Unlike the trade mission to the USA three years ago following the opening of that market, the mission to China last week adopted a much lower profile. However, it is a market that has greater potential to deliver for Irish beef farmers and the wider agri-food industry just as it already has done for dairy and pigmeat.
There are a couple of key differences between the market opportunity in the USA for beef and China. The USA is a mature beef market with a production base that produces as many kilos of beef as are consumed. However, it isn’t beef carcases that consumers buy, it is specific cuts or meal solutions.
Therefore in the USA the demand for burgers far exceeds the demand for steak meat, and this means that the USA is one of the biggest exporters of beef as well as being one of the top importers, with approximately 1m tonnes going each way.
The USA is a huge exporter of steak meat and a huge importer of manufacturing beef for making burgers. They have established export markets, primarily in Asia and the Middle East, and they have well-established import supply lines from Australia, New Zealand, Mexico and South America, particularly Uruguay.
It was into a saturated steak meat market that Ireland had its original ambitions and while business was done it has been consistently at low volumes.
What’s different in China?
There are actually a number of key differences. China is still in the early stages of developing an interest in beef protein which tends to grow parallel to the growth in personal income. Currently, Chinese per capita consumption is less than 5kg annually.
Comparing this with South Korea, which is further ahead in its economic development but with similar culinary tastes to China, per capita consumption is over 9kg annually, which suggests there is likely further per capita growth to come in China in the years ahead.
Putting this in context, according to Bord Bia, for every 1kg increase in per capita consumption, an extra 1.4m tonnes of beef are required to meet that demand. Unlike the USA, China has limited capacity to extend its production base. Strategically, China looks to rice as the staple food, with pigmeat the core protein. This means the government accepts that demand for beef is satisfied by imports complementing the domestic production which is currently 7.6m tonnes annually.
In a report by Bord Bia quoting GIRA, China imported 700,000t of beef in 2017 and this is projected to increase to 2.2m tonnes by 2022. China will be importing over 20% of its beef demand which means it will be a key buyer in international markets in the year ahead and ultimately will shape the global beef price.
By way of illustration, China is also one of the world’s biggest pigmeat importers but they import only 3-4% of their requirement. Yet because this is such a significant volume in terms of global trade, it impacts the price of pigmeat across the world. If we arrive at the point where a quarter of all the beef traded in the world is bought by China, then we can expect it will have an even greater influence on the price of beef.
Translating opportunity
Having established that there is a market in China with serious growth potential, the challenge now is that it is exploited in a way that maximises the return from that market.
In the perfect world, a selling organisation similar to what Ornua does for dairy would be the ideal way to coordinate entry.
However, the reality is that the Irish beef processing industry is privately owned, with each company in the business of doing what is best for it and in any case an Ornua-type organisation doesn’t exist.
Bord Bia, which is particularly linked to the beef industry through collecting levies from cattle and actively involved in promotion, isn’t mandated to get into the commercial side of the business and cannot do so as a Government organisation.
Perhaps with the will that could be altered or a new organisation set up but that isn’t going to happen immediately.
One safeguard against inter-company competition is the potential size of the market. From chatting to Irish companies participating in the SIAL show, the quantities that were being sought by buyers were so big that it may require companies to collaborate to service the market.
There is a long tradition of inter-company trading between Irish meat processors servicing the UK and EU markets so it would be a logical extension that they collaborate to take on business that was too big for one company to tackle alone.
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