Consolidation and modernization continue to shape China’s livestock outlook, according to USDA Foreign Agricultural Service staff in a report Wednesday.
Because of the modernization and consolidation, China’s beef production was expected to rise by 1% in 2018 to 7.4 million tonnes. However, the staff said China’s appetite for beef could grow by 3% to 8.4 million tonnes, outpacing supply and leading to higher imports.
China approved beef imports from several major suppliers over the last several months, most notably the US in June last year. China’s imports of US beef have seen slow growth with 2017 imports valued at $31 million.
(However, beef was included in a list of possible tariffs if the US government approves President Donald Trump’s proposed tariffs on steel and aluminum imports.)
In 2018, the number of swine on large-scale farms in China surpassed that of small-scale farms for the first time, the report said. This change has meant a more productive herd, leading to a 3% increase in domestic pork production to 55 million tonnes.
That increase in pork production will continue to pressure prices, leading to a substantial decrease in imports, possibly by 1.5 million tonnes, and an increase in exports, mainly to Hong Kong, the report said.
China’s cow herd was forecast to rise slightly this year. The report said China’s calf crop could continue rising this year by 0.7% to 51 million head.
That increase mainly was because of the continued growth of large-scale farms, the report said. Because of long breeding times, there is a lag between when large farms invest in additional cattle production and when that investment begins to result in increased production capacity.
Small-scale farms continue to retreat from the market or take a wait-and-see approach. Also, a notable factor that continues to constrain growth in this industry is the increasingly strict environmental regulations, the FAS staff said.
On Jan. 1, China began rolling out a nationwide Environmental Protection Tax program, which levies a tax on farms with more than 50 head of cattle, 500 head of hogs or 5,000 chickens or ducks, the report said. Each province designates the actual tax rate. Farms with pollution control measures will be exempted or receive a lower rate.
Feed costs were expected to rise slightly this year as corn prices rise, the report said. Overall feed costs were expected to rise slightly this year in a continued effort by the central government to reduce its massive reserves.
At the same time, China’s government also has been pushing for expanded corn utilization in the further processing industry, particularly ethanol production, which has driven up demand, the report said.
CATTLE, BEEF RECAP
On the Livestock Exchange Video Auction Wednesday, 232 head of Nebraska cattle sold at $118 per cwt; 127 Kansas cattle sold at $117.59, and 59 head of Texas cattle sold at $114 with a 17- to 30-day delivery window. Cattle sold last Wednesday on the video auction at $117 per cwt.
A few cattle sold in the cash market at $117 to $118 per cwt on a live basis, the top of last week’s $115 to $118 trade. Dressed-basis trading last week was at $188 to $190, down $2 to $4.
The USDA’s choice cutout Wednesday was down $0.44 per cwt at $213.07, while select was off $0.72 at $200.61. The choice/select spread widened to $12.46 from $12.18 with 102 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $134.85 per cwt, up $0.04. This compares with Wednesday’s Apr settlement of $135.27, up $0.45.