Hong Kong Livestock and Products Annual 2006

By USDA, Foreign Agricultural Service - This article provides the pork industry data from the USDA FAS Livestock and Products Annual 2006 report for Hong Kong. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.

24 September 2006

10 minute read

Report Highlights

In the first half-year of 2006, Hong Kong beef imports were valued at $93 million, plus an additional $87 million worth of variety meats, totaling $180 million. During the same period, U.S. beef exports to Hong Kong amounted to $5 million, compared to $26 million in the corresponding period in 2003. However, U.S. chilled beef exports to Hong Kong for January – June 2006 were valued at $3.7 million, very close to the level during the same period in 2003.

U.S. beef exports to Hong Kong are expected to increase steadily in the second half of 2006 as more new plants become eligible to export to Hong Kong. While at the same time, stocks of Canadian beef in Hong Kong are being further depleted. In the first half year of 2006, Hong Kong imported $196 million worth of pork. China is the leading pork supplier to Hong Kong, accounting for $100 million in terms of value in the first six months of 2006 and occupying 51 percent of the market share. U.S. products have secured a solid niche market by supplying end users in the very upscale market at both the retail and HRI sectors.

A major recent development in Hong Kong’s pork market is the government’s announcement to allow chilled pork imports from China effective August 2006. The impact is expected to be a gradual shifting in consumption from fresh pork to China’s chilled pork because of a significant price difference. Given this expectation, the Hong Kong government’s view is that now is the right time to introduce a pig farm license surrender scheme to cut local supplies of live pigs. The Hong Kong government hopes this plan will help to better control Hong Kong’s environmental and pollution problems.

Situation and Outlook: Pork

In the first half year of 2006, Hong Kong imported $196 million worth of pork, plus $90 million of pork offal, totaling $286 million. China is the leading pork supplier to Hong Kong, accounting for $100 million and 51 percent of the market share. During the same period, the U.S. exported $8 million worth of pork products to Hong Kong, securing a solid niche in the market.

Chilled Pork Arrives From China
Effective August 2006, Hong Kong allowed entry of chilled pork from China. Presently, there are four plants approved to export chilled pork products to Hong Kong. Pigs are sourced from designated farms in China that currently supply live pigs to Hong Kong. Each approved plant has a capacity to process 300 pigs daily. The maximum capacity of all four approved plants will be 1200 pigs, about 20 percent of the daily consumption of live pigs in Hong Kong. Initially, to test market demand when Hong Kong opened to China’s chilled pork in August, about 200 pigs were slaughtered and exported to Hong Kong as chilled pork. The quantity of China’s chilled pork exports to Hong Kong is expected to rise gradually.

It’s expected Hong Kong consumers will be tempted to replace fresh pork with chilled pork, given that chilled pork prices are 30 percent lower than fresh pork. Hong Kong’s pork imports will likely rise steadily in the future in contrast to the decrease in production (pigs slaughtered in Hong Kong). As the change will not be significant initially, trade figures for 2007 will be more discernible than 2006.

Hong Kong Initiates License Surrender Scheme

Given the expectation that consumers will increasingly be more receptive to chilled pork at the expense of fresh pork, the Hong Kong government’s view is that now is the right time to introduce a pig farm license surrender scheme to cut local supplies of live pigs. The Hong Kong Government hopes this plan will help to better control Hong Kong’s environmental and pollution problems. Ex-gratia payments will be offered to farmers if they agree to stop their pig-farming operations. The scheme started in June 2006 and will last for one year. The government estimates that 70 percent of the licenses will be surrendered through the scheme. Presently, there are 265 pig farms in Hong Kong rearing about 330,000 pigs. These farms supply about 20 percent of the local fresh pork market.

Narrative on Supply and Demand, Policy & Marketing: Production

Hong Kong Government Introduces Pig Farm License Surrender Scheme
The Hong Kong government has implemented a license-surrender scheme to reduce the number of pig farms in Hong Kong. In addition, the government is considering introducing legislation to stop issuing new pig farm licenses. The government explained that this measure is to reduce associated public health and environmental pollution problems in Hong Kong.

Given the rapid urbanization of Hong Kong, the government views pig farming operations, primarily located in the New Territories Region of Hong Kong, to generate considerable public health and environmental pollution problems. According to the Hong Kong government, pig farms generate an estimated 520 tonnes of excrement each day. Part of the excrement is disposed of as solid waste.

As a licensing condition, farms are required to install waste treatment facilities to properly treat farm wastewater to a specified standard before discharge. Nevertheless, indiscriminate discharge of waste from pig farms remains one of the main causes of pollution to streams and rivers. Indiscriminate dumping of dead pigs is another environmental problem. Pigs are also a main amplifying host for Japanese encephalitis. Because of the close proximity of pig farms to residential areas in Hong Kong, the government considers it desirable to reduce the number of pig farms in Hong Kong.

Presently, there are 265 pig farms in Hong Kong rearing about 330,000 pigs. These farms supply about 20 percent of the local fresh pork market. The actual total rearing capacity is about 430,000 pigs. The voluntary surrender scheme started on June 1, 2006 and will last for 12 months. Under the incentive package, which amounts to a total expenditure of HK$941 million (US$121 million), ex-gratia payment (EGP) will be provided to pig farm licenses who choose to surrender their licenses and cease pig farming permanently. The compensation calculation is based on farm operation and size. The minimum EGP the pig farmers can get is HK$450,000 (US$58,064) while the highest is HK$25.45 million (US$3.28 million).

The scheme also provides monetary compensation to pig farm workers and pig transport workers. People in the industry are inclined to return their licenses to the government, given the gloomy prospect of pig farming in Hong Kong. Licensing requirements are stringent and operation costs are expensive to fulfill all the government requirements. Consumers are also increasingly more receptive to consuming chilled/frozen meats. The government expects 70 percent of the licenses will be voluntarily surrendered by the end of the deadline.

Forecast

The 2005 Hong Kong’s self-sufficiency ratio of live pigs was 22 percent. A reduction in local supplies of live pigs in the future, resulting from the license surrender scheme, will cause the self-sufficiency ratio to start declining in 2007. To a certain extent, imports of live pigs are expected to increase to compensate for the reduction of local supplies. However, part of the reduction is expected to be replaced with chilled pork from China.

Hong Kong’s production of pigs is expected to decline by 1 percent in 2006 and by at least another 4 percent in 2007. The main reason is that Hong Kong’s consumption pattern is expected to gradually shift from freshly slaughtered pork to chilled/frozen pork. Effective August, 2006, Hong Kong allows imports of chilled pork from China. Given the price disparity between chilled pork and fresh pork, Hong Kong consumers are expected to gradually replace fresh pork with chilled pork, as the case with poultry.

Hong Kong started importing chilled whole chickens from China in December 2002 after reaching an inspection protocol between the two governments. Since then, Hong Kong consumers have gradually substituted freshly slaughtered chickens with chilled chickens due to price consideration. Between 2002 and 2005, Hong Kong’s imports of chilled chicken increased 5,050 percent from 668 MT in 2002 to 34,408 MT in 2005. In contrast, live chicken supplies declined over 36 percent in 3 years.

Cattle production had no significant changes since our last GAIN report (HK#6002). Hong Kong’s supply of live cattle relies entirely on imports from China.

Consumption: Hong Kong Allows Chilled Pork Imports From China

The Hong Kong government recently revealed that after over 2 years of negotiations with China on importation requirements of chilled pork from China, Hong Kong imported their first shipment in August 2006.

Hong Kong consumption demands require the slaughter of about 6,000 live pigs daily. Presently, only 4 plants are eligible to export chilled pork to Hong Kong. The total processing capacity is 1,200 pigs daily, with each plant capable at processing 300 head. When these plants are supplying at their maximum capacity to Hong Kong, 20 percent of fresh pork is replaced. On the first few days of the start up, only 150 pigs were slaughtered and exported to Hong Kong as chilled pork. Now daily slaughtering volume has increased slightly to about 200 or less. Retail prices are about 30 percent lower than fresh pork. Fresh pork is priced about HK$22/catty, (US$ 4.70/Kg). Given the significant price disparity between fresh and chilled pork, it is expected consumers will gradually replace fresh pork with chilled pork. Industry contacts report they expect that in 2 to 3 years’ time, the market share of China’s chilled pork will replace at least 30 percent of the fresh pork market.

In the first six months, Thailand was the leading supplier of chilled pork for Hong Kong, representing a market share of 94 percent. China’s chilled pork is expected to dominate the market in the near future. Despite competitive prices of chilled pork from China, some consumers still have a concern for food safety of meats from China. Just a day before the first consignment of chilled pork reached Hong Kong, the Chinese authority suspended the license of one of the four approved China slaughtering plants, amid media reports of unsavory conditions and the use of rusty blades for butchering. To address consumer safety concerns, a major Hong Kong supermarket chain spokesperson emphasized that each package has included plant name and slaughter date so that tracebility can be assured. The suggested “use by” date is within 4 days after slaughter date.

The Hong Kong government is well aware of Hong Kong consumers and legislators’ concern for food safety. Arrangements have been made between the Hong Kong government and Chinese authorities requiring chilled pork from China be supplied only by authorized pig farms. Pork from these supplying farms must meet the inspection and quarantine requirements of Hong Kong.