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USDA GAIN: Livestock and Products


05 March 2012

USDA GAIN: China Livestock and Products Semi-annualUSDA GAIN: China Livestock and Products Semi-annual

The Office of Agricultural Affairs in Beijing (OAA/Beijing) revised the 2012 forecast for China’s beef production upward by 24,000 metric tons (MT), carcass weight equivalent (CWE), to 5.5 million metric tons (MMT). The revised forecast for pork production is 51.6 MMT, a nominal increase from the initial 2012 estimate of 51.2 MMT. The pork import estimate remains unchanged and imports are still expected to fall 26 percent to 560,000 MT.

USDA GAIN: Livestock and Products

Cattle/Beef

Cattle/Beef Production:

The revised 2012 forecast for China’s beef production is 5.5 million metric tons (MMT), carcass weight equivalent (CWE), an increase of 24,000 MT from the initial estimate. The increase is largely attributable to the following factors:

  1. Fewer outbreaks of foot and mouth disease and warmer-than-usual winter weather are preventing sickness and early deaths in key producing provinces; and 

  2. Adequate domestic supplies (in grains and natural grass) and favorable pasture conditions in West and Southwest China are improving animal feeding and increasing cattle weights. Fresh grass production reached a record high of one billion metric tons in 2011.

Consumption:

Although OAA/Beijing’s revised forecast is 13,000 MT higher than the initial estimate, China’s production continues to trend downward over the past few years. A major factor constraining China’s beef consumption is high domestic prices. For instance, from October-December 2011, the average price for beef soared 21 percent compared to the same time in 2010. Inadequate beef supplies will continue to keep domestic prices at record high levels and drive consumers to cheaper broiler meat and/or pork products.

Imports:

OAA/Beijing revised the import forecast for breeding beef cattle down by 3,000 head to 97,000 head, largely because of higher than expected domestic production and rising import prices. China announced a new policy on November 25, 2011 that all imports of breeding animals and frozen semen and embryos must show three generations of pedigree (great grandparent, grandparent, and parent generations). China is also requiring a minimum Estimated Breeding Value (EBV) or Estimated Progeny Difference (EPD) of at least 120 for boars. According to industry contacts, China’s new policies may hinder trade. Post will continue to monitor and report on these new policies.

Beef imports are forecast at 28,000MT, which is 17,000 MT lower than the initial estimate. The downward revision is mainly due to higher import prices, which is discouraging demand. During October – December 2011, the average import price increased nearly 33 percent, which is well beyond the reach of many Chinese consumers. Lower-priced pork products are substituting beef imports.

Exports:

The revised forecast for live cattle is 33,000 head, a six percent increase from the initial estimate. The upturn is mainly driven by higher demand for live cattle from slaughter operations in Hong Kong and Macau. Exports of live cattle are expected to replace some beef exports, which are revised downward by 6,000MT to 59,000. Sales will continue to Hong Kong, the largest market for frozen cuts and prepared beef, as well as to Japan, the second largest market for cooked beef.

Swine/ Pork

Swine/Pork Production:

Post’s revised forecast for 2012 pork production is 51.6 MMT, a nominal increase from the initial estimate and four percent higher than the revised 2011 estimate. The slight upward revision is primarily due to the following factors:

  1. China’s policies for breeding animals and productive sows are encouraging farmers to increase their inventories, in order to help prevent another year of tight supplies and record high prices. Domestic and foreign-owned farms are building new facilities for breeding animals. Reportedly, these new facilities have larger storage space than government-owned facilities. Local quarantine offices have agreed to conduct their 45-day review process at these new locations. This new policy is expected to help expedite the import process for large operations. China resumed its production sow subsidy, which provides $16 (100 Yuan) per sow to small backyard and large scale farms. As of January 1, 2012, China’s insurance subsidy now covers fattening swine (swine used for slaughter) in all provinces. The Chinese government insures 20 percent of a hog’s value if the cause of death is related to a disease outbreak.
  2. China experienced warmer-than-average winter weather and fewer outbreaks of foot and mouth disease (FMD), blue ear disease (PRRS), and swine diarrhea in major producing provinces in late 2011. Sources reported that no major FMD or PRRS outbreaks have occurred to date for 2012 and that China’s improved veterinary service and new FMD vaccination have helped the death rate remain at a relatively low level compared to previous years. (Please refer to the Swine Disease Section below for additional information.)
  3. At the end of 2011, the average profit for swine was $63.50 per head for 100 kilograms of slaughter weight, which was well above feed costs. Favorable market returns in 2012 have already allowed farmers to afford better animal feed. Furthermore, China’s adequate domestic supplies (in grains and natural grass) and favorable pasture conditions have improved the quality of animal feed, thereby increasing swine weights. Reportedly, for total swine feed production in 2011, nutritious feed (grain, natural grass, and silage) accounted for 82 percent (up six percent from 2010), while concentrated feed (feed mixed with other feedstuffs) accounted for 15 percent (down six percent).
  4. Reportedly, China’s domestic ban on the use of clenbuterol and ractopamine has caused producers to purchase new breeding swine for better genetics and higher-quality feed to produce leaner meat. Sources also noted that China’s ban has restored consumers’ confidence in purchasing pork products.

With all that said, tight land resources, stricter environmental requirements, diseases, and short labor supplies all hinder China’s animal farming, which is gradually moving west where land is available for large modern farms.

Consumption:

Post’s new forecast for pork consumption is 51.8 MMT, which is 335,000 MT higher than the previous estimate, mainly due to larger domestic supplies and lower prices. Although China’s economy is expected to slowdown in 2012, it is unlikely that demand for China’s traditional meat preference will be impacted. Additionally, pork is cheaper than other red meats, and the central government requested that all provinces and municipalities establish price-subsidy systems by the end of 2011, which includes subsidies for low-income consumers if prices return to record levels.

Imports:

The pork import estimate for 2012 remains unchanged. In 2011, China made larger-than-normal purchases due to the following events:

  • Foot and mouth disease outbreaks shortened normal timelines for slaughter, which calculated lower-than-normal slaughter weights;
  • Despite of adequate, productive sow inventories and favorable grain/swine price ratios (at $7.64 in December 2011), farmers feared a repeat of 2010 when purchasing piglet replacements (used for slaughter) at the end of the year led to oversupply and significant declines in market prices. With this fear, large operations made fewer purchases of new piglet replacements and some backyard farms stopped pork farming; and
  • To help dampen China’s record-high food price inflation, the Chinese government purchased large amounts of pork supplies from foreign sources to release on the domestic market and replenish its central reserves. Pork prices account for 33 percent of China’s food price index.

The forecast for breeding swine remains unchanged at 12,000 head. As noted under beef/cattle production, China issued a new policy that all imports of breeding animals and frozen semen and embryos must show three generations of pedigree (great grandparent, grandparent, and parent generations). China’s new import policies may hinder trade. Post will continue to monitor and report.

Exports:

The revised forecast for live swine (all for slaughter) is 1.75 million head, largely due to high demand in Hong Kong and Macau. The revised pork forecast is 255,000 MT (CWE), which is nine percent lower than the initial forecast. This downward shift reflects replenishments of China’s central reserves and fewer pork purchases from Hong Kong.

Looking Forward: Swine disease in China:

Sixty percent of China’s meat protein comes from pork consumption, so addressing swine disease is a high priority for China. Swine diarrhea is a fatal disease for new piglets. Once affected, the death rate on small backyard farms is 50 percent and about one-third on commercial farms. Most cases occur in the winter, particularly south of the Yangtze River, where temperatures are cold and wet and no heating is available in pig pens. To date, there is no effective vaccine for this disease. In mid December 2011, there were cases found in Sichuan, Shanghai, Zhejiang, Jiangxi, Hubei, Henan, and Shanxi.

Blue ear disease (PRRS) does not currently seem to be a major threat, but the industry reported that the PRRS vaccination only lasts between six and nine months and that outbreaks are still possible. China’s Ministry of Agriculture’s laboratory in Lanzhou successfully developed a new FMD vaccine against the Burma-98 strain, which is the main source of FMD outbreaks in China. In October 2011, there were low death rates from the FMD outbreaks in Heilongjiang, Liaoning, Shanxi, Hebei, Henan, Shandong, Fujian, Sichuan, Guangxi, and Guangdong provinces. Reliable sources have noted that the FMD vaccine is 80 percent effective and has reduced outbreaks in several key producing provinces, but current supplies are inadequate for the rising demand.

As swine disease is a very sensitive topic in China, no incident or data reports are publicly available. According to various sources, China’s disease outbreaks decreased about 60 percent from October to December 2011, compared to the same period in 2010.



March 2012

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