Chinese Meat Market: Trends and Prospects for Russian Manufacturers

In 2022, the Chinese meat market was under the pressure of such negative factors, as higher feed prices and COVID-19 outbreak which hampered the work of companies, as well as reduced demand for meat products by the catering and tourism sectors.

Pork Production and Import Pork remains the most preferred type of animal protein in China due to the cultural and culinary traditions, which is why today this country is the world-leading producer and importer of pork.

In 2022, the total investments in the Chinese pork industry amounted to 14.2 billions yuan, which was by 80% less than in the previous year.

The import of breeding swine was significantly reduced due to lack of funds. This problem also slowed down the meat production increase. At the same time, the slaughter capacities of pork producers increased, and some companies switched to deep processing of pork.

The total pork consumption of pork in China decreased in 2022, dropping even lower than the expected indicators. One of the main reasons for that was the COVID-19 outbreak and the restrictions caused by the epidemic.

From January to November, the slaughter volume reached about 254.4 million heads which is by 7.8% more compared to the previous year. At the same time, the trade volume of pig carcasses in the wholesale segment decreased to 640.1 thousand tonnes which is by 31.3% less than in 2021.

As for pork prices, their dynamics showed mixed performance in 2022. For instance, during the first half of the year, the prices declined on a yearly basis, but from July they began to rise, and by October they increased by 45.7% in annual terms. By the end of the year, in November and December, the pork prices started to drop compared to the previous month, the annual growth rate fell, and the annual average maintained a downward trend.

In the second half of 2022, during the price surge period, the retail pork prices jumped to 40 yuan/kg, leading to the reduced pork consumption. The prices of live hogs were also subject to strong fluctuations. For example, in March, the prices fell below 11.5 yuan/kg, while the highest prices were seen in October – more than 28 yuan/kg.

In order to stabilize the supply, the Chinese government repeatedly released frozen pork in the market from the national reserve. 16 times in the first half of the year, with the total volume of 518 thousand tonnes, and 7 times in the second half of the year, which totaled to 137.1 thousand tonnes.

Speaking of foreign supply, 2022 saw a decrease in the volumes of imported pork and pork by-products, while the import of processed pork, on the contrary, increased.

According to the Chinese Ministry of Agriculture, the import volume of pork and pork by-products
is estimated at 2.8 mln tonnes in 2022, which is by 43% less than in the previous year. In 11 months, 1.5 mln tonnes of pork (-56% on annual basis) and 1 mln tonnes of pork by-products (-16%) were imported to China. In value terms, the volume of import to China is estimated at 22.3 bln yuan, which is by 65% less on an annual basis. The main suppliers are Spain, Brazil, Denmark, USA, the Netherlands, Canada, Chile, the United Kingdom, France and Ireland, which together account for 97% of pork import to China.

Notably, the import of processed pork (final products) increased in 2022: 2.5 thousand tonnes were imported from January to November, which is a 30% increase. These products were mainly supplied by Spain and Denmark (+48% and +54% respectively).

The market participants believe that the Chinese pork sector will continue to recover in 2023. Next year, the total pork production volume is expected to rise on an annual basis, the import of pork and pork by-products is expected to decrease to 2.3 mln tonnes, while the total supply of pork is expected to grow by 1% on an annual basis. It is assumed that the supply will slightly exceed the demand, and the risk of short term losses in the Chinese pork sector will remain.

Poultry Market

During the last few years, the poultry consumption in China is constantly increasing. The outbreaks of African swine fever (ASF) contributed to this, because they seriously impacted the pork segment, the change in consumer preferences and the increase in the industrial poultry production in China.

In 2022, the broiler production in China slightly decreased (-3.6%) compared to the previous year due to the high feed prices. The large poultry plants increased their production, while the small and medium-sized poultry plants decreased it.

For example, the sales volume of the ten largest poultry processing companies of China rose by 6%, up to 4 bln birds, which is 46% of the total poultry production volume in the country.

In 2022, due to the СOVID-19 outbreak, the poultry consumption in the catering, tourism and institutions sectors was slightly less than expected by the market. At the same time, the poultry consumption by the households significantly increased. Due to the consumption growth, in 2023, the poultry production volume in China is expected to continue increasing.

With the overall production decline, the poultry plants increased their prices which resulted in rising prices of poultry products and reaching a new high since 2020.

The average annual poultry prices rose by 6% due to the periodic shortages in supply and high cost of production. In 2022, the average price of broiler chickens decreased by 17% on an annual basis. The epidemic outbreaks and the high feed prices had a negative effect on the substitution of day-old chicks, and their prices fell by 21%.

The average price of live broilers was 8.9 yuan/kg, which is by 8.7% more than in the previous year. Their prices fluctuated from 7 to 10 yuan/kg due to the low productivity of the slaughterhouses caused by the wide spreading of СOVID-19.

According to the Chinese Ministry of Agriculture, the import volume of poultry in China in 2022 reached about 1.28 mln tonnes. In 11 months, China imported 1.19 mln tonnes of poultry, which is by 11% less than in the previous year. It is important to note that at the same time, the poultry export volume rose, reaching 490 thousand tonnes (+20%).

In the first eleven months of the year, the poultry import volume from Brazil reached 513.3 thousand tonnes, which is by 13.8% less compared to the previous year (43.1% of the total volume). The poultry supplies from USA dropped to 315.7 thousand tonnes, which is by 22% less than in the previous year (their share is 26.5%).

China mainly imports chicken legs (the overall supply of these products during the specified period of time amounted to 51.2%), as well as chicken wings (25%) and chicken drumsticks on bone (18.1%).

Russian Export Outlook

According to “IMIT” estimates, from January to November 2022, Russia’s share in poultry imports to China was almost 10%. Russian producers supplied 116 thousand tonnes of poultry to China. The annual supply volume rose by 10%. As usual, the main product in the export structure were chicken by-products (78 thousand tonnes), including chicken legs (50 thousand tonnes) and chicken wings (35 thousand tonnes).

In 2022, the Russian turkey meat export to China increased by 60%. This type of meat, however, is still supplied in small volumes: in eleven months Russia supplied 7.4 thousand tonnes, including 51% of turkey drumsticks and 36% or turkey wings.

Although the supply of poultry to the Chinese market became a major area of export for Russian producers, it is the opposite situation with pork, because this market is still closed for Russian pork producers.

Despite the decreasing meat import volumes in China due to the recovering local pork production and the sufficient poultry production volume in the country, the Chinese market remains extremely promising for Russia. Currently, China’s share of the total poultry export volume from Russia is about 40%. Russia is one of the top three suppliers of poultry to the world’s largest consumer market, and it can’t lose its positions.

Strong commercial ties with Chinese consumers of poultry allow Russia to diversify supplies and to increase the turkey meat export volumes. Moreover, Russia is currently working on the admission of Russian pork into the Chinese market. And because of the already developed logistics between the two countries, the supply of Russian pork to China will be much faster and cheaper.

Author: Lubov Savkina, CEO of the information and analytical agency “IMIT”.