Inside China‘s beef and sheep market

Wang Ming-li Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences 19. June, 2013 York/England

Part 1: Cattle 1. The global picture of beef production in China 2. The regional situation in Chinese beef production 3. Conclusions and outlook

1.The global picture Beef has a low proportion in total meat consumption rural vs. urban (kg per capita and year) 40 35 30

Urban consumption Meat Urban consumption Beef Rural consumption Meat Rural consumption Beef

25 20 15

10 2.77

5

0.98

0 1990

1995

2000

2005

2009

2010

2011

Source: China Statistic Yearbook 2012

This is household consumption, There are no statistical data for outdoor consumption. Total urban consumption is estimated to 5kg.

1.The global picture Slaughter increase outgrows total cattle inventories million head 140 120

103.0

100 80 60

Total cattle Dairy cows

Slaughter Beef cattle

66.5 47.0

40 14.7

20

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0

Source: China Statistic Yearbook 2012 and China Livestock Yearbook 2000 to 2010, the data of 2012 is estinated.

1. In 1996 and 2006, Bureau of Statistics corrected the data via the general investigation. 2. Draft cattle were also included in the total cattle numbers 3. China did not import live cattle but beef to close the gap.

1.The global picture Beef production came from almost zero and grew by 27% since the year of 2000 million tons 7,0

6,51

6,0 5,0

Production

5.13

4,0 3,0

2,0 1,0 0,0

Source: China Statistic Yearbook 2012

1.The global picture Beef price more than tripled since 2000, well above inflation CNY per kg

2011

2010

2009

2008

45.14

2007

2006

2005

2004

2003

2002

2001

2000

Beef Price Beef price deflated CPI CPI

160 140 120 100 80 60 40 20 0

2012

50 45 40 35 30 25 20 15 10 5 0

CPI Index

Source: China Statistic Yearbook 2012

Now the beef price has reached to 57 CNY/kg, i.e. 9 USD/kg

1.The global picture Calf prices remained relatively stable from 2010 to 2011; In 2012, the calf price increased significantly > shortage of calves. (CNY/kg) 25 20

Calf price

15 10

5 0 1

3

5

7

2010

9 11 1

3

5

7

2011

9 11 1

3

5

7

9 11

2012

Source: Minstry of Agriculture of China 2010, 2011 and 2012

1.The global picture • Two source of beef increased significantly: Low-yield cows and dairy bull calves • In past, we didn’t fatten the dairy bull calves, nowadays, it is much more done as a result of the shortage of calves from cow-calf origin. million heads 3.68 Fattening low-yield cows Dairy bull calves

1.91

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

4 3,5 3 2,5 2 1,5 1 0,5 0

Source: China Statistic Yearbook 2012 & own caculation

1.The global picture Average total costs compared to the previous year increased 7 % and 15 % per year in 2011 and 2012 CNY per head 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0

Total cost

Average 2010: CNY 5790 1

3

5

7

2010

9

11

y = 2,4041x2 - 31,474x + 5878,9 R² = 0,9695

Average 2011: CNY 6200 1

3

5

7

2011

Source: own survey of 750 farms in 9 provinces 2010, 2011 and 2012

9

11

Average 2012: CNY 7160 1

3

5

7

2012

9

11

1.The global picture Exports and imports on low level with imports increasing (`000 tons) (million USD) 70

61.4

60

250

Export Import

50

300

200

Export Import

40 150

30

Source: China Custom Statistics Yearbook & Uncomtrade database This two sources have the same data!

2012

2010

2008

2006

2004

2002

2000

1998

2012

2010

2008

2006

2004

2002

0

2000

0 1998

50 1996

10

1996

100

20

1.The global picture The main beef cattle breeds of China are the improved breeds based on foreign and native breeds hybrid, and local superior breeds .

Simmental cattle Charolais cattle Limousin cattle Piedmont Cattle

Luxi cattle

Qinchuan cattle Nanyang cattle Yanbian cattle

1.The global picture Types of beef finishing farms

Small scale Beef cattle farm

Fatten cattles from the dairy herd

Large scale beef farm

2. The regional situation

• Main production regions • Regional shifts in cattle inventories 2010/2011 vs. 2001/2002

2. The regional situation "Beef Advantage Regional Planning 2008-2015" central, northeast, northwest and southwest Beef cattle inventory about four advantage areas of the country accounts for 75%, slaughter capacity rate was 83% in 2010

North East

North West

Central

South West Source: China Statistic Yearbook 2010

2. The regional situation Central and Southwest China are on the decline million head of total cattle 40 35 30 25 20 15 10 5 0

2000/2001 2010/2011

Central • • •

Source: China Statistic Yearbook 2010 & 2011

North East

South West

North West

The North East is the main forage and maize production, so the feed price is lower than other regions. Labor cost is also relatively low. The inventory of draft cattle declined in crop farming regions like Central, North East, Southwest Cattle inventory stable in pastoral regions in Northwest

3. Conclusions and outlook 1. The shortage of breeding cattle resulted in the shortage of calf supply >> Beef and calf price increase dramatically Bulls from the dairy herd (presently about 5 percent) Dairy cows inventory is on the increase 2. The costs increased rapidly (energy, fertiliser …) and low technology level in breeding >>> Enhance intensive cattle farms (> 50 finishing cattle) with high productivity The large scale farm can get the profit in the market. 3. Most of the cattle farms do not grow their own feed, they buy from the market >> Feed price will be always in high level 4. The lack of beef market quality and safety supervision >>> Good quality beef can not get high price >>> Low quality beef dominates the beef market 5. China will be the net importer after the strict border trade. Now, the quantity of smuggled beef is very large according to survey of some beef enterprises.

Part 2: Sheep and Goat 1. The global picture of sheep and goat production in China 2. The regional situation in Chinese sheep and goat production

Inventory and slaughter of sheep and goat million head Sheep and goat meat (right axis) 350 Inventory (left) Slaughter (left) 300

282.4

3,6

250

266.6

3,0

million tons

4,2

200

2,4

150

1,8

100

Sheep and goat meat

1,2 0,6

0

0,0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

50

China Statistics Yearbook 2012

1996 and 2006, Bureau of Statistics made the correction for data

The inventory of sheep and goat million head 350 300

Sheep

Goats 139.6

250 200 150

142.7

100 50 0

China Statistics Yearbook 2012

Price evolution of sheep and goat meat The price of sheep and goat meat in-bone increased by two thirds from 01/2010-12/2012 CNY/kg 60,00

57.05

50,00

40,00 30,00 20,00

Sheep and goat meat with bone

10,00 0,00 1

3

5

7 2010

9

11

1

3

5

7 2011

9

11

1

3

5

7

9

11

2012

Now the price has reached to 63 CNY/kg, that is 10.2 USD/kg

The household consumption of sheep and goat meat (kg/year per capita) The city dwellers’ household consumption of sheep and goat meat went down, but the rural dwellers’ household consumption keeps rising. 1,6 1,4 1,2 1 0,8 0,6 Rural Dwellers

0,4

City Dwellers

0,2 0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 China Statistics Yearbook 2012

There are no statistical data for outdoor consumption.

China is a net importer of sheep and goat meat `000 tons

million USD

140

450 123.9 400

120 100

Import

350

Import value

Export

300

Export value

80

250

60

200

40

150 100

20

50

0

0

Source: China Custom Statistics Yearbook & Uncomtrade database This two sources have the same data!

The import of sheep and goat meat increases rapidly The export went down since 2006.

Top 5 provinces in goat inventory Traditional sheep and goat production area

Mountain area with affluent grass for goat

Main Agricultural production area with affluent feed for goat fatten.

Top 5 provinces in sheep inventory In these regions, people are minorities who are main consumption for sheep meat.

The average cost, returns and profit of sheep and goat Goat and sheep farming is a very profitable business.

CNY/head 1 200 994,70

1 000 Total value

Total cost

profit 775,41

800 660,17

523,50

329,21

308,43 260,63

282,88 157,12

85,69

47,80

520,18

417,89

373,26

243,52

200

639,67

575,01

600 400

632,68

814,52

90,38

180.18 136,67

112,50

135,74

0 2004

2005

2006

2007

2008

2009

Now the profit of sheep is about CNY 300 per head and for goat almost CNY 400 per head.

2010

2011

Thanks for your attention! And special thanks for the support from Dr. Claus Deblitz and Barbara Siwirska (Thünen Institute) E-mail: [email protected]