The Chinese beef market is facing a difficult challenge: while the Communist government encourages herdsmen to increase domestic production and opens the doors to more beef imports, the slowing Chinese economy has led to people tightening their wallets. As a result, meat is piling up in freezers, driving prices down to the lowest point in five years.
According to a Bloomberg report on July 3rd, wholesale beef prices have dropped by 18% from last year’s peak, to 62 Chinese yuan (8.53 US dollars) per kilogram. With the Chinese Ministry of Agriculture urging local authorities to provide subsidies and feed to farmers, most cattle farms are now operating at a loss, potentially becoming a burden on public finances.
Food safety is a hot topic for the Communist government, which has been striving to promote self-sufficiency in major markets including beef. The current economic challenges faced by China, such as tightening monetary pressure, have forced Beijing to support various industries from livestock to grains, but with little success. The current challenge is to ensure that farmers have the ability to pay, stabilize production, and navigate through the loss-making period, which has become more difficult for the beef industry with a surge in overseas meat imports.
In the domestic market, there is a supply-demand imbalance in the beef industry. Beef production has been increasing for ten consecutive years, while imported beef has seen 11 years of growth.
In the first five months of this year, China’s beef imports increased by 23%, as the Chinese Communist Party, in an attempt to balance geopolitics and counter the United States, aggressively opened up more beef markets to other countries like Brazil and Spain, with Australia recently added to the beef import list. This move by the Chinese government is referred to as “food diplomacy.”
By late June, in a supermarket along Beijing’s East Third Ring Road, a reporter from mainland China’s “Caijing” magazine found beef prices to be around over 30 yuan for every 500 grams, with beef hind leg priced at 29.7 yuan per 500 grams, and beef brisket at 27.9 yuan per 500 grams, showing an overall decrease in prices. On the supermarket’s e-commerce platform, the prices of frozen beef have been continuously decreasing, with some frozen beef brisket prices falling below 50 yuan per kilogram.
A vendor mentioned to “Caijing” that the continued decrease in beef prices is mainly due to the supply-demand imbalance. “Similar to the reasons for the continuous decline in pork prices last year, there is an oversupply of beef in the market, hence prices cannot rise.”
According to data from the U.S. Department of Agriculture, China produced about 7.5 million tons of beef last year. The demand is slightly higher at around 11 million tons, with the difference being made up by imports.
The U.S. Department of Agriculture currently predicts a 2.3% increase in production this year, while demand is only expected to rise by 0.4%, considering the deteriorating state of the industry, the supply-demand gap may widen further.
If price drops force farmers to reduce losses and slaughter more livestock, there may be more beef supply. Yang Chun, the chief analyst of the beef and mutton market analysis and early warning team of the Department of Agriculture and Rural Affairs, also pointed out that the slaughter in the dairy industry, which is similarly underperforming, has exacerbated the oversupply.
Due to the real estate crisis, the Chinese Communist Party’s crackdown on sectors like technology and education, as well as the tightening scrutiny on foreign enterprises leading to capital outflow, private enterprises being hit, the lackluster recovery of the Chinese economy, many households in China are forced to cut back on spending, causing a slowdown in demand. Yang Chun stated that some sellers of fresh beef to supermarkets and local markets reported a significant decline in orders since August last year.
Insiders unwilling to disclose their names when discussing market conditions mentioned that frozen meat storage remains high.
The beef industry is seeking to attract new customers, but amidst the ongoing real estate crisis in China, nearly every sector in the economic circle is feeling the impact of frugality.
“The money in the average person’s pocket is not as much as it used to be,” Yang Chun said. She emphasized that the demand for affordable protein means “giving up on beef and other premium products.”