Where's the beef?

Lazily chewing inside cattle pens  the impressive beasts of the Fuhua Meat Product Company in Dachang are unaware of their fate. Over 200 cattle housed at any one time in Fuhua’s sheds in this bucolic Hebei township are fattened over several months and then steered next door into the company’s slaughter house.

Demand for beef is strong from Beijing’s premium hotels and restaurants, said manager Feng Shangwu. Rising incomes and the local appeal of fast food are the key drivers – Feng is currently chasing a deal with McDonald’s, having already secured one to supply animal fat to KFC.

Soon, though, China won’t have enough cattle to supply busy slaughterhouses like Fuhua. The country consumed over seven million tons of beef last year but cattle are not being replaced, said Dr Claus Deblitz, director of the Asian Agribusiness Research Centre, which compiles beef statistics for the continent.

He predicts that, from 2008, China won’t have enough cattle to meet national demand for beef.

“The gap [between beef consumption and cattle numbers] is getting wider and by 2008 China will need to import 50,000 metric tons of beef per annum… Slaughter houses are already complaining of a looming shortfall.”

Feed lots like Fuhua’s have swollen China’s beef herd from 60 million in 1980 to nearly 160 million today, the third largest in the world after India and Brazil. On the other hand, a local policy of killing bull calves at birth for serum production has squeezed herd numbers. Farmers get only US$33 for a bull calf killed for serum production, compared to around US$530 for a 500-kilo animal.

Deblitz denounces the practice as wasteful and believes the bull calves of China’s 24 million dairy cows should instead be fattened for beef production.

“Given that about 50% of calves are male it makes sense that dairy calves can make up for beef cattle deficit,” he said. In Japan, so-called dairy beef – calves born to dairy cows – accounts for two thirds of Japan’s beef needs.

Efficiency issues

There are other obstacles to China’s ambitions for beef self-sufficiency, notably the inefficiencies in the local farming sector. Whereas larger feedlots like Fuhua are well run, most of the country’s cattle are produced in the backyards of village homes. They are often poorly fed – the diet is a mixture of millet stalks, peels and, if they’re lucky, grass.

“Feed in China is often of low nutritional value,” said Dr Jochen Koeckler, director of international affairs at the German Farmer’s Association (DLG), which organizes the annual AgricChina farm machinery and animal husbandry fair in Beijing.

He believes that quality feed will have to be imported to supplement produce from the country’s limited and inefficiently farmed arable land.

“Only 23% of China’s harvest is mechanized,” said Koeckler.

The future for the beef sector looks bright. Beef so far accounts for barely 10% of meat consumption – pork makes up 60% –  yet all the trends suggest that figure will rise as China broadens its palate. A feared outbreak of avian influenza could also drive people away from chicken.  
The news is also good for beef importers. China’s accession to the WTO forced it to cut tariffs on beef imports from 45% in 2001 to 12% in 2004.

Australia in particular has profited from the opening market – and from a Chinese ban on US beef because of an earlier outbreak of mad cow disease on American farms. In the first five months of 2007, Australia shipped 934 metric tons to China, compared to 352 metric tons during the same period last year, according to Meat & Livestock Australia Limited, a producer-owned firm that promotes meat exports.

Australia already led the way in China’s import market with a 23% share in 2006 to second-placed India’s 17%. Given that Australia exported 3,414 metric tons of beef to Taiwan last year, which has a smaller though wealthier population than China, Tim Kelf, MLA’s China director, expects further growth.

“Greater China accounted for only 5% of total Australian beef exports in 2006. Japan accounts for 43.5% … We see a lot more growth in China’s beef imports.”