Rising beef demand in China

In recent years, the People's Republic of China has become the world's largest beef importer. Domestic production cannot satisfy the growing demand. In 2021, China's increased imports combined with a limited global beef supply contributed to a significant price increase worldwide. Cattle farmers in the European Union also profited from record prices.

In its latest forecast, the U.S. Department of Agriculture (USDA) expects Chinese imports to increase by a further 300,000 t, to a new record level of 3.25 million metric tons, following a 6% growth last year. Despite an expected production increase of around 90,000 t to 6.92 million t of beef, it will significantly fall short of the estimated increase in demand of 390,000 t to 10.15 million t.  However, a long-term market forecast is near impossible due to the uncertain development of the ongoing Corona pandemic and its global implications. The current zero-covid strategy of the government in Beijing has led to strict lockdown measures and the sealing-off of entire cities with millions of inhabitants, including essential ports.

Besides safety measures, politics are also heavily influencing food imports. For instance, Australia's criticism of the Chinese government has led to prohibitive import tariffs on Australian wine and barley. In addition, many beef suppliers "Down Under" have been denied market access because of alleged hygiene violations. China's leading beef supplier, Brazil, was also affected in 2021 after exports came to a halt following two cases of atypical bovine spongiform encephalopathy (BSE). Exports and prices collapsed until Brazil was re-admitted in mid-December.

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Another potential candidate for large-scale beef exports could be the United States. Last year, import rates had surged due to their trade agreement. However, the recent reduction in cattle herds and high slaughter rates could pose a problem. According to the USDA, domestic beef production is expected to fall by about 350,000 t, or nearly 3%, to 12.38 million t compared to 2021.  In recent years, the importance of the European Union as part of the world's leading beef producers has subsided. In 2022, China could replace the EU and become the world's third important producer. Though the annual data on cattle population is not yet available, estimates suggest that fewer animals were kept in the EU once again. The USDA and the Brussels Commission expect EU beef production to fall by up to 1% in 2022, to about 6.8 million tons.

Slight losses in consumption rates are expected because of price increases. Still, they are assumed to be limited due to a possible lift of Corona restrictions for out-of-home catering. With exports virtually unchanged at 690,000 tons, USDA expects beef imports for the EU to pick up after the dip in 2021. Its fall forecast also assumes a more significant increase in imports.

In principle, the beef market will have a limited supply in 2022, not only in the EU but also worldwide, so prices should continue to be at an above-average level. However, this is also necessary for producers due to higher production costs.