China’s appetite for meat still growing
Nelson Low, Hong Kong Economic Journal Company/EJInsight (Hong Kong)
October 15, 2020
Despite the impact of Covid-19 and African swine fever, China’s appetite for meat is showing no sign of slowing down. The country is the world’s largest consumer of meat by some margin, with citizens expected to eat 40.3 million metric tons of pork in 2020, according to the United States Department of Agriculture (USDA).
To put that figure in context, pork consumption in the country is set to be more than double that for all European Union countries combined in 2020. While pork is the most widely eaten meat in China, the consumption of beef and chicken is also expected to be higher than for any other country apart from the United States.
Meeting Domestic Demand
In the pork industry, not only is China the world’s leading consumer, it is also the largest producer by some margin. In recent months, large scale Chinese hog producers have been very focused on restocking and it is forecast that a total of 36 million metric tons of pork will still be produced in 2020. This compares with 24.1 million metric tons for the European Union in second place, and three times more than the U.S. in third place.
Even so, domestic production still does not meet all of China’s demand from its citizens, particularly after the national herd was reduced by African swine fever. The outbreak caused pork production levels in China to fall by 21% year-on-year in 2019, and despite best efforts by the Chinese hog industry, output levels are estimated to drop by a further 15% in 2020, according to the USDA.
While pork in China rose to record high prices because of this, consumer demand remained strong, with the substitution effect marginal at best. China was the world’s largest importer of pork in 2019, and import levels are forecast to soar by 76% in 2020 to 4.4 million metric tons, accounting for 43% of the global total. Imports are likely to receive a further boost after China reduced tariffs on U.S. pork following the signing of the Phase 1 trade deal in January, while it also agreed to purchase an additional $32 billion worth of U.S. agriculture products, including pork, in the coming two years.
Future Growth in Consumption
The meat momentum is expected to continue in China, as disposable incomes increase and the middle class continues to expand. The average person in China only consumes 24.4 kilograms of pork and 14 kilograms of chicken a year, according to the OECD.
The fact that per capita consumption of certain meats in China still remains well below levels seen in developed markets highlights the huge potential for future growth in this area. For example, annual average per capita consumption of beef in the U.S. is 26.3 kilograms, compared with just 4.1 kilograms in China. Even after accounting for dietary preferences and shifts, there remains substantial room for growth.
Over the last decade, that rising demand for meat had already begun to exert some pressure on global supplies. In early 2019 this pressure exploded in dramatic fashion in the U.S. pork market. The CME Lean Hog futures prices made a sharp series of multi-day rallies, rising by 22% over a two-week period to reach a near-two year high.
The trigger was a U.S. Export Sales report released on March 7, 2019 showing China had made its biggest weekly purchase of pork in two years. This confirmed previous market speculation that African swine fever was spreading widely on mainland China and that domestic production had been severely reduced, necessitating large scale purchases from the global markets.
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