China has emerged as a key trading partner for Australia’s red meat industry in the past two decades, taking an increasing market share of beef, sheep and lamb exports.
In 2019, when Australia’s supply was ramped up from drought conditions across the country and the Chinese pig population was hit with Swine Flu, a record amount of our red meat was sent their way.
Covid-19 and some frosty diplomatic relations, including the banning of several Australian processors and increased tariffs meant beef exports to China decreased in the following years, but remained historically strong, and were back to their second highest on record last year. And it isn’t just the Australian market China has been bolstering, with other exporters such as Brazil and New Zealand also sending large volumes of red meat their way.
Now, however, the Chinese red meat market capacity is in question, as the country faces an economic downturn.
Fueling these questions was an announcement last week by China’s central bank of a stimulus package, the largest the country has seen since the Covid-19 pandemic, aiming to stop deflation and promote growth.
A recent report by Rabobank said that slowing economic growth and declining population were changing the consumer trends in China, and while beef consumption was still growing, the amount they were willing to pay for it was headed in the other direction.
This would particularly impact Australia, which sells mainly into the middle to high end beef market.
Australian beef exports to China have been lagging behind their five-year-average levels every month since March, and are 9% lower year-on-year for the year-to-August.
A reminder, however, that the volume of Australian beef sent to China last year was the second-highest on record.
China made up 19% of Australia’s beef export trade in 2023, and this year so far that market share sits just above 14%.
While some of the strongest trade months for the Chinese beef market are still to come in 2024, Australia is expected to hit their beef quota in China shortly, which will mean all exports there for the rest of the year will attract a 12% tariff.
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While this would have occurred at a similar time in the past, economic uncertainty may see this play a bigger role than usual.
The size of China’s pig herd and their pork consumption also gives insight into the country's demand for red meat, as it is the world’s largest producer, consumer and importer of pork.
Recent US Department of Agriculture figures show China’s pig herd will decrease by nearly 7% in 2024, on the back of increased slaughter. However, with much of this slaughter coming from producers trying to offset lower prices, pork production will still decline this year.
Not as much as consumption, however, which is set to be more than 2.5% lower, as the economic woes have consumers looking for cheaper food options than meat. This means Chinese pork imports will decrease, with Brazil already having sent 40% less port to China in the first half of this year compared to the same period in 2023. This will in turn flow through to other proteins.
In positive news for the trade, China has removed the ban on eight Australian meat export processors in recent months.
The latest Steiner Global Consulting global beef market review, released at the start of September, reported that while Chinese beef imports for the year-to-July were up 8.5% year-on-year, for the month of July they had decreased 27% compared to the same month the year prior.
They put this down to a growing domestic herd - albeit more dairy than beef - as well as 2023 being a very high level.
They still forecast year-on-year Chinese beef imports to increase.
Time will tell how the trade will hold up as China works on turning its economy around, but demand from the US is filling the void in the meantime.
