Latin American ranchers benefit from surging Chinese beef demand
Chinese beef imports from Latin America have soared after swine fever swept across rural China, reducing the country’s pig population by as much as a third and turbocharging demand for an alternative source of protein.
Argentina has taken the biggest cut of the growing Chinese beef market this year, with exports up 129 per cent year-on-year to 186,000 tonnes, according to Global Trade Atlas, equivalent to a 21 per cent market share.
Brazil consolidated its position as the biggest beef exporter in the world, and is the second-biggest exporter to China at 180,000 tonnes in the year to August, up by 15 per cent. “This is an unprecedented animal disease event and an unprecedented change in the market,” said Justin Sherrard, global strategist on animal protein from Rabobank.
Overall, China’s imports were up by a half in 2018 and have increased a further 60 per cent this year, according to official customs data. Aside from the pork shortfall, the rise of western cuisine in wealthy metropolitan areas of China is a key factor driving demand for beef, according to Mr Sherrard.
Demand for beef around the world continues to grow, as developing nations look for foodstuffs besides chicken and pork for their growing populations. The main beef-producing nations are in turn converting their land to pasture to feed the growing global appetite for high-protein foods.
Brazilian beef exports — concentrated in southern states, the northern savannah and the Amazon rainforest — increased 14 per cent year-on-year in the first eight months of 2019, according to trade body Abiec. Exports are forecast to climb to a record 1.8m tonnes through the end of the year, mainly leaving Brazil through ports in São Paulo state.
Analysts believe demand from China will remain strong for the next three years for Brazil, which has recently opened up 25 new export plants. Executives at JBS, the largest meat company and biggest exporter to China, are confident that demand from their main export market will remain strong.
“I guess the biggest barrier or the biggest bottleneck we could have would be . . . having enough growers to increase production,” said its founder Wesley Batista, at the company’s earnings call last month. “But today, our industrial capacity for that market is good, it’s well-suited for an increase in demand.”
Thiago Carvalho, cattle researcher at the Center for Advanced Studies on Applied Economics (CEPEA) in São Paulo, said there was little sign of demand weakening. “But we still need to be prepared for when it does by opening up other markets like Mercosur, Japan and the United States.”
Argentina leapfrogged Brazil to become the biggest exporter to China in 2019, in part because of low domestic demand, but also because the weakened peso made its beef much cheaper.
“They’re selling a lot of beef this year, but they’re going to have a supply problem next year,” said Mr Carvalho. “This has positioned Brazilian beef well for 2019.”
The US, on the other hand, has been frustrated in its efforts to capitalise on the swelling Chinese beef market — to which it regained access only in 2017 — because of the trade war that has raised tariffs.
“There is definitely potential to grow US beef exports to China,” said Joel Haggard, senior vice-president for Asia-Pacific at the US Meat Export Federation. “But the uncertainty of what the tariff rate might be tomorrow has hindered demand from Chinese importers and slowed production of China-eligible beef in the US.”