Beef Exports to China are Booming… But For How Long?


China’s population is on track to reach 1.4 billion. It’s quickly becoming the world’s largest food and drink market.

Feeding that amount of people can be a challenge.

China is the 4th largest beef producer in the world, behind only the US, Brazil and the EU. It produces almost 12% of the world’s beef.

Chinese are not large beef consumers, especially when you compare them to Australia. But their consumption becomes important when you look at China’s population size.

And it’s rising.

A growing, wealthier urban middle class and young people willing to try new foods are increasing the demand for beef.

Even though the Chinese economy has slowed down, beef imports have not. It’s expected that China will become a major beef importer in the future.

Brazil and Australia are the current giants of beef exports to China.

In 2012, Brazil’s beef imports to China were banned after mad cow disease was detected. Australia’s exports increased from almost nothing to AU$900 million in 2015.

Last August, China lifted the ban. Since then, Brazil has become the largest beef exporter to China, pushing Australia to second place.

How have Brazilian imports increased in such a short time?

Let’s face it, China is a price oriented market. Brazil has flooded the Chinese market with cheap frozen beef.

And this has lowered beef prices.

Since Brazil started exporting to China, the price of beef per kilo paid for Australian beef went from US$5.28 in June 2015 to US$4.64 in December 2015.

This is in tune with China’s strategy. The country wants to diversify their sources of beef imports to lower meat prices.

Brazil’s currency, the real has been depreciating. This makes their beef exports more affordable in comparison to other exporters.

And they have cheaper production costs than Australia.

Brazil is also in economic crisis. That’s seen the domestic demand for beef decrease.

Brazilians now prefer cheaper types of meat such as chicken and pork. This means that Brazil has a larger amount of beef ready for export.

And Brazil is looking to increase beef exports to China. The Chinese government has predicted that Brazil’s imports will keep growing. And Australia’s will shrink.

But this has its challenges.

Brazil’s beef productivity is low. This is because their carcass weight and the beef percentage from each carcass is smaller than Australia’s.

They also have logistics problems. It currently takes forty days for shipments to reach China from Brazil.

China is too far to be able to export live cattle and Brazil’s beef industry is not as sophisticated as Australia’s.

Australia also has some other advantages over Brazil.

They have more technology and a higher carcass weight. And Australia has just signed a Free Trade Agreement with China. This will decrease entry barriers.

But Australia will be decreasing its beef exports in the next few years. According to MLA, in 2016 Australian exports will fall by 13%.

Since 2013, Australia has been producing beef at high levels. This has eaten away the national herd, if you’ll excuse the pun. And it will have an impact on the amount Australia will be able to export in the mid-term future.

There is also the threat of US competition. After a 12 year ban, China is considering opening their doors to the USA.

Can Australia compete against Brazil?

Brazil has a cheaper product. But China sees Australia’s beef as more natural and with higher quality.

Australia currently exports chilled and frozen beef to China. Brazil only exports frozen beef. Australia should take advantage of this exclusive access and specialise in high priced chilled beef.

The challenge is finding that demographic willing to pay more for quality and freshness.

Selva Freigedo


PS: Uncertainty over China’s economy is at the forefront of what’s playing out across global markets today. As house prices decline, so too will China’s purchasing power. That could hasten a crisis that spreads around the world.

According to The Daily Reckoning’s Vern Gowdie, we’re already standing on the edge of this next financial crisis.

Vern is the award-winning Founder of the Gowdie Letter and Gowdie Family Wealthadvisory services. As one of Australia’s Top 50 financial planners, Vern believes there’s nothing we can do to stop what’s coming.

It won’t be only stock markets that crash when the crisis hits. There’s another multibillion dollar market that’s poised to collapse when the credit bubble pops. Australia’s gone through two such credit bubbles in its history. The third, and latest, has been building for the last 65 years. When it pops, it won’t be pretty.

The fallout of this impending crash could do serious harm to your wealth. Yet, with some preparation, you can safeguard your wealth from the worst effects of the crisis. Vern will show you how to do this, and more, in his brand new report, ‘Global Financial Crisis 2016: 3 Crisis Scenarios, and How They’ll Impact Australia’. To get your free copy today,click here.

Selva Freigedo

Selva Freigedo

Selva Freigedo

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