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China's Beef Imports Surge Amid Plummeting Domestic Prices

Key Developments

In 2024, China's beef prices have been declining steadily, with wholesale beef prices dropping to 60.03 RMB/kg by the 50th week of the year, marking a 12-month consecutive decline. This represents a 16.2% year-on-year decrease, and live cattle prices have fallen to a five-year low, down by 24% in just six months.

On December 27, China's Ministry of Commerce announced a safeguard investigation into imported beef following a petition by the China Animal Husbandry Association and other regional organizations. The petition highlighted that beef imports surged by 65% between 2019 and 2023, with the first half of 2024 alone doubling 2019's figures. In 2023, China imported 274 million tons of beef, equivalent to 36.4% of domestic production.

Challenges for Domestic Beef Industry

1. Severe Losses for Farmers:

  • Over 65% of cattle farms are operating at a loss, with an average deficit of 1,600 RMB per head of beef cattle in November 2024.
  • The sharp price drop has left many farmers unable to repay loans, forcing them to exit the industry.

2. Mass Slaughter of Breeding Cows:

  • Due to financial pressures, many farmers are selling breeding cows for slaughter.
  • The base herd of breeding cows has declined by over 3% since mid-2023, with newborn calves down by 8% year-on-year. This trend could take 4-5 years to reverse, endangering the long-term stability of China's beef industry.

3. Price Imbalance:

  • Retail beef prices in supermarkets and restaurants have not decreased significantly, dampening consumer demand and confidence.
  • Meanwhile, beef prices at wholesale and market levels have dropped dramatically, with some cuts selling for as low as 28 RMB/kg, a five-year low.

Causes of the Crisis

1. Import Surge:

  • China's beef imports reached 260 million tons between January and November 2024, a 4.3% year-on-year increase. Imported beef is priced significantly lower than domestically produced beef, putting pressure on local producers.
  • Illegal imports through gray channels and border smuggling further exacerbate the situation.

2. Weak Market Linkages:

  • The domestic beef supply chain lacks maturity, with disconnected interests among producers, processors, and retailers. This fragmentation amplifies the financial burden on farmers during price declines.

3. Concentrated Slaughtering:

  • Panic selling among farmers has resulted in a surge in the slaughter of breeding cows, increasing market supply and further depressing prices.

Government Response and Industry Outlook

The Ministry of Commerce's investigation aims to evaluate whether the surge in imports has caused substantial harm to the domestic beef industry. Measures could include restrictions to stabilize the market and protect local farmers.

The China Animal Husbandry Association has emphasized the urgency of safeguarding the domestic industry to prevent long-term damage to the country's beef production capacity. Effective measures are crucial to stabilizing expectations and ensuring the sustainability of China's beef sector.

January 21, 2025

Key Developments

In 2024, China's beef prices have been declining steadily, with wholesale beef prices dropping to 60.03 RMB/kg by the 50th week of the year, marking a 12-month consecutive decline. This represents a 16.2% year-on-year decrease, and live cattle prices have fallen to a five-year low, down by 24% in just six months.

On December 27, China's Ministry of Commerce announced a safeguard investigation into imported beef following a petition by the China Animal Husbandry Association and other regional organizations. The petition highlighted that beef imports surged by 65% between 2019 and 2023, with the first half of 2024 alone doubling 2019's figures. In 2023, China imported 274 million tons of beef, equivalent to 36.4% of domestic production.

Challenges for Domestic Beef Industry

1. Severe Losses for Farmers:

  • Over 65% of cattle farms are operating at a loss, with an average deficit of 1,600 RMB per head of beef cattle in November 2024.
  • The sharp price drop has left many farmers unable to repay loans, forcing them to exit the industry.

2. Mass Slaughter of Breeding Cows:

  • Due to financial pressures, many farmers are selling breeding cows for slaughter.
  • The base herd of breeding cows has declined by over 3% since mid-2023, with newborn calves down by 8% year-on-year. This trend could take 4-5 years to reverse, endangering the long-term stability of China's beef industry.

3. Price Imbalance:

  • Retail beef prices in supermarkets and restaurants have not decreased significantly, dampening consumer demand and confidence.
  • Meanwhile, beef prices at wholesale and market levels have dropped dramatically, with some cuts selling for as low as 28 RMB/kg, a five-year low.

Causes of the Crisis

1. Import Surge:

  • China's beef imports reached 260 million tons between January and November 2024, a 4.3% year-on-year increase. Imported beef is priced significantly lower than domestically produced beef, putting pressure on local producers.
  • Illegal imports through gray channels and border smuggling further exacerbate the situation.

2. Weak Market Linkages:

  • The domestic beef supply chain lacks maturity, with disconnected interests among producers, processors, and retailers. This fragmentation amplifies the financial burden on farmers during price declines.

3. Concentrated Slaughtering:

  • Panic selling among farmers has resulted in a surge in the slaughter of breeding cows, increasing market supply and further depressing prices.

Government Response and Industry Outlook

The Ministry of Commerce's investigation aims to evaluate whether the surge in imports has caused substantial harm to the domestic beef industry. Measures could include restrictions to stabilize the market and protect local farmers.

The China Animal Husbandry Association has emphasized the urgency of safeguarding the domestic industry to prevent long-term damage to the country's beef production capacity. Effective measures are crucial to stabilizing expectations and ensuring the sustainability of China's beef sector.

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