Will the Declining Beef Industry Rebound? How Will China's Beef Cattle Industry Develop?

The Fall in Beef Prices: Imbalance Between Supply and Demand Is the Key Factor

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The recent continuous decline in beef prices has sparked much discussion. Li Jie, President of the Inner Mongolia Beef Cattle Industry Association, based on observations of both domestic and international markets, pointed out that "current beef prices have approached international beef prices... and will enter a basically stable situation, with no more cliff-like declines."

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At its core, the reason for price fluctuations lies in the imbalance between supply and demand. Cao Jianmin, Director of the Industrial Economics Research Office of the National Beef Cattle and Yak Industry Technology System and Professor at Jilin Agricultural University, noted from an economic perspective that the decrease in beef prices is mainly due to a short-term supply exceeding demand. He summarized the factors affecting supply into three aspects: first, many beef cattle-related breeding projects were promoted domestically in recent years, with production peaking in 2023 and 2024; second, imported beef has also been increasing, compounded by the accumulation of frozen beef due to the pandemic over the past three years; third, due to the poor development of the dairy industry, some dairy cows are being culled and sold as beef. With all these factors combined, China's beef supply exceeds demand, and the demand side has not increased due to structural factors such as dietary changes and consumption willingness, as well as cyclical factors like the off-season, leading to a sustained decline in beef prices.

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"Cyclical bottoming out is both a problem and a new opportunity for industrial development."

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For consumers, falling prices are undoubtedly good news. However, for the industry, this downward trend puts enormous pressure and challenges on practitioners, affecting the industry's sustainable development. Li Jie pointed out that "currently, 70-80% of farmers are operating at a loss, while only 30% of companies are barely profitable or breaking even through adjusting their inventory and slaughter times, and differentiating their beef cattle breeds."

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This pain stems from the historical development and inherent characteristics of China's beef cattle industry, where risk-resistant small-scale farmers are hit hardest. Cao Jianmin analyzed that China's beef cattle industry involves large investments and long cycles, with slow cash flow during the breeding process, making it naturally vulnerable to risks. Moreover, currently, slaughterhouses and beef sellers in the Chinese market often order live cattle based on market demand, which naturally concentrates the risk of falling beef prices on the breeding end.

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So, will the industry rebound amid the continuous decline in beef prices? How can the beef cattle industry be reborn after experiencing the pains of transformation? From a macro perspective, Li Jie believes that the current decline in beef prices actually reflects "the process of natural selection within the industry, transitioning from a quantity-driven model to a quality-friendly model." Specifically, on one hand, reduced profit margins force breeding enterprises to reduce production costs through technological means and innovative management capabilities. On the other hand, the imbalance between supply and demand prompts the industry to optimize product structures, deepen the integration and extension of the industrial chain, and leverage the leading role of major companies to actively improve market efficiency. "This cyclical bottoming out is both a problem and a new opportunity for industrial development," Li Jie remains optimistic about the future of the beef cattle industry.

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The Industry Welcomes an Adjustment Opportunity Period

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In previous years, high beef prices led to a significant expansion of the domestic beef cattle breeding industry, rapidly increasing breeding scale, with the number of cattle in stock exceeding 100 million heads in 2022.

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Preliminary statistics show that from 2021 to 2023, the annual number of cattle slaughtered in China increased from 47.07 million heads to 50.23 million heads. At the same time, beef imports remained high, reaching 2.737 million metric tons in 2023. During these three years, the domestic consumer market underwent significant changes, with weak demand for beef.

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Data shows that from 2021 to 2023, per capita beef consumption in China was 6.85 kg, 7.04 kg, and 7.20 kg respectively, growing by 2.7%, 4%, and 2.27% year-on-year.

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In the short term, it is unlikely that there will be significant changes in the beef market. During the downturn in the dairy industry, farms are accelerating the culling of adult cows to reduce costs, which could also impact the market. According to Li Shengli, Chief Scientist of the National Dairy Cow Industry Technology System, around 300,000 adult cows will be culled this year.

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The China Animal Husbandry Association's Beef Branch stated in an industry report that the domestic beef market is likely to remain low in 2023.

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Facing a declining market, the Chinese government has also promptly issued corresponding regulatory and support policies. On June 21, the Office of the Ministry of Agriculture and Rural Affairs issued a notice titled "Notice on Stabilizing Beef Cattle Production," proposing various measures specifically aimed at stabilizing the basic capacity of beef cattle production and helping farmers overcome difficulties, highlighting the government's attention to ensuring national security and self-sufficiency and emphasizing the importance of the beef cattle industry.

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According to Cao Jianmin, the key points of the series of policies provide three major directions for improving the beef cattle industry: first, stabilizing the foundation by supporting mother cow breeders to stabilize industry development and mitigate market shocks; second, resisting risks by addressing the industry's large investment and slow return characteristics, increasing loan disbursements to ease the financial burden on operators; and third, truly implementing policies by including beef cattle in local advantageous specialty agricultural insurance subsidy funds, providing special support for product development. In addition, the policy also specifically mentions measures to ensure feed supply, strengthen production monitoring and early warning, and provide guidance services, all working together to help beef cattle farmers reduce costs and improve efficiency.