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Commodities

That rumbling you hear is China's hunger for beef

Surging demand a boon for Brazilian and US exporters, but spooks Japanese buyers

TOKYO -- China's swelling appetite for beef is having a global impact, with Brazilian and U.S. exporters benefiting from the lifting of import bans, and Japanese and Southeast Asian buyers bracing for higher prices amid competition with Chinese rivals.

Rising incomes are driving the stronger Chinese demand for beef, which is more expensive than pork. The growth is so fast -- one forecast sees consumption surging some 20% between 2017 and 2025 -- that local producers are unable to keep up. Beijing has responded by lifting import bans on Brazil and the U.S.

China resumed imports from Brazil, the world's second-largest beef exporter, in 2015 after suspending shipments due to a case of mad cow disease a few years earlier. In mid-June this year, the country ended a 14-year ban -- also over the bovine disease -- on imports from the U.S., the No. 4 exporter.

"China just agreed that the U.S. will be allowed to sell beef, and other major products, into China once again," U.S. President Donald Trump tweeted in mid-May, after the U.S. and China had agreed on a 100-day action plan aimed at correcting the trade imbalance between the two countries. The plan called for China to resume imports of U.S. beef and ease regulations in the financial field.

Thanks to higher disposable incomes in China, beef is cropping up in more hot pot dishes there.

China formally lifted the U.S. ban in mid-June, with both governments publishing the details of the trade conditions. China had been purchasing American beef through "informal routes" via Hong Kong before the ban was lifted. 

The deal has Japanese trading companies bracing for higher costs.

"When importers in China, where large quantities of beef are consumed in hot pot dishes, procure more American beef, purchase costs will rise," said a buyer for a major Japanese meat wholesaler.

Fat-rich beef ribs are popular in China because the fat easily separates from the meat when cooked in the hot pot dishes. This type of beef is also popular in Japan, where it is used by beef bowl chain restaurants. The Japanese trading companies that purchase the meat for these eateries will likely face increasing competition from Chinese buyers. The same goes for food companies in Southeast Asia.

More burgers, too 

Chinese have never been hungrier for beef. The government forecasts that domestic beef consumption will total 7.9 million tons in 2017, up 6% from 2015, and that domestic beef production will grow 5% to 7.32 million tons. The country will import an estimated 590,000 tons in 2017.

The report states that by 2025, Chinese beef consumption will grow 21% from the 2017 figure to 9.54 million tons, while domestic production will expand 16%, and imports will rise to 1.05 million tons.

U.S. burger chain McDonald's plans to increase the number of its outlets in China from 2,500 at present to 4,500 by 2022, according to a growth plan the company released on Aug. 8. Such an expansion would likely further push up beef consumption.

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