Yahoo Finance Chinese Beef Prices Plunge as Appetite for Premium Meat Wavers
(Bloomberg) -- The Chinese beef market is facing a conundrum.
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The government has pushed farmers to raise production at home and opened the door to more imports, but a slowing economy has left meat piling up in freezers and dragged local prices to a five-year low.
Wholesale prices have dropped 18% from last year’s peak to around 62 yuan ($8.53) a kilogram. Much of the cattle industry is now loss-making and could increasingly become a drain on the public purse after the farm ministry urged local authorities to provide subsidies and forage to farmers.
Food security is a hot topic for the government, which has sought to promote self-reliance across key markets including beef. The deflationary pressures now gripping the economy have forced Beijing to step in and support a variety of sectors from livestock to grains. Now the challenge is to keep farmers solvent, stabilize production and ride out a period of losses, a task made trickier for the beef industry because of a flood of meat from overseas.
China’s beef imports advanced 23% in the first five months of the year as Beijing went on a spree of granting more market access to other countries — call it food diplomacy — to warm up relations with nations including Brazil and Spain. Australia has recently been added to the list.
Beef is a relatively luxurious option in China that costs almost three times as much as pork, the usual meat of choice. As the nation grew wealthier, that allowed for steady gains in both output and consumption. China produced about 7.5 million tons last year, according to the US Department of Agriculture. Demand was just over 11 million tons, with the balance made up by imports.
The USDA is currently forecasting a 2.3% rise in production this year, against demand growth of just 0.4%, although the gap could turn out to be wider given the industry’s worsening conditions.
Additional beef could become available if lower prices force farmers to cut their losses and slaughter more of their herds. Culls in the dairy sector, which is also doing badly, are exacerbating the glut, said Yang Chun, chief beef and mutton analyst at the farm ministry’s markets department.
And demand is slowing as households are compelled to ration their spending. Yang said some sellers of fresh beef to supermarkets and wet markets have reported a significant drop in orders since August. Traders, who asked not to be named discussing market conditions, said frozen stockpiles of the meat remain elevated.
The industry is looking to entice new customers, but there are few corners of the economy immune to penny-pinching while China’s property crisis persists. That suggests any turnaround could depend on the government’s ability to engineer a broad-based improvement in consumer optimism.
“Regular folk don’t have as much money in their pockets as before,” said Yang. The need for cheaper protein means “giving up on premium products like beef,” she said.
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