Beef Quarterly Q1 2019: China’s Trade Sending Waves Through South-East Asia

Stricter border policing in China as a consequence of African swine fever is restricting the unofficial meat trade, with flow-on effects in other countries, according to the latest RaboResearch Beef Quarterly report.

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Following the outbreak of African swine fever (ASF) in August 2018, the Chinese government strengthened border controls. Rabobank believes the increased enforcement measures have led to the sharp decline in the volume of trade through unofficial channels in Q4 2018. The increased Chinese border enforcement has slowed unofficial bovine trade from Hong Kong and Vietnam. Subsequently we have seen Vietnamese imports of Indian carabeef in Q4 2018 down 60% YOY at 120,370 tonnes and in turn Indian buffalo prices have dropped. But this could easily be reversed.

This is our feature article this quarter, but there are many other important developments… 

African swine fever

ASF is now widespread across China. “Despite pork consumption dropping, we estimate that production drops will be deeper, leaving a supply gap of some 1m to 2m tonnes for 2019,” according to Angus Gidley-Baird, Senior Analyst – Animal Protein. “This will be partially filled by other meats, including poultry, beef, sheepmeat, and seafood. Due to the size of the pork market in China, additional imports and meat substitution cannot make up for the decline in pork production, and we expect all meat prices to rise in Q2 of 2019.”

USDA decision on Lean Fine Textured Beef

In December, the USDA reclassified Beef Products Incorporated Lean Fine Textured Beef to now meet the definition of ground beef. This means LFTB can be incorporated into lean beef without separately disclosing it. This reclassification provides opportunities for better use of fattier grades of trim and will influence the demand for leaner trim.

Brexit

Brexit presents a potentially significant disruption in Europe, as the UK is a big importer of beef from the EU-27. Rabobank’s view is that UK beef imports will change little, if at all, during 2019. However, a hard Brexit will bring changes over time as beef exporters compete to access the relatively high-value UK market, with intra-EU trade flows potentially disrupted as a result.

Floods in Australia

Approximately 13m ha of northern Australia cattle country were impacted by floods in early February. Large numbers of stock have been killed and while it will be some time before the actual numbers of stock affected can be determined, it is estimated that the area that received heavy rains contained about 1m head of cattle.

Rabobank Seven-Nation Cattle Price Index

The index strengthened in late 2018, fuelled by rising cattle prices in the US, Brazil, and to a lesser extent Argentina and Australia.