Trends in retail meat prices China

When WH Group China released its prospectus for the takeover of USA Smithfield Foods in April 2014, they looked at the massive size of the Chinese pork industry and potential rises in per capita pork consumption. Chart below:

While the growth in Chinese pork consumption in the mass market has grown, a number of factors including the industrialization of the pork processing industry have impacted on the trade.

China Yurun Food Group, another pork and processed meat listed company, recently highlighted some industry trends in their interim report for 2016.

"However, in the first half of this year, affected by factors such as tight market supply, hog prices rose rapidly and increased significantly by approximately 48% compared to the same period last year to approximately RMB21.4

per kilogram, being the highest price in the past 5 years. 

During the Review Period, pork production in China amounted to 24.73 million tons, representing a decrease of 3.9% over the same period last year. During the Review Period, the number of live hogs production of China was approximately 402 million heads, representing a decrease of 3.7% over the same period in 2015; the number of hogs output was approximately 320 million heads, representing a year on year decrease of 4.4% as compared to the same period last year. As the hog farmers’ incentives to rebuild inventories resumed gradually and the supply should improve steadily, pork prices are therefore expected to decrease in the second half of 2016." In late November, the Ministry of Agriculture published their wholesale meat price trends and pork was quoted at 22.99 CNY per kg, 2.5% higher than 12 months earlier.

Pork is the largest meat consumed in China and prices are higher than chicken. Agriculture China latest wholesale price on slaughtered chicken is CNY14.40 per kg. That is equivalent to AUD S2.80 per kg.

Far higher prices for beef has seen some consumer resistance in the slowing conditions in the China market and Agriculture China latest (Nov 27 2016) wholesale price for beef is CNY 53 per kg, 1.9% down on the same month in 2015. Mutton prices have fallen a far more significant amount of 6.9%.

Retail price trends in China since 2013 shown below indicate the trend down in mutton prices, clearly separating from the level of beef over several months.

After the booming growth in the Chinese sheep meat market in 2013, with a jump of almost 40% in mutton retail prices along with sharp upturn in beef prices, mutton demand and prices have adjusted to more historical differentials with beef. Australian sheep meat exports to China have dropped from 97.423 tonnes in 2013 (MLA, DA) to 60,220 tonnes in 2015 annual and further adjusted to 47,824 tonnes year to date to October 2016.

BMI Agribusiness report for China Q4 2016 very clearly shows the far more competitive landscape for China beef imports, with Brazil product surging.

According to Brazilian export statistics, Brazilian beef exports to China Jan-Oct, have jumped from 61,260 tonnes 2015 to 132,383 tonnes in 10 months of 2016. Brazilian beef unit prices have dropped 14% from levels in the first 10 months of 2015. However, Brazil has also seen beef exports drop and in November 2016, the total fresh frozen beef was 75,800 tonnes, the lowest level since Jan 2015.