The Impact of China’s Pork Production on Beef Imports: Price Drops and Volume Recovery

In the last 15 months there have been strong changes in the price of cattle in the main beef exporting countries.

The most drastic fall has occurred in Australia, where the steer went from being worth US$ 6.00 per kilo on the hook in April last year to US$ 3.65 (-39%) today.

In a few months the panorama changed diametrically: the retention after the 2019/2022 dry season ended and the international prices of beef fell.

In Uruguay, a country that is highly exposed to the international market – it exports 80% of its production – the drop in FOB prices, especially to China, and the dry season, led to a 30% drop in the price of steers in less than 15 months. It went from US$ 5.45 per kilo on the hook in April 2022 to US$ 3.80 today (-30%).

In Argentina, also in the last 15 months, the price of the steer has fallen from US$5.24 to US$3.79 per kilo, showing a drop of 28%.

The fall in dollars, in our case, has not been greater due to the exchange rate delay.

In Paraguay, a country not exposed to the fluctuations of the Chinese market, the steer fell from US$ 3.80 to US$ 3.30 per kilo on hook, representing a drop of only 13%.

The pig, a Chinese giant

Starting in 2018, and as a consequence of the devastating spread of African swine fever, Chinese pork production collapsed: it went from 54 million tons that year to only 36 million tons in 2020, with a drop of 18 million tons in two years.

By 2022, just two years later, pork production had already recovered, and now the super-supply of pork suffers from reduced domestic demand, which has fallen due to the slowdown in economic activity.

In the second quarter of the year, pig slaughter increased by 4.6% compared to last year, becoming the largest supply of pork for the second quarter of the last 10 years.

The prices of pork to the public have fallen steadily in recent months, contributing – due to its weight in the consumer price index and in family spending – to China not only not having inflation but also being on the verge of of deflation.

Everything indicates that China will produce just over 55 million tons of pork this year, a historical record.

In the first half of the year, production amounted to 30.3 million tons, 3.2% more than last year. The Chinese market is flooded with very cheap pork, and this very cheap alternative protein is not exactly contributing to the recovery in demand for beef.

The glut of pork could (theoretically) affect beef imports, but in recent weeks there has been a modest rebound in the prices paid by Chinese importers for beef.

Regarding the imported volumes, and taking into account the shipments to China in June from the main supplying countries (Brazil, Argentina, Uruguay, the United States and Australia), everything indicates that they will increase in the coming months, as a reflection of the The greatest seasonal demand than every year occurs in August-November. It is when the Chinese Lunar New Year festivities take place, which will begin on February 10 next year.

In short, imports from China in volumes that seem to be recovering, but with prices still 30-35% lower than 15 months ago.

2023-07-29 03:00:00
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