Where's the Meat?: PORK

The accession of China into the World Trade Organization (WTO) will lower tariffs for meat and allow the entry of new imports into their market. According to the U.S. Meat Export Federation, U.S. market share will grow over the next few years, as Chinese (tourist) demand for meat increases, meat products penetrate secondary cities in China, and the middle class in urban areas demand more consumer-oriented meat products.

Production Trends for Pork:

China has a national inventory of pigs estimated at 454 million head in 2001. This compares to a world inventory of 928 million. The U.S. is the world's second largest producer with 61 million head in 2001.

Up to 80 percent of Chinese production is located in "backyard" operations. These producers literally raise two or three pigs annually in their backyards. The family pigs consume scraps or excess crop residue as opposed to grain-based diets in the U.S. The labor is cheap, the inputs are available but quality is not totally consistent.

This fact alone opens up a potential market for quality producers in the United States to sell into China for the tourist market in Beijing, Shanghai and Hong Kong, as well as the increasing urban middle class.

A Typical Chinese Pig Operation

While larger-size pig farms with up to 100+ swine are on the increase in China, they still represent less than 20 percent of the total marketable hog supply – and much less than 20 percent of the farms. The vast population of China allows for the majority of production to be of the backyard variety, keeping China as the "number one" world producer by a large margin.

World Pig Production 2002

The U.S. Meat Export Federation (USMEF) expects pig production in China to increase gradually – in line with the growing Chinese population. Given that current production costs are low, based on family labor and feeding scraps, any increase in the large-scale production farms could cause domestic pork prices to rise. This could either dampen domestic consumption or make imports more competitive in price – leading to an increase in imports.

Current Pork Imports to China:

The top supplier of pork and pork variety meats to China is (currently) the European Union. At present, import demand is made up of mostly pork variety meats (80+ percent) since muscle cuts are not competitive with domestic prices. (An example of a pork variety meat is "pigs feet".) The recent outbreak of FMD in Europe may open the market for more pork sales from the United States.

Chinese Imports of Pork & Pork Variety Meats, 2000 (metric tons)

According to the Foreign Agricultural Service, the US exported over $22 million in red meats to China in 2000 – with two-thirds estimated to be in pork products. Year-to-date, this figure has risen another 66% in 2001.

WTO Implications:

The lower tariffs that China will fully implement are significant. Tariffs for pork and pork variety meats will decline from the non-WTO duty of 20 percent to 12 percent by 2004. Tariffs on processed products will decline from 25 percent to 18 percent, over the same time horizon.

According to the U.S Meat Export Federation, a 17 percent value added tax on all pork products will remain in effect and constrain certain pork imports in the short to medium term. Long-term prospects remain bright.

Market Trends:

China produces and consumes over 50 percent of the world's pork. Pork is also the meat of choice in China, making up about two-thirds of all meat production. With rising incomes, expect per capita consumption of all meats to rise. China will import increasing amounts of pork per year, but such imports will still account for only one or two percent of domestic consumption. But in a market of 1.25 billion individuals, that's still a great deal of people being fed by imports – and an attractive market for the United States to continue to develop!