Forecasts out of the United States suggest that beef imports into China, the world's largest beef import market, will level out next year and likely contract by up to 19 per cent as the economy struggles under strict COVID-19 prevention measures along with forecasts of increased domestic production and ongoing uncertainty in the hotel, restaurant and institutional sector.
The cost to China of its beef imports in the first half of 2022 rose by 37pc year-on-year according to the US Department of Agriculture in a period of economic disruption and a global pandemic.
Pork has always been the major animal protein in China and in fact around half of the world's pigs, as well as half of the world's production and consumption of pork, occurs in China.
China's annual beef imports increased from around 20,000 tonnes per annum in 2010 to over two million tonnes per annum a decade later.
Consumption per capita grew steadily over this period as incomes rose and consumers diversified diets to some extent away from pork.
Domestic beef supply has not kept pace with the increasing demand, in part says the USDA, because much of China's beef herds lack access to land and forage.
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Official Chinese statistics show beef imports in the first six months of 2022 reached over 1.17 million tonnes and could approach 2.4m tonnes for the full 12 months given the recent surge in imports.
Australia exported close to 150,000 tonnes of beef to China in the 12 months to June this year - 18pc or 25,000 tonnes of that as chilled.
Against total imports, however, we remain just one of many players in the Chinese beef market all seeking to take advantage of the size, the attractive prices and the sheer potential of the market despite the short-term pandemic issues.
China's longer-term potential
The USDA's assessment of Chinese beef imports for next year comes at the same time as the USDA's Economic Research Service has released a more detailed long-term assessment of China's potential beef imports.
The report suggests that despite current limitations, tariff and non tariff barriers and the pandemic, an evaluation of the differences between China's domestic prices and import prices for beef suggests that at present a further 25.2pc increase in beef imports is possible.
The medium and longer term scenario suggests an even larger increase in beef imports of 46.3pc is possible.
The ERS analysis has used the wedge approach - the difference between domestic and import prices for beef imported into the country.
The USDA suggests that increasing demand and constrained domestic supply have caused high beef prices in China, exceeding foreign prices (using the US as an example) by around 58pc for beef.
USDA estimates suggest that removing these price wedges could lead to further increases in beef imports.
When this ERS modeling uses Australian beef prices, it estimates that the price wedge could be as high as 122pc and would provide a much larger trade impact.
The Phase One US Trade Agreement with China signed in January 2020 eliminated several restrictions on US beef into the Middle Kingdom but Australia still benefits from the import tariff arrangements for beef negotiated through its FTA with China in 2015.
The inference in all this is that despite the amazing growth in the Chinese import beef market over the last decade, the potential for further growth is substantial if and when the economic and geopolitical conditions are more optimal for that to happen.
Market Parameters
Brazilian beef exports in August set a new record at 225,963 tonnes for the month according to the USDA, up 9pc year-on-year. They included a new record for China of 130,800 tonnes.
Australia exported 16,800 tonnes to China for the same month of August, the largest monthly total since 2020.
Brazil is China's largest single supplier of imported beef at present.
The Hanwoo Association in Korea has highlighted this week that for the first time in the country, meat consumption at 56.5kg per capita has overtaken the once revered staple of rice at 54.1kgs per capita.
This statistic reflects a major evolution for an Asian country and the adoption of more westernised dietary patterns.
The strong US dollar at present will create some headwinds for US beef exports going forward.
The Australian dollar at below 70 cents to the US dollar is providing some relief for Australian exporters who are otherwise facing ever rising costs of livestock and input costs in processing generally, let alone ongoing severe labour shortages.
The Japanese yen is at its lowest to the US dollar and the Australian dollar for close to 20 years.
As a major boost to the economy in Japan, the country will eliminate its limits on daily arrivals by foreign travellers by the end of October as Japan seeks an economic boost through tourism.
Earlier this month the daily limit was increased from 20,000 to 50,000 people. The move is welcomed by the Japanese trade and is expected to support increased meat consumption especially in the hospitality sector ravaged by the pandemic.
Of concern is the ongoing strike action in the port of Felixstowe in the UK, Australia's major port of entry for meat shipments.
Labour talks have reached a standstill and unions are planning a second wave of strikes from September 27 through to October 5. This action will overlap with strikes at the Port of Liverpool from September 19 through October 3.
The strikes result in delays, congestion and containers being offloaded at other ports across the UK and even western Europe.
The passing of Queen Elizabeth II has had unions reviewing strike plans in the short term but ongoing union unrest in an economic climate of over 10pc inflation appears like it will continue.
This is not the best environment for when the ground breaking free trade agreement between the UK and Australia, now in the final stages of ratification, enters into force hopefully later this year.
Closer to home a downturn in Australian national cattle slaughter in the last week reflects a shortage of available cattle, tight logistics and supply chain challenges playing into domestic and international market sentiment.
Forecasts of a third La Nina summer outlook with increased rainfall will provide further confidence in herd rebuilding to continue along with good expectations on price.