The Chinese meat boom

The growing middle-class wealth in China has been touted as a key driver of meat protein demand for more than a decade.

More recently, however, the disruption to China’s pig herd due to the spread of African Swine Fever (ASF) has supercharged consumers’ appetite for beef, chicken, pork, and sheep meat imports.

ASF was first reported in China in August 2018. During 2019, the Chinese government publicly acknowledged the significant impact of ASF on its domestic pig herd. Last year, it was estimated that the decline in pork production within China created a gap of 25 million tonnes in available pork meat, which has been partially offset by an increase to imports of pork product.

Meat imports of all kinds had been growing in China before the outbreak of ASF, as the combination of increased population and per-capita-wealth growth fuelled the demand for meat protein.

However, the outbreak of ASF in 2018 led to a marked increase in Chinese demand for imported pork product. The value of imports into China has lifted by a staggering 3,910 per cent during the past decade.

A comparison with other pork-importing nations shows just how aggressive the increase in demand for pork has been within China. For example, Mexico and South Korea have also experienced robust growth in the value of their pork imports, 135 per cent and 139 per cent, respectively. Meanwhile Australia, the US, and Japan have demonstrated more moderate growth over the decade of 54 per cent, 45 per cent, and 33 per cent.

Another useful measure that highlights the growth in Chinese demand for meat protein is the proportion of meat imports relative to their domestic consumption of each type of meat protein.

The lift in beef imports into China began to rise in the early 2010s, jumping from 1.5 per cent of domestic consumption in 2012 to 5.8 per cent in 2013. Prior to the outbreak of ASF, it was sitting around 17.5 per cent, with the outbreak of ASF seeing a surge towards 30 per cent.

The larger lift in pork and chicken imports as a proportion of domestic consumption materialised post-ASF. In 2018, chicken imports as a percentage of domestic consumption were sitting at 2.9 per cent and pork imports 2.6 per cent. By 2020, these had surged to 6.6 per cent for chicken and 12.7 per cent for pork.

Given China’s huge appetite for pork – three times the size of its chicken consumption and nearly six times the size of beef consumption in the past decade – it is no mean feat for the proportion of pork imports to rise so much.

Sheep meat imports tell a similar story to beef, in that the increase in imports into China as a proportion of domestic consumption began to lift pre-ASF. Granted, there is only data available for sheep meat up until 2019, but the trend is clear. Sheep meat imports into China began to rise before beef, back in 2010. Lifting quickly from 2.7 per cent in 2010 to 11.5 per cent in 2014. After a short lull between 2015 and 2018, sheep meat imports as a proportion of consumption began to rise again after the outbreak of ASF to be at 13.7 per cent of domestic consumption by 2019.

Given that China has the largest sheep flock in the world, and annual sheep meat consumption levels that are larger than Australia’s entire annual beef production, these are significant import volumes, nearing 400,000 tonnes.

Trade tensions between Australia and China, very elevated domestic beef prices, and low supply have all contributed to a dampening of the demand for Australian beef into China this season. The dispute has also allowed the US and South American competitors to gain a greater foothold in China.

However, despite the low sheep supply and relatively high prices of lamb and mutton, the position Australia holds as a dominant supplier of sheep meat to the global market means there have been limited options for China to look elsewhere for lamb and mutton product.

This has resulted in some very strong flows of sheep meat into China during 2021, particularly for lamb.

The slow recovery of the Chinese pork sector should continue to favour the Australian red meat producer (particularly the sheep meat producer) as we head toward the middle of the decade.

• Matt Dalgleish is a manager of commodity market insights at Thomas Elder Markets (TEM)