New hunger for pork products as China hogs the market

Tue, May 15, 2012, 01:00

Irish pork exports are growing rapidly and, last year, were the country’s second most important export to China

RISING WEALTH IN China has translated into surging demand for meat, which has sparked efforts to modernise the country’s agribusiness sector and also translates into opportunities for Irish meat processors.

That the Chinese are obsessed with food is no surprise to anyone who has visited the country. This is a country emerging from years of poverty and, for most people, it is only a couple of decades since meat was something eaten only at Chinese new year or other special occasions.

A key ingredient in China’s obsession is the staple meat, pork.

The Great Helmsman himself, Mao Zedong, loved pork. “Chairman Mao’s Favourite Pork” is a Hunan dish of braised pork belly that delights both Chinese and foreign palates, while one of the most important works of art in Chinese history is a Qing Dynasty carving of a piece of pork, complete with lean and fatty layers.

It’s hard to overstate the importance of hogs in China. The cost of pork has such a powerful impact on inflation that a recent report by Rabobank was entitled Is the CPI the China Pork Index?

China does not release details of its consumer price index basket, but pork is certainly a major element.

April CPI data released last week showed inflation had slowed because of a slower increase in the price of pork – prices rose by 5.2 per cent in April from a year earlier, compared with 11.3 per cent annual growth seen in March.

Of all the pigs raised in the world, half are in China, and half the world’s pork – some 50 million tonnes – comes from the country. But they are raised in small farms; last year, less than a quarter of China’s pigs were raised in industrialised farms with more than 500 pigs.

“Anyone producing pork in the world today is looking at what is going to happen in China over the next couple of decades,” Joel Haggard, Asia Pacific senior vice-president of the US Meat Export Federation, told a meeting of the Foreign Correspondents Club of China, held in the Irish Embassy in Beijing.

China may be producer and consumer of more than half of the world’s pigs, but, incredibly, until 2008 its meat market was almost completely divorced from the rest of the world, said Haggard.

“What happened in China had no influence on the global market, and what happened in the global market had no influence in China, but all that changed,” he said.

Until 2007 prices for pork were very low. Then, for various reasons, including disease, China started to import, and prices spiked globally. Now the country has a huge impact on the global market.

China is 97 per cent self-sufficient in pork. “But if domestic production drops to 90 per cent, that amounts to the total current world trade right now,” he said. “If China comes in and just orders a hundred thousand tonnes of extra pork, it has tremendous influence on the market.”

Pork imports from the United States climbed more than three-fold in 2011.

The price of pork has fallen dramatically in recent months, to below the price of production. However, because of an outbreak of porcine epidemic diarrhoea among piglets, there are expected to be fewer animals for slaughter later this year. Tighter supply during the winter and high grain prices could lead to a potentially destabilising increase in prices, so the government starts to import more pork.

Michael Boddington, managing director of Asian Agribusiness Consulting, said local farms were becoming more efficient, but still suffer from being so diffuse.

“Chinese farms are forecast to produce more pork from fewer pigs – ie, carcass weight will increase. When disease comes in, farmers don’t have the resources to handle it,” he said.

In the 1980s and 1990s, there was a lot of investment in the US industry, which was reaping benefits today, and that is happening in China too.

There are also efforts to control smuggling and counterfeiting, especially as food safety has become an emotive national issue following a wave of scandals over the past few years.

Irish pork exports are growing rapidly and, last year, were the country’s second most important export to China. During last month’s Bord Bia trade mission to China, the boss of meat company Rosderra, Jim Hanley, spoke of how he expected trade with China to expand in coming months.

Rosderra has been selling pig-meat into China since exports resumed in 2007, and it has links to the giant Yurun Group, based in Nanjing.

Irish producers are also keen to see how the beef industry develops. The Chinese market has been closed to Irish, and EU, beef since the BSE scare of the mid-1990s and it remains a highly sensitive topic.

There are definitely opportunities for beef, although the market is smaller as beef is not widely eaten in China, except in some regions and in Tibet. As with everything else in China, even a small market is enormous by most countries’ standards.

“The potential for beef is big, but we don’t know how big as we don’t know how much the Chinese will consume. Only a small percentage of the population eat beef,” said Haggard. Most beef imports would focus on the food services sector, such as specific cuts for a restaurant chain.

Pork still has the edge on the Chinese dinner table.