The Collapse of Meat Prices in China
Unprecedented Drop in Exported Meat Prices
The prices of meat that is exported to China suffer a collapse never seen before. The latest data provided by exporters indicate that the garrón and brazuelo had a drop of 50% compared to the maximum that they had achieved a few months ago.
These days you pay $4,000 a ton for those beef cuts that are highly demanded by China, when they came to be worth twice as much. The same drop occurs with cow cut sets, which are priced as low as $3,000 per ton.
To the low Chinese demand, a consequence of the fact that the level of economic activity does not pick up, is added the high supply of meat from Brazil, Argentina, and Australia.
Increased Exports and Challenges Faced by Exporters
Between China and the exchange rate delay: Meat exports grow 14%, but the income of dollars generated by that chain falls sharply
The weakened internal demand for meat in Brazil generates higher exportable balances and that is why in May that country sent 200,000 tons to international markets, most of which ended up in China.
Argentina exported 65,000 tons of product weight in May, of which almost 79% went to China. In addition, Australia is also placing larger volumes of meat there, according to meat industry analysts.
“The business became very challenging for us,” said an exporter, and clarified that the operations with China had been done at a loss. The prices of the “cows” category, which are the raw material of the business, had an increase of just over 20% in the last year, but the drop in the price of the ton that is exported to that destination is so significant that even this is how you operate counter-margin.
Added to these factors typical of any business are the distortions imposed by the government and that subtract income from the production chain. There appear the export duties (9% for beef) and the exchange rate split, which deepen the damage to companies due to the visible exchange rate delay in income.
In this context of economic losses, the authorities also came out to demand that the industries provide the meat promised in the price agreement, which generated more concern and tension among the businessmen who had their shipments stopped in recent days.
A few months ago. This sudden drop in meat prices is a result of several factors, including oversupply and a decline in demand due to various factors such as the African swine fever outbreak and the ongoing trade war between China and the United States.
This collapse in meat prices is causing significant challenges for meat exporters in China. With prices now significantly lower than before, exporters are struggling to maintain profitability and keep their businesses afloat. Some exporters are even reconsidering their strategies and looking for alternative markets to sell their products.
Experts predict that it may take some time for the meat market in China to recover from this collapse. In the meantime, exporters will have to find innovative solutions to adapt to the changing market conditions and find new ways to make their businesses viable.
Overall, the collapse in meat prices in China is a significant development that has far-reaching implications for both exporters and the meat industry in general. It underscores the importance of diversifying markets and being prepared for unexpected shifts in demand and prices.
What are some potential long-term implications of the current collapse in meat prices for the meat industry in China, and what steps can exporters take to mitigate these risks
The current collapse in meat prices in China could have several potential long-term implications for the meat industry:
1. Decreased profitability: Lower meat prices mean reduced profit margins for meat producers and exporters. This could lead to financial difficulties and potential bankruptcies for smaller players in the market.
2. Oversupply: If meat prices remain low for an extended period, it may lead to an oversupply of meat in the market. This oversupply can further depress prices and create a cycle of declining profits.
3. Import dependency: China has historically relied heavily on meat imports to meet its domestic demand. The collapse in meat prices could discourage domestic production and increase China’s dependency on imports, making it vulnerable to price fluctuations and supply disruptions in other countries.
4. Consumer behavior shift: With lower prices, consumers may switch to alternative protein sources or substitute meat with other food products. This shift in consumer behavior could have long-term consequences for the meat industry, with potentially reduced demand for meat products.
To mitigate these risks, exporters can take several steps:
1. Diversify product offerings: Exporters can explore diversifying their product offerings to include alternative protein sources, such as plant-based or lab-grown meat. This would help them cater to changing consumer preferences and reduce their dependence on traditional meat products.
2. Invest in technology and efficiency: Exporters can invest in technologies that enhance productivity and reduce production costs. By improving operational efficiency, they can maintain profitability even in a low-price market.
3. Expand into new markets: Exporters can consider expanding their market reach beyond China. By targeting other countries with growing meat consumption, they can reduce their dependency on the Chinese market and mitigate the risks associated with price collapses.
4. Strengthen supply chain resilience: Exporters should focus on building resilient supply chains by diversifying sourcing regions and suppliers. This would help them minimize the impact of supply disruptions, ensuring a steady flow of products even during market fluctuations.
5. Adapt to changing consumer preferences: Keeping track of evolving consumer preferences and adapting product offerings accordingly is crucial. Exporters should be proactive in understanding and meeting the demands of health-conscious or environmentally conscious consumers.
Overall, exporters need to be agile and adaptable to navigate the long-term implications of the current collapse in meat prices in China. By diversifying product offerings, improving efficiency, expanding into new markets, strengthening supply chains, and catering to changing consumer preferences, they can mitigate the risks associated with this market situation.