China can't keep up with demand for beef, exporters line up to fillet

28-Aug-2013 - Last updated on 29-Aug-2013 at 12:13 GMT

Rising incomes, dietary changes and increasing urbanisation are behind China’s newfound appetite for beef, with consumption expected to grow by one-quarter over the next 10 years.

But while demand has increased, local production has not been able to keep up, meaning that China now has fertile opportunities for key beef exporting countries.

These include exporters in Australia, New Zealand, Brazil, Uruguay, India and potentially the United States, if it’s suspension from the Chinese market in the aftermath of the 2004 BSE outbreak is lifted.

Missing its potential

“The consumption of beef in China is expected to rise, on a per-capita basis, by 24% in the coming decade,” explained Rabobank Analyst, Guilherme Melo.

This figure, however, could be even bigger, but supply shortages and rising prices have a big role in restrict demand

“Nonetheless, while market share will probably remain flat over the next 10 years as a result, the absolute volume will increase by roughly 25% when adjusted for population growth,” Melo added.

Accounting for only 8% of per-capita meat consumption, beef is still a niche product in China in contrast to poultry and pork, which command 22% and 65% respectively.

While the two leading meats are used for everyday meals, beef is generally considered more as an option for special occasions.

Indeed, it is estimated that almost two-thirds of total beef consumption takes place outside the home, most popularly at work canteens, Western-style restaurants and fast-food restaurants like McDonald’s.

Stagnant production

While beef demand has been growing at a reasonable pace, production has stagnated since 2006. This is largely due to low economic returns for beef compared to other agricultural activities as a result of high input labour and feed costs, poor genetics, reduced government support and difficult access to rural credit.

To correct the market imbalance, imports will remain on the rise over the coming years, according to Rabobank, offering opportunities for exporters from the key beef producing countries, most notably Australia, which is not only geographically closer, but is also well placed to supply a variety of beef products to meet different segments in China’s market.

However, other important exporter countries are also likely to benefit, and no specific country is expected to dominate the market, given that China is expected to provide or increase access to more countries wishing to enter its beef market.