. The Chinese 11th Five-Year-Plan for Feed Development (2006-2010), which targets feed production capability at 170 MMT, stresses safety, high quality, high efficiency and sustainable development. This will not doubt continue to benefit China’s swine industry.

Pork consumption in 2007 forecast to increase by 4 percent to 53.8 MMT

Post adjusted China’s pork consumption number in 2007 slightly down to 53.8 MMT from the previous forecast of 55.3 MMT in the last livestock annual report (CH6074) due to estimated slow slaughter. Pork is still the most important animal protein for Chinese consumers though the trend is going down due to availability of other meats, milk and aquatic products. Pork share in China’s total meat production is forecast to drop 4 percent to 60 percent by 2010 based on China’s 11th Five-Year-Plan for Food Development. Although China is a large pork producing country, 99 percent of its total pork is consumed in China due to animal diseases such as FMD and swine fever.

Pork imports in 2007 forecast to increase 4 percent to 55,000 MT

This report’s production, supply and demand table (i.e., PSD) includes the tariff line HS Code (HSC) 160249 for China, which was not included in the past. If this HSC is excluded, China’s imports through Hong Kong or exports to other countries will be impacted significantly.

Post forecasts China’s pork imports in 2007 to continue growing because of slow domestic slaughters and the uncertainty of beef imports. The pace of increase in China’s pork imports is forecast to be lower than 2006 due to substitution of poultry meat and pork offal imports.

U.S. pork exports to China in 2007 are forecast to increase by 5 percent to 44,000 MT. China’s pork import data and U.S. export data to China differ by 30,247 MT as the result of direct shipments to the Mainland in 2006. FAS Beijing believes “grey channel” trade in South China explains this difference. U.S. pork offal exports to China in 2006 increased by 12 percent to 33,422 MT, and exports through Hong Kong increased by 36 percent to 5,871 MT. In 2006, the average price for U.S. direct pork shipments to China increased by 15 percent, while the average price for transshipments through Hong Kong increased 10 percent for pork and 188 percent for pork offal. This is hopefully to change in 2007 with an expectation of strong U.S. pork growth, and strong RMB against U.S. Dollars will relax import prices.

Pork exports in 2007 forecast to increase by 3 percent to 560,000 MT

FAS Beijing forecasts China’s pork exports in 2007 to increase by 3 percent to 560,000 MT (CEW) from the estimated 544,000 MT in 2006. Although China is the world’s largest pork producing country, it is not a significant player in pork export markets, and exports only account for 1 percent of China’s total pork production.

We forecast China’s pork exports will fall 5 percent compared with 2006 due to reduced domestic slaughters, but also due to the stronger RMB against the U.S. Dollar. For the first time, the RMB is now equivalent to the Hong Kong dollar since China and Hong Kong reunited in 1997.

Russia used to be one of China’s largest export markets, but after Russia implemented an import quota system in 2003, China’s quota fell to only several thousand MT a year due to food safety concerns. This quota will not likely change in 2007.

Another reason for China’s decline in exports is the crackdown on illegal exports from China to these countries. Some EU countries reported found illegal meat exported to or transshipped to their country from China. As a result, AQSIQ, MOFCOM, and China’s General Customs Administration jointly issued a notification requiring CIQ offices to strengthen export inspection and quarantine to stop this malpractice. Additionally, Japan, a key export market for China, is forecast to reduce imports nearly 2 percent due to its high-level pork stock levels.

China’s live swine exports to Hong Kong and Macau are forecast to decline nearly 2 percent to 1.8 million head due to import increases. The two markets account nearly all of China’s live cattle exports. This trend will continue in 2007.

There is some positive news for China’s pork exports. Hong Kong and Macau, for the first time, opened their fresh and chilled pork market for China in August and November 2006, respectively. China has already exported 17,000 MT to Macau. On October 18, 2006, Singapore reopened its market for boneless pork from China’s Jiangsu and Shandong Provinces (previously closed due to FMD concerns).

Further Information

To view the full report, including tables, please click here (PDF Format)

List of Articles in this series

To view our complete list of 2007 Livestock and Products Semi-Annual reports, please click here

March 2007