Changes occurring with China’s supply and demand for beef and live cattle

Are we there yet? Connecting the dots of China’s beef importing revolution.

*rossainsworth / July 21, 2014

When will the 40 year long oversupply situation come to an end and give the long suffering Australian beef producers a decent return for their hard work and investment? Connect the dots below to discover the answer. Sometime around 2010 dramatic changes occurred with China’s supply and demand for beef and live cattle. The first map shows traditional direction of flow of live cattle traded around continental Southeast Asia for the 50 years leading up to 2010. The second map shows today’s trade flow patterns.

• At the end of the 1990’s China reviewed its position on subsidizingmeat production and quite correctly concluded that feeding grain to pigs and chickens was far more efficient than feeding this scarce and expensive resource to ruminants. Subsidies for beef production were reduced.
• The Chinese domestic herd of approximately 100 million cattle at the turn of the century began to decline.  Unofficial figures suggest that the national beef herd may now be closer to 70 million or less.
• Official figures for national beef consumption rose from 5.13 million tons in 2000 to 6.53 million tons in 2010.
• Using a generous estimate of 150 kg of beef recovered per domestic carcase, the consumption of 6.53 million tons would require the annual slaughter of 43 million head. This level of slaughtering from a herd of around 70 million is obviously not sustainable.
• The national cattle herds in all of China’s southern neighbours have reduced dramatically during the last 5 years as live cattle have been exported to China at a time when all of these economies were also expanding and increasing their own domestic consumption.
• Domestic beef prices in all of China’s southern neighbours have roughly doubled in the last 5 years
• For the first time in the 50 year history of the trade, live Australian slaughter cattle delivered to Malaysia are cheaper than the small number of imports still brought across the border from Thailand.
• Hundreds of thousands of tons of box beef (from India, north and south America) have been going into China via the grey route but still this has not been sufficient to meet growing demand with legal box meat imports from Australia (and NZ, Uruguay and Brazil) booming over the last 3 years.
• Prices for Thai slaughter cattle delivered to their northern borders for smuggling into China are close to AUD$5 per kg live weight. By the time these animals arrive at their destination in China they are sure to be worth quite a bit more.
• Prices paid to Australian producers remain depressed due to the simple fact that Australian supply continues to exceed demand.

Now that China has almost exhausted the supplies of live cattle from its own herds and its southern neighbours, the next stop is Australia. Our proximity allows China to buy live cattle from Australia as well as processed beef. This gives the Australian industry a significant advantage over the rest of the world. Once live exports to China begin to flow, demand will finally outstrip supply and the Australian producer will, at long last, get a fair return for his efforts.  Not long to wait now.

*Article compiled by Ross Ainsworth  – http://seabeefreport.com/2014/07/21/are-we-there-yet-connecting-the-dots-of-chinas-beef-importing-revolution/

Will be great to see these events unfold and lift the Australian Cattle Market to new heights, if mother nature is kind with an early break in the season the industry will be on the road to recovery but much better times for the future. Feel free to ring if you are looking to buy or sell a property.

Regards,

Richard Brosnan

M 0400 361 114