China’s pork consumption set to be double that for the EU, while interest in meat alternatives grows
Published: Nov 10, 2020 05:05 PM

Photo: IC

Despite the impact of COVID-19 and African swine fever, China's appetite for meat is showing no sign of slowing down. The country is the world's largest consumer of meat by some margin, with citizens expected to eat 40.3 million metric tons of pork in 2020, according to the United States Department of Agriculture (USDA). 

To put that figure in context, pork consumption in the country is set to be more than double that for all EU countries in 2020. While pork is the most widely eaten meat in China, the consumption of beef and chicken is also expected to be higher than for any other country apart from the US.

Not only is China the world's leading consumer of pork, it is also the largest producer. In recent months, large scale Chinese hog producers have been focused on restocking and it is forecast that 36 million metric tons of pork is still to be produced in 2020. This compares with 24.1 million metric tons for second place EU, and three times more than the US which is the third largest producer. 

Domestic production will still not meet consumer demand in China, particularly since the national herd was reduced by African swine fever. The outbreak caused pork production levels in China to fall by 21 percent year-on-year in 2019, and despite best efforts by the Chinese hog industry, output levels are estimated to drop by a further 15 percent in 2020, according to the USDA. 

While pork in China rose to record high prices, consumer demand remained strong, with the substitution effect marginal at best. China was the world's largest importer of pork in 2019, and import levels are forecast to soar by 76 percent in 2020 to 4.4 million metric tons, accounting for 43 percent of the global total. Imports are likely to receive a further boost after China reduced tariffs on US pork following the signing of the Phase one trade deal in January, while it also agreed to purchase an additional $32 billion worth of US agriculture products, including pork, in the coming two years.

The meat momentum is expected to continue in China, as incomes increase and the middle class continues to expand.  The fact that per capita consumption of certain meats in China still remains well below levels seen in developed markets highlights the huge potential for future growth in this area. For example, annual average per capita consumption of beef in the US is 26.3 kilograms, compared with just 4.1 kilograms in China. Even after accounting for dietary preferences and shifts, there remains substantial room for growth.

Over the last decade, rising demand for meat had already begun to exert some pressure on global supplies. In early 2019 this pressure exploded in dramatic fashion in the US pork market. The CME Lean Hog futures prices made a series of sharp multi-day rallies, rising by 22 percent over a two-week period to reach a near-two year high. 

The past few years have seen significant progress made in the development of meat alternatives. Big names, such as US-based Beyond Meat and Impossible Foods, have introduced laboratory-grown alternatives with a color, texture and taste that is much more like actual beef than previous alternatives. 

While early products focused on providing an alternative to beef, the market has since evolved to look for pork replacements. Hong Kong-based Right Treat was the first company to produce a pork substitute when it launched OmniPork and OmniMince, which uses a blend of pea, soy, shiitake mushroom and rice protein, to replicate pork. 

Specifically aimed at the Asian market, it was developed by Asian chefs as a pork substitute in traditional Asian dishes. China also has two home-grown meat substitute companies, Zhenmeat and Starfield, focusing on traditional Chinese fare such as dumplings and mooncakes.

Investors have given artificial meat an enthusiastic response. The price of shares in Beyond Meat more than doubled on its first day of trading in May 2019, rising from $25 to $65, and then soaring to an all-time high of $239 just two months later.  

Consumers in China are similarly enthused. The country's "free from meat" market, which includes plant-based meat replacement products, has grown 33.5 percent since 2014 to be worth $9.7 billion in 2018, according to Euromonitor. It predicts that the industry will be worth $11.9 billion by 2023. 

One major barrier to increasing market share is always cost. The fact that meat-substitutes typically cost more than the real thing is a key hurdle, especially among price-sensitive consumers.  Another big barrier is taste - while recent alternatives have made significant inroads into replicating the flavour of real meat, it still isn't the real thing. 

The Greek philosopher Heraclitus famously said that change is the only constant in life. With pork prices soaring by 53 percent in China in the past year, imports vulnerable to further disruption and declining costs of production for plant-based meat substitutes, will we see more and more Chinese consumers flocking to meat-substitutes, or will old habits die hard as they stick to the tried and tested when it comes to meat consumption? Only time will tell. 

The author is executive director of Commodity Products, Asia at CME Group.