China, a trap for major beef exporters
The Chinese beef market has been breaking record after record last year, as the animal protein deficit created by the African swine fever has encouraged beef imports in large volumes. However, the trend that favoured major players such as Argentina, Brazil, Australia, New Zealand, and Paraguay may soon change due to the fact that China is constantly looking for new suppliers of beef to cool the prices and limit the inflation.
In 2018, there were only 15 countries allowed to export beef in the Chinese market and their number has grown fast in just two years. Currently, 26 countries are allowed to export beef to China, the latest new entries comprising Russia, Panama, Ukraine, UK, Bolivia, and Namibia, in a total mix of low-value cuts and premium products.
High exposure to the Chinese beef market has triggered alerts in Argentina and Australia over the last 12 months, as beef prices in the Asian market were skyrocketing. By the end of 2019, the downside of this valuable coin was creating waves across the Pacific, with deals denounced by the Chinese importers as prices were slowly going down. Since then the situation hasn't changed too much, possibly due to the impact of the coronavirus outbreak and the lockdown of several major cities in China. "January’s beef import volume amounted to 155,000 tonnes, valued at $885 million, marking a decline of 17% in volume and 12% in value from last December," reports Beef to China.
The situation may persist as the impact of the blockade is still felt and the containment of the epic is far from over. "The outbreak of the coronavirus in China has had a major impact on foodservice and trade. With foodservice as the main channel for sales, beef is expected to feel the impact more than others. Indications from the 2003 SARS outbreak suggest that once the virus is contained, sales and trade should rebound quickly. However, the timeframe for control remains uncertain," according to Rabobank's senior animal protein analyst Angus Gidley-Baird.
In Australia, the herd decline has pushed the cattle inventory to the lowest level in the last three decades and exports are expected to drop by 8% this year due to limited production. The recovery of the national cattle inventory is not expected for the next 5 years, according to the latest outlook from the Australian Bureau of Agricultural and Resource Economics (ABARES). "Low livestock numbers mean that it will take several years for production to recover and production in 2024–25 will still be 8% below the 2014–15 peak, but close to the average for the 10 years ending 2018–19," said the report.
ABARES said some beef exports had already been disrupted earlier this year, and the foodservice industry had been affected because people in China had been encouraged to stay home. It expected the impact of the corona outbreak to be temporary and have little impact beyond 2020–21.
Nevertheless, as the number of beef suppliers in the Chinese market is expected to grow to reach 30 by the end of the year, the impact will be felt (especially in value) by the countries that have reported historical records in beef exportation to China in 2019, such as Australia, Argentina or New Zealand.
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