China to build new beef plant, despite cattle scarcity

By Mark Godfrey, in Beijing

- Last updated on GMT

Related tags: Meat, China, Beef, Livestock

Chinese meat processing capacity continues to expand apace with the latest announcement of a new 50,000-head beef lot and slaughtering plant in the mid-sized city of Xiangyang in the central province of Hubei.

However one of the country’s foremost beef breeding researchers believes any meat plant here will struggle to source cattle.

China’s smaller farmers in particular prefer to sell to smaller slaughterhouses because they are more conveniently located, says Professor Xu Shangzhong, a beef genetics specialist at the Chinese Academy of Agricultural Sciences (CAAS).

The vast majority (95%) of China’s cattle breeders/fatteners keep only one to nine beasts, according to Xu’s research. Thus, he says: "It will remain difficult for the larger processors to suck up any more cattle supply.

"The government wants to consolidate the sector, but this will remain very difficult," stresses Xu, noting, "It will be much easier to import 30,000 tons of Australian beef than it is to source 30,000 tons locally."

The average wholesale price of beef went up 34% year on year in February this year to RMB63.7/kg which is twice the cost of Australian beef, adds Xu.

Looking at the data, the situation appears urgent: Xu claims China had a beef cattle herd of 66.9 million in 2013, of which 47.6 million were slaughtered. "Our slaughter rate is much higher than the global average, it’s not sustainable."

Getting cattle has been a persistent challenge for a handful of large-scale beef processors which have emerged in China. Scarcity of cattle has prompted one of the leading players, Dalian-based firm Xue Long, to focus on the very high-end Wagyu market.

Its ‘Black Angus’ steaks sell for RMB750/kg in Beijing, a significant premium considering regular domestic ribeye sells for RMB130/kg. Xue Long is slaughtering the Bohai Black, a breed similar in stature to the Aberdeen Angus, though shorter in height.

A gradual shift of Chinese farmers off the land and into cities means fewer breeder/fatteners, even on a small scale. Likewise, the modernisation of farms – encouraged with generous state subsidies for mechanisation – means there are fewer draught cattle being bred, says Xu.

In the meantime, state-led efforts to breed quality cattle continue, with some success. The CAAS published a handbook recently, showing staff in blue overalls lining up specimens of local and imported breeds – and crosses of the two.

The Xiang Nan, for instance, is a cross between the local ‘Chinese Yellow’ breed and imported Charolais bulls. Among the 20 breeds which China has sought to trial locally are Belgian Blue and Brahman specimens. Shorthorns have been imported from UK and, more lately, from Australia for beef breeding programmes.

The China Simmental Breeding Committee has been aided and promoted by European breeding concerns, while the China Elite Native Yellow Cattle Breeding Committee has sought to prioritise the attributes of the dominant local breed. The Jin Nan and the Luxi Yellow breeds are both on a par with Western beef breeds in meat quality, claims Xu.

However, Xu spells out some of the key challenges facing the domestic beef sector. Farmers are put off by the long-term production cycle of cattle, while supervision and inspection of the beef value chain remains below par. "Prices will continue to rise, along with consumption, but supply is not going to be able to keep up."

Other factors that may restrict expansion of China’s herds are environmental. Beef production remains centred on the north east, while 30% of cattle are fattened in central provinces, such as Henan. Water shortages plague both regions, while heavily populated central provinces are struggling with the effects of pollution.

The country’s Department of Environmental Protection revealed last month that livestock accounted for three billion tons of waste production in 2012, up 400% in a decade. Livestock effluent accounts for 45% of China’s chemical oxygen demand (COD), 25% of nitrogen emissions, and 58% of phosphorus emissions.

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