China is set to import up to 20 percent more beef every year for the next five in the wake of declining domestic production, according to a new research report by Rabobank International. This spells good news for fund managers focusing on the beef sector in countries such as Australia.
The Chinese government’s ‘Guideline for Beef Industry Development Towards 2020’ initiative aims to support the industry and increase local production by 13.8 percent by 2015 and 24.8 percent by 2020, some 7.86 million tonnes, but this will not catch up with growing demand. Beef is an increasingly popular source of protein in China as incomes rise, particularly among people living in cities.
Source: Rabobank, 2014
China’s beef cattle stock has been declining since 2004 and could worsen as beef cattle farmers shift their focus to other forms of agribusiness, according to Chenjun Pan, the report’s author in Rabobank’s food and agribusiness research and advisory department.
“There are a number of reasons why China has seen such a serious drop in beef production,” writes Pan in the report. “First, until recently, there has been a lack of government support. Compared with the pork and poultry sectors, beef cattle receives the least amount of support… Second, China’s beef cattle productivity is very low compared with other major beef-producing countries, making China uncompetitive and allowing imports to gradually eat up local market share.”
The meat yield in China’s beef sector is only between 40 percent and 45 percent, compared with 55 percent in Australia and the US. Furthermore the weight of the cows at slaughter in China are quite a bit less than in those developed markets at 500kg and 700kg respectively.