china's growing appetite for meats

277 Pages·2012·6.73 MB·English

CHINA’S GROWING APPETITE
FOR MEATS: IMPLICATIONS FOR
WORLD COMMODITIES TRADE

A Multi-Client Analysis and Outlook

September 2012
China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

Table of Contents
Executive Summary ............................................................................................................ 1
I. Review of China’s Meat Supply and Demand .............................................................. 10
1.1 Overview of China’s Pork Production .................................................................... 10
1.2 Regional characteristics of pork production ........................................................... 11
1.3 Overview of China’s Pork Production Policies ...................................................... 13
1.3.1 Hog Production Policies in the Past ................................................................. 13
1.3.2 Recently Introduced Policies ........................................................................... 15
1.4 Pork Consumption Trends in China ........................................................................ 20
1.5 Review of China’s Pork Supply and Demand Situation ......................................... 22
1.6 Regional Pork Surplus and Deficit ......................................................................... 25
1.6.1 Major Pork Surplus Provinces ......................................................................... 25
1.6.2 Major Pork Deficit Provinces .......................................................................... 26
1.6.3 Pork Self-Sufficient Provinces ......................................................................... 32
1.2 Overview of China’s Beef Production and Demand............................................... 32
1.2.1 Regional Concentration of Beef Production .................................................... 32
1.2.3 Beef Consumption Trends in China ................................................................. 34
1.2.4 Review of China’s Beef Supply and Demand Situation .................................. 36
1.3 Overview of China’s Lamb/Mutton Production and Demand ................................ 37
1.3.1 Regional Concentration of Mutton Production ................................................ 37
1.3.2 Overview of China’s Mutton Production Policies ........................................... 39
1.3.3 Lamb/Mutton Consumption Trends in China .................................................. 39
1.3.4 Review of China’s Mutton Supply and Demand Situation .............................. 40
1.4 Overview of China’s Poultry Production and Demand .......................................... 42
1.4.1 Regional Characteristics of Poultry Meat Production ..................................... 42
1.4.2 Overview of China’s Poultry Production Policies ........................................... 43
1.4.3 Poultry Meat Consumption Trends in China ................................................... 44
1.4.4 Review of China’s Poultry Supply and Demand Situation .............................. 45
1.4.5 Regional Surplus and Deficit of Poultry Meat ................................................. 46
1.5 Overview of China’s Egg Production and Demand ................................................ 48
1.6 Overview of China’s Other Meat Production and Demand .................................... 49
1.7 Overview of China’s Aquatic Products Production and Demand .......................... 49
1.8 Backyard vs. Commercial Operations .................................................................... 52
1.8.1 Hog Backyard vs. Commercial Operations ..................................................... 53
1.8.2 Poultry Backyard vs. Commercial Operations................................................. 56
1.8.3 Cattle and Dairy Cow Backyard vs. Commercial Operations ......................... 59
1.9 The Chinese Government’s Production Plan for the Next Five Years ................... 61
II. Overview of China’s Meat Trade Situation and Policies ............................................. 62
2.1 Overview of China’s Meat Trade Situation ............................................................ 62
2.1.1 Overview of China’s Pork Trade ..................................................................... 62
2.1.3 Overview of China’s Poultry Meat Trade ........................................................ 69
2.1.4 Grey Channel for Meat Imports ....................................................................... 72
2.2 China’s Meat Trade Policy and Future Trends ....................................................... 74
2.3 Meat Labeling, Transshipment, and Packing Requirements .................................. 75

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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

2.4 Designated Meat Import Ports ................................................................................ 76
2.5 China’s Free Trade Agreements ............................................................................. 81
2.5.1 China-Asian Pacific Free Trade Agreement .................................................... 81
2.5.2 China-Chile Free Trade Agreement ................................................................. 81
2.5.3 China-New Zealand Free Trade Agreement .................................................... 84
2.5.4 China-Pakistan Free Trade Agreement ............................................................ 84
2.5.5 New Free Trade Agreements under Negotiation or Study............................... 86
2.6 Major Factors Affecting China’s Meat Trade ......................................................... 87
2.7 Approved Countries and Companies to Export Meats to China ............................. 87
III. Feed Ingredient Supplies and Feed Industry Development ........................................ 94
3.1 Arable Land and Water Resources in China ........................................................... 94
3.2 Future Trends in Arable Land and Crop Area ........................................................ 95
3.3 Review of China’s Corn Supply and Demand ........................................................ 95
3.4 Review of China’s Wheat Supply and Use ............................................................. 99
3.5 Review of China’s Rice Supply and Use .............................................................. 101
3.6 Review of Other Coarse Grain Supplies and Usage ............................................. 103
3.7 Review of Protein Meal Supplies and Demand .................................................... 105
3.8 Review of Other Feedstuff Supplies and Use ....................................................... 107
3.9 Feed Conversion Ratio for Standard Feed Ingredients ......................................... 107
3.10 Transition from Backyard to Commercial Operations and Impacts on Grain
Demand ....................................................................................................................... 109
3.11 Overview of the Feed Industry ........................................................................... 110
3.12 Structure of Feed Products .................................................................................. 113
3.13 Regional Concentration of Feed Production ....................................................... 115
3.14 Investment Outlook for China’s Feed Industry .................................................. 122
IV. China’s Meat Processing Industry and Marketing.................................................... 123
4.1 Categories of Processed Meats in China ............................................................... 123
4.2 Market Shares of Top Branded Processed Meat Products .................................... 123
4.3 China’s Meat Processing Industry ........................................................................ 125
4.4 Key Players in the Industry ................................................................................... 126
4.5 Marketing Channels for Meat Products ................................................................ 127
4.6 Cold Storage Chain and its Future Development in China ................................... 127
4.7 Government Policies toward the Meat-Processing Industry ................................. 128
4.8 The State Reserve’s Role in China’s Meat Marketing.......................................... 128
V. Demand Drivers and Outlook .................................................................................... 129
5.1 An Overview of the Chinese Economy ................................................................ 129
5.2 Driving Forces behind China’s Economic Growth ............................................... 131
5.3 Rising Income and Growing Middle Class in China ............................................ 133
5.4 Urbanization and Migration .................................................................................. 135
5.5 Dietary Trends ...................................................................................................... 137
VI. Outlook for Domestic Feed Grain and Protein Meal Supplies ................................. 138
6.1 Long Term Projection of Corn Supply and Demand ............................................ 138
6.2 Long Term Projection of Wheat Supply and Demand.......................................... 143
6.3 Long Term Projection of Rice Supply and Demand ............................................. 147
6.4 Long Term Projection of Other Coarse Grain Supply and Demand ..................... 150
6.5 Long Term Projection of Protein Meal Supply..................................................... 153
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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

6.6 Long Term Projection of Other Feed Ingredient Supply ...................................... 155
VII. Outlook for China’s Meat Supply and Demand ...................................................... 157
7.1 China’s Long-term Pork Supply and Demand ...................................................... 157
7.2 China’s Long-term Beef Supply and Demand ...................................................... 158
7.3 China’s Long-term Lamb/Mutton Supply and Demand ....................................... 159
7.4 China’s Long-term Poultry Meat Supply and Demand ........................................ 160
VIII. Conclusions: China’s Meat Supply and Demand Summary .................................. 161
8.1 China’s Meat Supply and Demand Outlook for the Next Decade ........................ 161
8.2 Assessment of the Potential for China to Become a Major Meat Importer .......... 161
8.3 Implications to World Meat Trade ........................................................................ 161
8.4 Major Implications to World Feed Grain Trade ................................................... 162
8.5 Major Implications for World Oilseed Trade ....................................................... 162

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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

List of Exhibits
Exhibit 1: Top Pork Producing Countries (1,000 MT) ..................................................... 10
Exhibit 2: Shares of Chinese Meat Production by Species 2000-2011 (percent) ............. 11
Exhibit 3: Provinces of China ........................................................................................... 11
Exhibit 4: Regional Distribution of Pork Production and Feed Grain Production ........... 14
Exhibit 5: Monthly Hog-to-Corn Price Ratio ................................................................... 18
Exhibit 6: Feeder Pig-to-Pork Price Ratio ........................................................................ 18
Exhibit 7: Hog Inventory and Target Level ...................................................................... 19
Exhibit 8: Gilt/Sow Inventory and Target Level .............................................................. 19
Exhibit 9: Pork Consumption by Type ............................................................................. 21
Exhibit 10: Shanghui Group and Jinluo Group’s Chilled Fresh Pork Chain Stores ......... 22
Exhibit 11 : China Pork Balance (1000 MT) .................................................................... 23
Exhibit 12: Per Capita Pork Consumption in China ......................................................... 24
Exhibit 13: Per Capita Pork Consumption by Country and Region (kg/person) .............. 25
Exhibit 14: Map Pork Flow from Hunan Province ........................................................... 27
Exhibit 15: Map Pork Flow from Sichuan, Guangxi, Yunnan Province .......................... 28
Exhibit 16: Map Pork Flow from Henan, Shandong and Hebei Provinces ...................... 29
Exhibit 17: Map Pork Flow from Jilin and Lianong Provinces ........................................ 30
Exhibit 18: Pork Surplus and Deficit by Province (1,000 MT) ........................................ 31
Exhibit 19: Top Beef Producing Countries (1,000 MT) ................................................... 32
Exhibit 20 : Regional Distribution of Beef Production .................................................... 33
Exhibit 21: Per Capita Beef Consumption by Country and Region (kg/person) .............. 35
Exhibit 22: Most Common Beef Consumption Types ...................................................... 36
Exhibit 23: China Beef Balance (1,000 MT) .................................................................... 38
Exhibit 24: Regional Distribution of Mutton Production ................................................. 39
Exhibit 25: Chinese Per Capita Consumption of Mutton ................................................. 40
Exhibit 26: China Mutton Balance (1,000 MT) ................................................................ 41
Exhibit 27: Poultry Supply and Demand 1997-2010 (Million Birds) ............................... 42
Exhibit 28: Regional Distribution of Poultry Meat Production (1,000 MT and % of Total)
........................................................................................................................................... 43
Exhibit 29: Difference Between Southern and Northern Cooking Style .......................... 45
Exhibit 30: Per Capita Poultry Meat Consumption by Country and Region (kg/person) 45
Exhibit 31: Poultry Meat Supply and Demand (000 MT) ................................................ 47
Exhibit 32: Poultry Meat Surplus and Deficit by Province (1,000 MT) ........................... 48
Exhibit 33: Egg Supply and Demand (1,000 MT) ............................................................ 50
Exhibit 34: China’s Other Meats Supply and Demand Balance (1,000 MT) ................... 51
Exhibit 35: China’s Aquatic Product Supply and Demand (000 MT) .............................. 52
Exhibit 36: Share of Backyard and Commercial Hog Operations (Percent of Pork
Production) ........................................................................................................................ 54
Exhibit 37: Production Costs by Type of Hog Operation ................................................. 56
Exhibit 38: Days to Market and Hog Live Weight by Type of Operation ....................... 56
Exhibit 39: Share of Broiler Backyard and Commercial Production ............................... 57
Exhibit 40: Share of Egg Layer Backyard and Commercial Production .......................... 58
Exhibit 41: Broiler and Egg Layer Production Costs ....................................................... 59
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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

Exhibit 42: Share of Beef Cattle Backyard and Commercial Production ......................... 60
Exhibit 43: Share of Dairy Cow Backyard and Commercial Production ......................... 60
Exhibit 44: Government’s Five-Year Target (2011-2015) ............................................... 61
Exhibit 45: China’s Pork Trade (1,000 MT) ..................................................................... 62
Exhibit 46: China’s Pork Exports by Countries ................................................................ 63
Exhibit 47: China’s Pork Exports by Type (1,000 MT) ................................................... 63
Exhibit 48: China’s Pork Imports by Country of Origin .................................................. 64
Exhibit 49: China’s Pork Imports by Types (1,000 MT) .................................................. 65
Exhibit 50: China’s Beef Trade (1,000 MT) ..................................................................... 66
Exhibit 51: China Beef Exports by Destination ................................................................ 67
Exhibit 52: China Beef Exports by Type (MT) ................................................................ 67
Exhibit 53: China’s Fresh/Frozen Beef Imports by Country (MT) .................................. 68
Exhibit 54: China’s Beef Imports, Fresh/Chilled vs. Frozen (MT) .................................. 68
Exhibit 55: China’s Fresh/Frozen Beef Imports by Type (MT) ....................................... 69
Exhibit 56: China Poultry Meat Trade (1,000 MT) .......................................................... 70
Exhibit 57: China’s Poultry Meat Imports by Country ..................................................... 71
Exhibit 58: China’s Poultry Meat Exports by Country ..................................................... 72
Exhibit 59: Hong Kong Re-Exports to China (MT) ......................................................... 73
Exhibit 60: Designated Meat Import Ports ....................................................................... 77
Exhibit 61: CIQ Designated Cold Storage Companies Outside Port Area (MT) ............. 78
Exhibit 62: China-Asian Pacific FTA Tariff Schedule ..................................................... 81
Exhibit 63: China-Chile FTA Tariff Schedule.................................................................. 82
Exhibit 64: China-Chile FTA Tariff Schedule.................................................................. 83
Exhibit 65: China-Pakistan FTA Tariff Schedule ............................................................. 84
Exhibit 66: China-Pakistan FTA Category ....................................................................... 85
Exhibit 67: China-Pakistan FTA Category ....................................................................... 86
Exhibit 68: Countries and Companies Approved for Exporting Pork to China ............... 88
Exhibit 69: Countries and Companies Approved for Exporting Pork to China ............... 89
Exhibit 70: Countries and Companies Approved for Exporting Pork to China ............... 90
Exhibit 71: Countries and Companies Approved for Exporting Beef to China ............... 91
Exhibit 72: Countries and Companies Approved for Exporting Beef to China ............... 92
Exhibit 73: Countries and Companies Approved for Exporting Beef to China ............... 93
Exhibit 74: China’s Arable Land 1997 - 2010 .................................................................. 94
Exhibit 75: China Corn Area and Production, 1991-2011 ................................................ 96
Exhibit 76: China Corn Yields, 2000 - 2011 .................................................................... 97
Exhibit 77: China Corn Feed Use ..................................................................................... 98
Exhibit 78: China’s Corn Trade 1991-2010...................................................................... 99
Exhibit 79: China Wheat Area and Production............................................................... 100
Exhibit 80: China Wheat Yields ..................................................................................... 100
Exhibit 81: China Wheat Feed Usage ............................................................................. 101
Exhibit 82: China Rice Area and Production .................................................................. 102
Exhibit 83: China Rice Yield .......................................................................................... 103
Exhibit 84: China Other Coarse Grain Area and Production .......................................... 104
Exhibit 85: China Other Coarse Grain Yields ................................................................ 104
Exhibit 86: China Other Coarse Grain Feed Use ............................................................ 105
Exhibit 87: Protein Meal Supply and Demand (1,000 MT)............................................ 106
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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

Exhibit 88: Other Feedstuff Feed Use (1,000 MT) ......................................................... 108
Exhibit 89: Feed to Meat Conversion Ratio ................................................................... 109
Exhibit 90: Corn and Soybean Meal Feed Use Growth .................................................. 110
Exhibit 91: China’s Feed Output 1991-2011 .................................................................. 111
Exhibit 92: China Feed Production by Type (1,000 MT) ............................................... 111
Exhibit 93: Number of Feed Mills by Province .............................................................. 112
Exhibit 94: Share of Different Feed Products ................................................................. 114
Exhibit 95: Share of the Compound Feed Market by Specie.......................................... 115
Exhibit 96: Regional Concentration of Compound Feed Production (1,000 MT) ......... 116
Exhibit 97: Percentage of Hog Compound Feed Production by Province ...................... 117
Exhibit 98: Percentage of Egg Layer Compound Feed Production by Province ............ 118
Exhibit 99: Percentage of Broiler Compound Feed Production by Province ................. 119
Exhibit 100: Percentage of Aquatic Compound Feed Production by Province .............. 120
Exhibit 101: Percentage of Ruminant Compound Feed Production by Province ........... 121
Exhibit 102: China Feed Production Forecast (1,000 MT)............................................. 122
Exhibit 103: Market Share of Branded Sausage Products (percent) ............................... 124
Exhibit 104: Market Coverage of Branded Sausage Products (percent) ........................ 124
Exhibit 105: Market Share and Coverage of Low Temperature Meat ............................ 125
Exhibit 106: China’s GDP Growth ................................................................................. 129
Exhibit 107: China’s Consumer Price Index Percent Change ........................................ 130
Exhibit 108: China Domestic Investment ....................................................................... 131
Exhibit 109: China Foreign Trade .................................................................................. 132
Exhibit 110: China’s Foreign Exchange Reserves .......................................................... 132
Exhibit 111: Average Family Income in 2010 ................................................................ 133
Exhibit 112: Urban Family Expenditure ......................................................................... 134
Exhibit 113: Chinese Family Asset Value and Debt ...................................................... 135
Exhibit 114: Urban Population Share in China............................................................... 137
Exhibit 115: Dietary Trend ............................................................................................. 138
Exhibit 116: Corn Acreage Projection ............................................................................ 139
Exhibit 117: China’s Corn Yields ................................................................................... 140
Exhibit 118: Projection of China’s Corn Feed Demand ................................................. 141
Exhibit 119: China’s Corn Food and Industrial Use ....................................................... 142
Exhibit 120: China’s Domestic Corn Supply and Demand ............................................ 143
Exhibit 121: Wheat Acreage Projection ......................................................................... 144
Exhibit 122: Projection of China’s Wheat Production ................................................... 145
Exhibit 123: Projection of China’s Wheat Feed Use ...................................................... 145
Exhibit 124: Projection of China’s Total Wheat Demand .............................................. 146
Exhibit 125: China’s Wheat Trade ................................................................................. 147
Exhibit 126: China’s Rice Acreage Projection ............................................................... 148
Exhibit 127: Projection of China’s Rice Production....................................................... 148
Exhibit 128: Projection of China’s Rice Feed Demand .................................................. 149
Exhibit 129: China’s Rice Trade..................................................................................... 150
Exhibit 130: Other Coarse Grain Acreage Projection ..................................................... 151
Exhibit 131: Projection of China’s Other Coarse Grain Production ............................... 152
Exhibit 132: Projection of China’s Other Coarse Grain Feed Use ................................. 152
Exhibit 133: China’s Other Coarse Grain Imports ......................................................... 153
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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

Exhibit 134: Projection of China’s Protein Meal Production ......................................... 154
Exhibit 135: Projection of China’s Protein Meal Feed Use ............................................ 155
Exhibit 136: Projection of Other Feed Ingredient Supply (1,000 MT) ........................... 156
Exhibit 137: China’s Pork Supply and Demand Projection (1,000 MT) ........................ 157
Exhibit 138: China’s Beef Supply and Demand Projection (1,000 MT) ........................ 158
Exhibit 139: China’s Lamb/Mutton Supply and Demand Projection (1,000 MT) ......... 159
Exhibit 140: China’s Poultry Meat Supply and Demand Projection (1,000 MT) .......... 160
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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

Executive Summary
Objective of the Study

China is by far the world’s largest producer and consumer of meats. Historically, this
situation did not have a large impact on the rest of the world, as China, for the most part,
maintained self-sufficiency in meats. However, since 2007 China has gradually turned
into a net importer of meats. If China develops into a large-scale importer of meats, this
would have a significant impact on the world meat sector; on the other hand, if rising
demand is met largely through domestic production, the need for imports of feed
ingredients would continue to be a major driver of the world oilseed market and could
become increasingly important for world grain trade. Accordingly, the objective of this
multiclient study is to evaluate carefully and thoroughly all aspects of the outlook for
China’s meat supply and demand and to determine the implications for the global
livestock/poultry and agriculture sectors.

Key Findings

Foundations for Rising Meat Demand: Economic Growth and Urbanization

 China has enjoyed spectacular economic growth, especially after the country gained
access to the World Trade Organization (WTO) in 2001. From 2003 to 2007, China’s
economy experienced double-digit growth five years in a row. China’s economic
growth lost some of its momentum in 2008 and early 2009 due to the global financial
crisis, but the government countered these economic forces by loosening bank credit,
cutting taxes and embarking on a massive 4-trillion yuan (nearly US$600 billion)
infrastructure spending program. China’s economy staged a generally robust
rebound, and the Chinese economy is now the world’s second largest, but economic
performance has been uneven. Still, Chinese economists generally believe that the
country’s economy can grow at 6 to 8 percent annually over the next decade.

 As personal income has increased, a middle class has gradually formed in China.
With a population of 1.3 billion, the middle-income population is around 100 million.
China’s Social Science Academy has estimated that the share of the total population
accounted for by the middle class will grow by about one percentage point every
year, reaching close to 20 percent in 2020.

 Since 1978, when market reforms were initiated, China has experienced a rapid
process of urbanization, as history’s largest flow of rural-urban migration has
occurred. At the end of 2011, the Chinese urban population reached 691 million
implying a 51.3 percent urbanization rate, a 33.4 percent increase compared with the
urbanization rate in 1978.

 The rising the middle class and increasing urbanization have been transforming food
consumption patterns in China. Demand for value-added food products such as meats
has been increasing, while per capita demand for food grains has been either flat or

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China’s Growing Appetite for Meat – A Multi-Client Analysis and Outlook

declining. These dietary trends are expected to continue over the next decade.

The Hog and Pork Sector

 China is the largest hog and pork producer in the world. Chinese pork output in 2011
was 50.5 million metric tons, accounting for close to 50 percent of world pork
production. The increase in China’s pork production over the past 10 years accounted
for about 60 percent of the world increase.

 Though the share of pork in the total meat complex has been declining over the past
ten years, pork still commands a majority share in total meat production, followed by
poultry and then beef. Pork’s share of total meat output declined from over 65.9
percent in 2000 to about 63.5 percent in 2011.

 Commercial production of hogs in China has been increasing, but household
operations still account for a majority of hog production in China. The share of
production accounted for by specialized household operations rapidly increased over
the past 25 years, from below 3 percent of total production in 1985 to over 50 percent
in 2010. As differentiated from backyard operations, specialized household
operations refer to households that rely on livestock and poultry as a major income
source along with other agricultural income. Additionally, commercial production
increased from 2.5 percent in 1985 to 29.7 percent in 2010. The shift from traditional
backyard to specialized household and commercial operations has increased the
demand for feed grain, protein meal and commercial compound feed.

 Backyard operations have the lowest production costs among the three major
categories of producers. The average production cost per head for commercial
producers was 42 percent higher than backyard producers and 20 percent higher than
specialized household operations in 2010.

 Warm fresh pork still accounts for more than 90 percent of pork consumption in
China. The majority of warm fresh pork is marketed through “wet markets,” with
some going into grocery stores and supermarkets. Pork packers have been promoting
chilled fresh pork consumption in China for several years, even creating their own
chain stores and franchised stores across the country. However, they have achieved
little success thus far in expanding its market share. Still, the industry believes that
consumers eventually will accept chilled fresh pork.

 Per capita consumption of pork in China has grown from 28.9 kilograms per person
in 1997 to 38.2 kilograms per person in 2011, up 32 percent. China’s per capita pork
consumption is 8.6 kilograms above the world average of 29.6 kilograms.

 Rising pork demand has turned China into a net importer of pork since 2008. In
2011, imports were estimated to be 758,000 metric tons. China exports higher-value
pork cuts and imports lower-value cuts. Though Chinese consumers prefer warm
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