(Bloomberg) -- China will need more beef imports as its demand continues to grow, according to the world’s second-largest producer.
While some market watchers have started to question whether Chinese meat imports will continue to increase as the nation’s rebuilding of its pig herd accelerates, Marfrig Global Foods SA says the African swine fever’s effect on China’s beef demand is likely to remain through 2022. After that, demand will keep rising as the rural population moves to cities and China adopts more western eating habits.
“Everything suggests the Chinese phenomenon is here to stay,” Miguel Gularte, Marfrig’s chief executive officer, said in an interview. “Each 100-gram gain to China’s per capita consumption means additional imports of 2,000 tons. Demand will keep rising on higher incomes.”
The potential is clear when comparing the Chinese pork per capita consumption of 47 kilograms (104 pounds) a year with beef consumption of 5 kilograms, according to Gularte.
While recent figures show a fast recovery of the Chinese pig herd, pork supplies are expected to keep falling next year. The Asian nation will continue to be the biggest customer for South American supply, accounting for more than 70% of the region’s beef exports, and about 60% of Brazil’s.
The increased sales to China have helped send Marfrig shares up 49% this year, while benchmark Ibovespa declined 12%. The company has the best performance among global meat processors in six months.
Brazil’s beef shipments slowed down last month, with the average price in dollar terms falling form a year earlier for the first time in 2020, including to China, government data show.
Meanwhile, emerging economies, encouraged by weak currencies, will continue to divert a great part of their production to export markets. In Brazil, strong exports will help meat processors offset falling domestic demand amid an economic crisis and the end of a monthly government stipend which has helped to support food consumption, he said.
So far, the government aid program is “working well,” helping to support wholesale demand, while food service sales have shown a strong rebound. In the past couple weeks, it reached 90% of Marfrig’s daily average sales before the Covid-19 pandemic, according to Gularte. The government’s massive program, which had reached around 30% of the population, is expiring at the end of the year.
“Any supply surplus will be directed to exports, and when you talk about exports you mean China.”
(Updates with Marfrig shares in sixth paragraph)
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The Link LonkOctober 24, 2020 at 12:48AM
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