Despite slowing economic growth and slackening demand for commodities, China imported record volumes of red meat in December, solidifying a record year for both pork and beef imports. December pork/pork variety meat imports into China/Hong Kong totaled 224,000 metric tons (mt), up 20 percent year-over-year, pushing imports for the full calendar year to 1.937 million mt, up 8 percent. The European Union was the primary beneficiary of China’s growing pork imports, with about 70 percent market share.
China’s imports of beef reached a monthly record 65,159 mt in December, putting the annual total at nearly 495,000 mt, up 56 percent from 2014. All beef suppliers with access to China saw significant year-over-year increases, led by Australia, Uruguay and New Zealand. But Brazil, which regained access to the market in June, was the largest supplier in December and jumped to fourth-largest for the year. Canada had also ramped up shipments to more than 5,000 mt per month in October and November, with China emerging as the second-largest (behind the U.S.) destination for Canadian beef. But exporters have been cautious recently, after some products subject to routine in-market testing were found to contain banned residues.
Hong Kong’s December beef imports were lower from all main suppliers, putting the 2015 total at 596,960 mt, down 27 percent year-over-year.
As China began to shut down for the weeklong Lunar New Year holiday this week, meat traders were anxious about prospects for the post-holiday period, when consumption usually trends seasonally lower. Aggressive shipments from South America, especially during the fourth quarter of 2015, saw traders taking losses on higher priced inventories booked earlier last year. Although overall beef demand in China is still growing, the softer economy has affected restaurant sales. But cold January weather helped sales of hot pot restaurants, which are large users of imported beef, spike upward.
China’s domestic beef prices remain basically steady, down just 1 percent year-over-year and averaging $4.39/lb while mutton prices are down 11 percent, averaging $3.99/lb. The strong rebound in domestic mutton production has tempered prices and correspondingly, imports were down 21 percent to 222,049 mt.
China’s live hog prices continued to move higher through the third week of January, up 37 percent year-over-year at 18 RMB/kg ($1.24/lb). Prices are being partly driven by seasonal Lunar New Year demand and cold weather. Piglet prices have soared, up 74 percent from a year ago to $2.31/lb, reflecting strong profitability in the industry, and thus demand for feeder pigs. Live hog and piglet price trends are similar to 2012, following a drop in production and subsequent price spike in 2011. Of course the decline in China’s breeding herd over the past year has also limited the number of piglets. China’s corn prices were recently down 13 percent year-over-year to their lowest level since 2011, but still averaging more than $8 per bushel, based on official Ministry of Agriculture data. Combined with higher hog prices, this put the hog: corn ratio at 8.58:1, indicating the highest profitability in recent history, and thus expectations for a rebound in production by mid-year. Experts are divided, however, on how fast the industry can expand, especially as new environmental regulations pinch expansion plans, especially for larger operators.
The spread between U.S. and EU hog prices and China’s prices remains historically wide, with China’s prices nearly three times U.S. prices since December. This should mean continued opportunities for exports to China, but wholesale prices for EU pork cuts in China remain extremely competitive. Also, the wholesale market is reportedly quite calm, with large frozen inventories, but importers continue to buy as imported pork is clearly a value compared to domestic product. China’s wholesale prices for imported variety meats were mixed in the first part of January, with higher prices for feet and stomachs while ear prices were sharply lower and tongue prices eased. Importers are hedging on continued RMB devaluation which could further impact pricing.
National Bureau of Statistics data show that China’s annual livestock and poultry production in 2015 was 84.54 million mt, down 1.0 percent compared with 2014. Pork production was down 3.3 percent from the previous year to 54.87 million mt. Enforcement of environmental regulations pushed many small hog farms to exit in 2015, resulting in a continued drop of both sow and live hog inventories, leaving further room for pork imports in 2016. At the same time, China’s industry continues to make efficiency improvements as it transitions from backyard to commercial production.
Although flush with large domestic stocks, China’s grain imports were also record-large at 32.6 million mt, a 68 percent increase over 2014, as China’s corn policy effectively kept China’s prices at more than double the world price. The U.S. was the largest supplier with 10 million mt, primarily sorghum. Imports of distiller’s dried grains with solubles (DDGS) from the U.S. were 6.8 million mt, up 26 percent. China’s soybean imports exceeded 90 million mt, up 13 percent primarily from Brazil, the U.S., and Argentina. But the global grain industry is watching with concern as China modifies its corn policy and will likely import a lower volume of feedgrains in the near term (though soybeans remain the exception). The Chinese government is working to slow corn imports, including another anti-dumping investigation on DDGS. China is by far the largest market for U.S. DDGS, taking 45 percent of U.S. export volume.
- Data is sourced from the Global Trade Atlas and China’s Ministry of Agriculture.
- China/Hong Kong pork and pork variety meat imports exclude re-exports from Hong Kong and Hong Kong’s imports from China