context: Beef prices slid through H1, with an estimated 1.2 million dairy cows culled as losses continue to mount. Supply, up 4.8 percent y-o-y in 2023, continues to outstrip demand, leading to prices hitting a five-year low in June. Though prices may see a cyclical rebound in autumn and winter due to higher consumer demand, Food China industry experts predicted beef prices would take at least two years to 'recover significantly'.
Beef prices fell to C¥59.25/kg on 7 August, down 23.92 percent from C¥77.88/kg in January 2023, according to MARA (Ministry of Agriculture and Rural Affairs) data.
The core reason for the price decrease is a beef oversupply, notes Cao Jianmin 曹建民 National Cattle and Yak Industry Technology System Economics Research Office director. The current oversupply results from
- numerous beef cattle farming projects reaching peak output
- beef imports continuing to increase
- the pandemic leading to frozen beef stock accumulation
- dairy industry struggles resulted in dairy cow culling, further adding to the beef supply
While the price decline benefits consumers, the market structure places the burden of price declines primarily on farmers, as slaughterhouses and beef sellers typically base their purchasing decisions on market demand.
Around 70–80 percent of cattle farmers are operating at a loss, with less than 30 percent breaking even or achieving minimal profits by adjusting herd management and differentiating breeds. This is because the industry is capital-intensive, slow to generate returns and vulnerable to market fluctuations, argues Li Jie 李杰, Inner Mongolia Cattle Industry Association president.
MARA's Notice to stabilise beef production addresses these issues by emphasising three critical areas for industry improvement, argues Cao
- foundation stabilisation
- supporting cow farmers to mitigate market shocks
- ensure industry stability
- risk mitigation
- increased loan support to alleviate financial pressures
- local ag insurance inclusion
- beef cattle inclusion explicitly targets sector development
This strategy, and developing a stable supply chain that caters to diverse consumer markets, can enhance industry resilience and carve out a 'localised, specialised' path for the beef sector, contends Cao.
The current price slump, while challenging, presents an opportunity for the beef industry to evolve from quantity-focused growth to quality-oriented development, agrees Li.
Reduced profit margins pressure cattle farming enterprises to adopt tech innovations and improve operational efficiency to lower production costs. Additionally, the supply-demand imbalance encourages the industry to improve product structures, integrate supply chains and leverage leading enterprises to enhance market benefits.