Chinese Pork Demand Stagnates Over Health And Food Safety Concerns

01 November 2017

Pork will always be king in China. Chinese pork consumption grew year-over-year for decades, reaching a record 57 million tonnes in 2014. Since then, China’s booming population decelerated and pork consumption stabilized. Food companies may still try to flood Chinese consumers with more protein, but per capita consumption across meat options has remained stable over the past five years. Chinese consumers may now be demanding quality over quantity.

In a 2015 Pew Research Center survey, 71 percent of respondents stated food safety in China was a “moderately big problem.” Of that group, 32 percent of participants believed food safety was a “very big problem.” This concern arose from constant disease outbreaks and health issues in China’s animal stock. As a result, studies show that Chinese consumers highly value safety labels on food packaging.

With rising domestic and international pressure over spotty food safety and awful pollution, the Chinese government recognizes that it must evolve. “Having reached the current stage of development, China can now advance only through reform and innovation,” stated Chinese Premier Li Keqiang earlier this year. At this development stage, Chinese consumers may no longer be satisfied by quantity and variety. With China's maturing protein preferences, consumers may begin to seek better quality bites.

Read more:

Pork peaks quantitatively...
...but not from a quality standpoint
Beef? No thanks!
Looking for a healthier bite
Conclusion

Pork peaks quantitatively...

Driven by population growth, pork consumption climbed each year in China between 2000 and 2014, excluding the period during the 2007 blue-ear pig disease outbreak. During that timespan, domestic pork consumption shot from 39.5 to 57.2 million tonnes. China’s urban population simultaneously grew from 482 to 784 million people. Chinese urbanization began in the 1970s and some would argue is nearing completion. The UN’s Food and Agriculture Organization (FAO) forecasts that a decelerating urban growth rate coupled with a contracting rural population will lead to a declining overall population by 2029.

Since 2014, pork consumption has flattened, and the USDA projects China will consume just over 56 million tonnes of pork in 2018. With population growth trailing off, pork may have peaked in China. Per capita urban pork consumption only supports this notion, and in fact, has not varied significantly since 2002. In 2015, urban and rural China ate 20.7 and 19.5 kg of pork per capita respectively. Urban per capita pork consumption jumped from 15.9 to 20.3 kg between 2001 and 2002. Since then, this figure has not varied lower than 18.2 kg per capita or higher than 20.8 kg per capita.

Urban China’s Protein Preferences Settle

 

In general, urban Chinese consumers’ protein preferences have not shifted significantly since 2000. Fresh egg consumption has hovered around 10 kg per capita for the last 15 years after falling from 11.74 kg per capita in 2000. Poultry consumption has jumped erratically around 9 kg per capita since 2002. Only aquatic product consumption has seen considerable growth, increasing by 41 percent between 2001 and 2011. China’s preferences, collectively, appear to have coalesced. While the introduction of other specific proteins may profit, the country’s stabilizing population and consumption represent citizens settling into a new, higher quality of life. As protein demand begins to balance and income continues to grow, consumers may consider forking over more for higher quality meats.

...but not from a quality standpoint

Food safety remains a major national issue in China, and for good reason. In 2006 and 2007, Chinese hogs suffered multiple porcine reproductive and respiratory syndrome outbreaks, known as blue-ear pig disease. Between June and September 2006, the disease infected over 2 million pigs and killed 400,000. Blue-ear pig disease infected another 310,000 pigs and killed 81,000 in 2007. In 2010, disease killed over one million piglets across 10 provinces, only to be followed by foot-and-mouth disease cases in both 2012 and 2013.

These constant disease and food safety concerns yielded wary Chinese citizens. While the government enacted better food safety laws in October 2015, the general population remains leery of domestic pork products. A 2008 report published in the journal Appetite surmised that mistrust of domestic food production led to a better reputation of imported food throughout China. Following the slew of disease outbreaks, a 2017 study published in Food and Nutrition similarly concluded Chinese consumers regarded imported pork as higher quality pork. Accordingly, they are willing to pay more for the stronger reputation of imported products.

Pork Producer Prices Prove Erratic

 

Domestic pork producer prices are the most erratic of the main Chinese proteins. Pork production still largely occurs in backyard farms as the country goes through the transition to modern operations. Producers have begun to use more protein-rich grains and concentrates in lieu of cheap fodders. An inefficient production model and more expensive feed have multiplied production costs. In response, Chinese suppliers have increasingly looked abroad, as evidenced by pork imports ballooning from 761,000 tonnes to 2.2 million tonnes between 2014 and 2017.

Notably, European pork exports increased from 21,869 tonnes in 2006 to 273,526 tonnes in 2012. The US, Brazil, and other larger countries have a comparative advantage in terms of production quantity. European countries could look to organic products to satisfy Chinese consumers’ quality demands. The “under 50kg” herd grew substantially from 43,711 to 334,319 head between 2006 and 2011.

Beef? No thanks!

Chinese consumers have not taken to beef as enthusiastically as other proteins during the country’s development. Beef and veal consumption increased from 5.1 to 7.8 million tonnes between 2000 and 2016, but they remain the least consumed of the main proteins. Urban per capita consumption of beef and mutton has remained flat since 1997, hovering between 3 and 4 kg per year. Rural areas experienced a slight uptick in beef and mutton consumption, growing from 0.71 to 1.7 kg per capita from 1995 to 2015. Still, both of these values are dwarfed by pork, poultry, and aquatic product demand.

Chinese Consumers Turn Down Beef

 

In June 2017, the United States Department of Agriculture (USDA) announced China will allow certain US beef exports for the first time in nearly 14 years. China had banned US beef on Christmas Eve 2003 following a positive test for mad cow disease on a Washington state farm. US beef exports had been growing throughout the late 1990s and early 2000s, reaching a peak of 703.6 tonnes in February 2002. Producers now see a chance to regain some traction after the recent ban ended, but beef will remain far from the dominant meat market in China.

Australia recently engaged in a free trade agreement with China beginning in December 2015, which slowly rolls back import tariffs over the next decade. Australian beef producers hoped this would spur Chinese imports, but exports to China have dropped from a peak of over 150,000 tonnes in 2013. However, China also granted import access to a large number of other foreign cattlemen in 2013. Then Brazilian beef regained access to China in 2015, further amplifying competition to feed limited demand. As China continues to expand its food safety legislation and allows more firms to import beef, market competition will intensify even more.

Australian Beef Exports to China Trail Off

 

Looking for a healthier bite

In October 2016, China’s government released its Healthy China 2030 initiative outlining national health goals. The plan included raising life expectancy from 76.34 in 2015 to 79 years in 2030. The government’s mindset has extended to Chinese youth as younger citizens are demanding healthier food. Frozen dumpling companies took notice and began to offer more vegetable varieties of the Chinese staple. But regardless of government pressure, consumers will probably not rapidly adopt vegetarian practices. On the contrary, the data indicates that meat protein will remain an essential part of the Chinese diet.

When we integrated the China Agricultural Supply and Demand Estimates (CASDE) data source into Gro, it became evident that food use of soybeans in China is on the rise. Soybean consumption for food is expected to rise to over 12 million tonnes by the 2017-18 market year, a 31.5 percent increase since 2014-15. But it looks like increasing population, not necessarily popularity, has driven soybean consumption for food. Rural per capita consumption of soybeans fell from 2.53 to 1.14 kg between 2000 and 2012. While soybeans and related bean products could emerge as a healthier source of protein, Chinese consumers are unlikely to stray far enough from their meat-centric diet to make soybeans a significant percentage of their diet.

Aquatic products is the only food group to keep pace with pork consumption since the 1970s, hitting a new high over 49 million tonnes in 2013. Rural per capita consumption of aquatic products rose from 3.92 to 7.2 kg between 2000 and 2015, while urban demand rose from 11.74 to 14.7 kg per capita in the same timespan. Some crustaceans, fish, and mollusks are leaner proteins than pork. If domestic pork prices continue to climb, aquatic products could become relatively price competitive.

Seafood Consumption in China Grows

Conclusion

Pork and other common proteins may have peaked quantitatively in China, but there is still room in each market for higher quality products. A 2015 Michigan State University study found that food safety was the top criterion for the quality of pork produced in China, the US, and the EU.

While non-organic imported pork products may satisfy Chinese consumers’ demand for quality, US and EU organic producers should also consider exporting to China. France and Austria introduced organic pig stocks over 150,000 head in the past five years to add to established producers in Denmark, Germany, and Italy. The EU’s organic pig stock rose from 697,125 to 978,000 head between 2010 and 2015. US organic hog and pig end-of-year inventory nearly doubled from 8,366 to 14,707 head between 2015 and 2016. The EU also had 17.8 million head of organic poultry in 2015, and the US totaled over 22 million in the same year. While poultry and chicken consumption in China has declined over the past few years, the introduction of organic products could revive growth in quantity or at least revenues.

The EU and US have the stock to satisfy Chinese demand, but must be careful with their labels. A 2017 study published in the Journal of Agricultural and Resource Economics also concludes that food safety labels can increase demand for US pork. The study also found that US consumers' willingness to buy imported pork is inversely related to their level of patriotism. Still, even if that study’s conclusion applies to Chinese consumers, after years of justified distrust for domestic pork quality, there may still be an opportunity for foreign producers to supply less nationalistic consumers.

The Chinese government continues to implement stronger food safety regulations, but it will take time to regain the general trust of citizens and ramp up organic production. With rising Chinese pork producer prices, organic pork and poultry farms in the US and EU should quickly seek Chinese import approval. The demand for quality is developing faster than Chinese producers can transition their operations. EU and US producers may want to jump on the market before Chinese farms can come up to par.

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