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China meat shortages poses opportunity for Australian beef industry

China is set to become Australia’s largest beef export market in 2019 as the Asian country grapples with the African Swine Fever disease, according to Rabobank.

Chinese consumers are already veering away from pork due to the crisis, which has affected South Korea, Southeast Asia, parts of Europe and Africa.

Rabobank’s senior animal proteins analyst for China, Chenjun Pan said that the disease China’s pig herd halved in 2018 to 200 million pigs, leading to higher demand and higher prices for other meats such as beef. The country has seen pork pricing increase by 50 to 80 per cent.

China is the world’s largest animal protein importer with 27 per cent of the world’s pork imports and 24 per cent of global beef imports.

“Chinese beef imports have risen by 53 per cent so far this year, while imports from Australia have increased by 65 per cent in the year-to-date (July) – with China overtaking the US and Japan to become Australia’s largest export market for beef,” Pan said.

“This is a total turnaround from just 10 years ago when China was a net exporter of beef and an increase on last year, when 20 per cent of the country’s beef was imported,” she said.

African Swine Fever was first confirmed in August 2018 and since then 25 per cent of China’s pork production has been eradicated.

“This has resulted in a serious shortage in animal protein, with the market shrinking by eight million tonnes – even with the considerable increase in imports this year,” Pan said.

“In particular, the middle and upper classes are steering away from pork by substituting their diets with other proteins, such as ground beef. But from a price point of view, poultry has been the key substitute,” Pan explained.

“The disease has spread very quickly throughout the country and is very hard to eradicate. There are no restrictions to restock, but it will take time. With the breeding herd down significantly we expect the herd, and subsequently pork production, to rebound a little by 2021, but it is likely to take three to five years for it to return anywhere near the levels seen before the outbreak. And this will see beef and poultry imports remain high at least out to 2025.

The beef makes up about 9 per cent of China’s total meat consumption – with pork at around 65 per cent and poultry at 20 per cent (before the disease).

“While there has been a lot of talk about the slowing Chinese economy, the consumer market appears to be resilient, particularly among the middle, aspirant and lower affluent classes,” she said.

“In these segments of the market, price is no longer the single most important factor driving demand, rather convenience, taste, nutrition and value-added snacking. And with an increase in demand for ‘ready to cook’ meals, this supports greater consumption of beef at home – as beef is [predominantly] consumed in food service, such as restaurants.”

While beef is still considered a premium product, at double the price of pork, domestic production can’t keep up with demand.

“China has absorbed much of the increased slaughter that has been going through the system at the moment. and if they weren’t there, prices would be softer than where they are currently,” Australian-based senior animal proteins analyst Angus Gidley-Baird said.

Gidley-Baird said while ASF paves way for great opportunities for Australia in the next few years, “our competitiveness will fall once we get rain and cattle prices increase”.

“The Chinese market is very sensitive to price, and while we are competitive with the likes of South America at the moment, once our prices increase – and they are coming off a high base – they are likely to remain high. This means the risk is that when our own supply comes back on board, it could be at a time when there is a lot of supply from South America and the US on the global market,” he explained.

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