Global beef trade is on the rise with an increased demand for beef imports in China. In the first three quarters of 2022, China imported 1.69 million tons of beef from all over the world, an increase of 200,000 tons from the same period in 2021. As of right now, the price of beef in the Chinese market stands at 65.80 Chinese Yuan per kilogram (equivalent to around 9.50 USD per kilogram), which adds up to only a one percent rise within the last year.
Meanwhile, across the equator in New Zealand, the export of protein has boomed. For example, in the single month of August 2022, New Zealand ports shipped 885 million USD worth of red meat, mostly to their three key markets of China, the United States, and Japan; a 34% increase since 2021. According to the Meat Industry Association, the import of beef to China from New Zealand has increased 49%. This means that monthly, China imports nearly 24,000 tons of beef from New Zealand, a record high that has not been seen since June 2019.
Though New Zealand’s market share still occupies a relatively small portion of the dramatic increase of beef imported to the Chinese market, this expanding trend is noticeable especially when considering larger trade trends between the two nations. Notably, China has become New Zealand’s largest trading partner in goods. According to the New Zealand Ministry of Foreign Affairs and Trade, two-way trade has increased from 10 billion to 30 billion New Zealand dollars since 2007. The following article will have a deep dive into the factors leading to the current situation.
How macro-environmental factors are affecting global beef trade
The global macro-environment has facilitated this trend in two key ways:
Firstly, in April 2022, the two countries have upgraded the protocol of the China-New Zealand Free Trade Agreement (FTA), which was originally signed in 2008 and opened the door to the trading relationship. The recent upgrade is a major move to improve bilateral economic and trade cooperation while also bringing positive momentum into regional and global trade cooperation.
Secondly, the Regional Comprehensive Economic Partnership Agreement (RCEP) has officially entered into force on January 1st, 2022 for 16 participating countries, including China and New Zealand, with the aim to eliminate tariffs in the future for foreign trade. For countries like New Zealand, which is rich in agricultural and protein resources, participating in the RCEP Agreement allows for a great benefit, with tariff reductions on such exports. Taking beef as an example, Chinese importers can enjoy an annual tariff reduction of 1.2%-1.3% for New Zealand beef, ultimately achieve zero tariffs after 20 years.
New Zealand Trade Minister, Damien O'Connor, recently said that with RCEP, coupled with the effect of the upgraded FTA protocol, most of New Zealand's dairy and protein products will enter the Chinese market with zero tariffs. Additionally, based on current export volumes, New Zealand exporters can anticipate around 180 million New Zealand dollars (equivalent to 120 million USD) in tariff benefits.
Increased demand due to lifestyle changes in China
The general lifestyle improvements in China are another factor for this boom in imported beef. With these changes come increased demand for beef, and China has transformed into the biggest battlefield for countries reliant on beef exports on the global trade market. While historically, China has been the largest pork consumer in the world, beef is now taking its fair share. Statistics show that while pork occupied 95.92% of all meat consumption in China in 2014, as of 2020 it dropped 22.53% to a 73.39% market share. At the same time, beef has climbed to occupy 9.27% of the market share and is still growing quickly. Significantly, in 2019, China surpassed the United States to become the biggest beef importer in the world.
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Quality is in demand for beef imports
Almost all of New Zealand's beef cattle are raised by natural grazing, natural foraging, and free growth; leading to cows that are high in muscle, low in fat, and more robust in flavour. These characteristics lead to a national beef industry that is renowned for its natural label and its prioritisation of organic products and grass-fed cattle. Additionally, this kind of beef is more popular among Chinese people compared to the higher fat beef from grain-fed cattle countries, such as Australia and Brazil.
Proximity is key for trade partnerships
Lastly, transit time and cost of freight to Europe from New Zealand has encouraged New Zealand exporters to develop new markets and move away from traditional European destinations in the global beef trade. By exporting a little closer to home, New Zealand has found new opportunities in China, allowing for shorter transit time and ease of refrigerated cargo solutions.
What’s next: global beef trade in 2023
Looking forward to 2023, global beef production is expected to decline slightly due to the economic downturn with China also seeing less import demand than 2022. Some importers may sell their beef stock below the purchase price at the end of 2022 to avoid rising inventory and cold storage costs.
Thus, after analysing these factors, though we can conclude that 2022 was an exceptional year for the global beef trade and import of beef in China, the US Department of Agriculture predicts that China's beef imports will decline in 2023. However, the China Animal and Agriculture Association reports longer-term projections that estimate the imported volume of beef to China will rise to 14 million tons by 2035, providing plenty of room for growth for countries keen to claim their piece of beef export.
Therefore, even with a short-term decrease in demand for beef import into China, the long-term estimates show that 2022 growth is not a fluke, but a newfound interest in the protein, at a very large scale. This means that logistics providers that can ensure an unbroken cold chain from farm to store refrigerator will be able to capitalise on this opportunity for massive growth potential in the years ahead.
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