Like it or not China is now a key driver in many U.S. agriculture markets, from dairy to corn to pork, and now, beef. China’s rapid economic development during the past two decades, multiplied by 1.3 billion people, has created a wave of consumerism across the nation. Cell phones rode a wave as China Mobile (owned by the Chinese government) became the largest cell provider on earth. China Mobile has three times as many subscribers as AT&T and Verizon combined. Automobiles have also rode the wave of Chinese consumerism with 2013 auto sales topping $21 million; U.S. auto sales hit $15.6 million last year. And now it may be beef’s turn to ride that wave.

Discussion
Chinese consumers eat small amounts of beef, 10 pounds per capita in 2013 (weights on a carcass-weight basis). That is nearly half of the world average 18 pounds and far below the U.S. average of 81 pounds. However, their pork consumption on a per-capita basis, at 89 pounds, surpasses the U.S. at 60 pounds.

Source: USDA/FAS

However, the price that Chinese consumers pay for beef has moved sharply higher in recent years.  In January 2011, retail beef in China averaged 37 RMB/kg (US$2.57/lb). Three years later in January 2014, that price had jumped 81 percent to 68 RMB/kg (US$5.06/lb) surpassing, for the first time ever, U.S. retail beef prices. And even more amazing, per-capita Chinese consumption increased from 9.1 pounds to 9.8 pounds during that timeframe. Chinese consumers saw prices double in three years and bought even more beef. The economic definition of rising prices and rising consumption is demand growth. 
Chinese beef demand growth is further evidenced by the stable pork and chicken prices. While Chinese retail beef prices jumped 81 percent in the three years ended January 2014, pork prices increased a paltry 7 percent while chicken prices increased 6 percent.  The following chart shows the rapid demand growth for beef.

 Source:  China National Bureau of Statistics

The rising demand for beef has not been matched by Chinese supplies. Chinese cattle slaughter declined by 3.7 million head from 2008 to 2013, an 8 percent decline. Chinese agriculture is fighting for resources (feed, land and water), and beef is much less significant than pork. Chinese beef production also declined 8 percent from 2008 to 2013. Chinese officials are currently scrambling to ensure food resources for their 1.3 billion citizens, offering new rounds of subsidies for key staples such as rice, corn and pork. Beef will likely take a backseat in the Chinese food policy realm as officials seek to maintain self-sufficiency in other key strategic food items.

This is also evident in China’s willingness to allow beef imports.  Imported corn and pork have faced strong Chinese resistance in recent years through non-scientific trade barriers, from GMO restrictions on corn to bans on FDA-approved feed additives in pork. During this same time, beef import access has improved with China opening to Canada and working to open Brazilian access. In fact, Chinese officials have recently stated that July may be a good time to consider relaxing the 10 year old BSE ban on U.S. beef.  

As a result of the rising demand and increased access, China’s beef imports have skyrocketed, up 345 percent last year alone to 314,000 metric tons. If you add in Hong Kong and Vietnam, potential sources of beef into China, the total grew to 1.39 million metric tons of beef and beef products in 2014. That takes the greater China region solidly to the No. 1 spot globally, nearly double the volume of the No. 2 importer (U.S.) in terms of beef imports. 

Source: GTIS, Global AgriTrends

Conclusion
The beef shipped directly to China must originate from only a few eligible countries today (Australia, Uruguay, New Zealand, Canada, and Argentina – in order of 2013 volumes). However, if Hong Kong and Vietnam are included, then that greater China region is buying large volumes of beef from nearly every available exporter.

In 2013, the greater China region increased beef and beef product imports by more than half a million metric tons. That was against virtually no global beef production growth. Chinese demand for beef is strong and growing. China’s middle class has recently been estimated near 300 million and is expected to grow to 620 million by 2022. This newfound demand for beef will rise in coming years. United States ranchers, feeders and processors stand to gain significantly from an access agreement for U.S. beef to China.


Source: GTIS, Global AgriTrends

 

 

Source: GTIS, Global AgriTrends

Additional Resources

Global AgriTrends