Livestock and Products Annual

An Expert's View about Cattle in Hong Kong SAR

Last updated: 15 Sep 2011

U.S. pork exports show good prospects for growth in Hong Kong’s domestic market, benefiting from the Hong Kong dollar’s peg to the U.S. dollar which has caused products from other major competitors to become relatively more expensive as a result of their currency appreciating against the U.S. dollar.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 8/24/2011 GAIN Report Number: HK1133 Hong Kong Livestock and Products Annual 2011 Approved By: Erich Kuss Prepared By: Caroline Yuen and Juliana Madrid Report Highlights: U.S. pork exports show good prospects for growth in Hong Kong?s domestic market, benefiting from the Hong Kong dollar?s peg to the U.S. dollar which has caused products from other major competitors to become relatively more expensive as a result of their currency appreciating against the U.S. dollar. However, despite the favorable domestic market, Hong Kong?s imports of U.S. pork and offals are expected to drop to $190 million, a 32 percent decline from $278 million in 2010. The forecasted decline is due to the expectation of a continued decrease in U.S. pork exports transshipping through Hong Kong. Executive Summary: (Data included in this report is not official USDA data. Official USDA data is available at http://www.fas.usda.gov/psdonlineonline) U.S. pork exports show good prospects for growth in Hong Kong?s domestic market, greatly benefiting from the Hong Kong dollar?s peg to the U.S. dollar (US$1= HK$7.80). Products from other major competitors have become more expensive as a result of their currency appreciating against the U.S., and thus, Hong Kong dollar. U.S. pork products continue to sell favorably in high- end markets. The use of Chinese cuts has helped increase sales for U.S. pork products used in Chinese restaurants. Nevertheless, competition remains tough in an open market like Hong Kong. Chilled pork products face increasing competition from premium pork products supplied by Spain and Japan. Despite the favorable domestic market, Hong Kong?s 2011 imports of U.S. pork and offals are expected to drop to $190 million, a 32 percent decline from $278 million in 2010. The decline is due to the continued expected decrease in U.S. pork exports transshipping through Hong Kong. Hong Kong?s trade is very volatile due to the re-export trade. In the first half of 2011, Hong Kong imported $27 million in U.S. pork products and $67 million in offals. During the same time period, Hong Kong?s pork and offal re-exports amounted to 28 percent and 75 percent of total imports, respectively. The high export percentage, particularly for offals, highlights the fact that Hong Kong remains a key re-export center for the Chinese market. China and Brazil are the two leading pork suppliers to Hong Kong. Currently, Hong Kong importers are very reluctant to source Chinese pork because it is considered too expensive. Brazilian products are relatively more popular in terms of prices and supply. Recently, importers said they were given very competitive offers when Russia imposed a ban on pork imports from certain Brazilian plants. Hong Kong is experiencing inflationary pressure. From July 2010 to July of this year, the average retail price for pork rose nearly 26 percent. In a bid to combat inflation, price conscience consumers are replacing freshly slaughtered pork with Chinese chilled or even frozen pork. Commodities: Meat, Swine Select   Production: Pig production is expected to reach 1.63 million head (114,000 MT) in 2011 and 1.67 million head (116,000 MT) in 2012, five percent and three percent lower than the 1.72 million head (120,000 MT) in 2010. This decline is due to ongoing high pig prices in China, which make exports to Hong Kong less attractive. Presently, China supplies over 94 percent of the pigs for slaughter in Hong Kong, while local farms supply the remaining 6 percent. Thus, a reduced supply from China would have a significant impact on local production. The July consumer price index report for China revealed a 14.8 percent year-on-year rise on overall prices, with pork having risen 56.7 percent. To some extent these figures are telling of the stringent supply of live pigs in China. Since over 94 percent of Hong Kong?s live pig supply comes from China, the local live pig market inevitably suffers spillover effects from the rising prices and stringent supply of the pig industry in China. In June of this year, Hong Kong?s average import price for live pigs rose by 38 percent compared to June 2010, a rate less than that of China?s pork prices (56 percent) as Hong Kong agents buying live pigs from China have been unwilling to offer higher prices. On the other hand, Chinese pig traders experiencing a bullish domestic market have little incentive to sell their pigs to Hong Kong. As such, the supply of pigs to Hong Kong has been declining and may continue to decline as the situation in China is expected to continue in 2011 and 2012. Local pig farming began to drop significantly in 2007 following a government buy-out plan of operation licenses in an effort to reduce local pig farming. Hong Kong?s self-sufficiency ratio declined from 23 percent in 2006 to 6 percent presently. Since the buy-out scheme has ended, further significant decreases in local pig production are not expected, as farmers who declined the government?s reimbursement offer are likely to remain in the industry for the immediate future. These farmers may be further encouraged by the developing niche market for locally raised pigs. Some retail outlets are encouraging this niche market by specifying where their pork comes from. In Hong Kong there is the general perception that local pigs are less likely to be subject to unnecessary hormone treatments. On average live pigs from China are smaller, weighing about 68 kg, whereas those raised locally weigh 86 kg on average. Given the appreciation of the Renminbi, rising import prices, and Hong Kong?s inflation, the wholesale prices of live pigs between January and May 2011 reached $2,919/MT, representing a rise of 29 percent compared to 2010. Table 1. Hong Kong: Supply and Consumption of Live Pigs, in Number of Head 2009-2010 2007 2008 2009 2010 2011 estimates % change Local Supply 269,810 87,240 84,655 88,639 4.7% 88,000 Imports 1,503,212 1,494,568 1,597,373 1,630,452 2.1% 1,545,000 Total 1,773,022 1,581,808 1,682,028 1,719,091 2.2% 1,633,000 Source: Hong Kong Agricultural, Fisheries and Conservation Department Table 2. Hong Kong: Average Wholesale Prices of Live Pigs, in US$/Metric ton 2011 2008 2009 2010 % change Jan- May Live Pigs 2,717 2,065 2,260 2,919 29% Exchange Rate: US$1.00 = HK$7.78 Source: Hong Kong Census & Statistics Department Consumption: Hong Kong?s pork consumption pattern has been affected by escalating inflationary pressure. Once consumers get accustomed to a new consumption pattern, it is very likely that this behavior will continue even when inflation subsides. This July, the year-on-year inflation rate was recorded at 7.9 percent, the highest after August 2008. Aside from housing rentals, food was the largest driving cause for inflation with a 7.4 percent year-on-year increase. Pork was among the food items that experienced the most noticeable price increase. The average retail price of pork in July 2011 was 26 percent higher than that in June 2010. In response to increasing prices, industry sources confirmed that both consumers and catering services have modified their pork consumption. The most noticeable change is in the sharp shift from freshly slaughtered pork to chilled pork from China. Chinese chilled pork was introduced to Hong Kong as an alternative to freshly slaughtered pork and its sales have been expanding gradually over the years. The rising cost of food has served as a catalyst in accelerating this shifting process. In Hong Kong there is about a 10 percent price difference between freshly slaughtered pork and chilled pork from China. Although the overall pork prices in China are on an upward trend, chilled pork prices are not as volatile as live pig prices. The price volatility for live pigs is due to the supply of live pigs being largely confined to the Guangdong province (adjacent to Hong Kong), whereas the chilled pork supply has less of a geographical restriction. In a bid for lower prices, a similar shifting in consumer preference is taking place between Chinese chilled meats and frozen meats. Hong Kong retail outlets have seen a sharp increase in the consumption of Brazilian frozen pork. Ribs and pork chops are popular Brazilian cuts. Given the strong exchange rate of Renminbi and the rising pork prices in China, Brazilian products have become more competitive and attractive at the expense of Chinese chilled and frozen pork. Hong Kong?s inflationary pressure will remain notable. To avoid the upward price pressure, the shift in consumer preferences is very likely to continue in the coming year. Table 3. Hong Kong: Average Retail Prices of Pork Relative to Beef and Poultry, (Freshly Slaughtered), in US$/kg 2011 2008 2009 2010 % change Jan - May Chicken (whole chicken) 8.19 9.82 9.78 10.82 11% Beef (best quality) 11.72 12.50 12.61 13.10 4% Beef (belly flesh) 9.09 9.82 9.91 10.58 7% Pork (best cut) 8.11 7.23 7.04 7.76 10% Pork Chop 8.05 7.19 7.08 7.83 11% Source : Hong Kong Census & Statistics Department One distinct advantage for U.S. chilled pork is the stable exchange rate. Additionally, U.S. pork products enjoy an established premium market image associated with its taste and safety. U.S. chilled pork, primarily consumed by the well-to-do consumers and upscale catering services, continue to sell well despite high prices. However, the coming years will be challenging for U.S. chilled pork products because many traders are gradually introducing premium chilled pork from other countries. The most noticeable is Spanish Iberico pork and Japanese Berkshire pork. Both pork types are being well received in the market. Australian and Canadian pork are also making inroads to upscale markets. Currently, Australian and Canadian pork exports are disadvantaged by the high exchange rate, but they are likely to build on the Hong Kong consumers? receptiveness to new food products. There has not been any significant consumer shift towards different types of meats as a result of rising pork prices, because other meat products are facing similar upward trends in price. More importantly, pork and chicken are staple meats consumed by the Hong Kong Chinese. Table 4. Hong Kong: Pork, Chicken, and Beef Consumption 2010, By Type, in Metric Tons Freshly slaughtered Chilled/Frozen Pork 120,000 266,602 Chicken 13,000 301,261 Beef 8,000 109,800 Source: Hong Kong Agriculture, Fisheries and Conservative Department Hong Kong Census and Statistics Department Trade: U.S. Supplies U.S. pork and offal exports to Hong Kong in 2011 are forecast at $190 million, representing a significant drop of 32 percent. This forecast is based on increasing direct U.S. exports of pork and offals products to China. In efforts to cut transaction costs, many U.S. pork exporters have decreased their transshipments through Hong Kong. In the first half year of 2011, U.S. pork and offal exports to China increased tremendously by 2,234 percent reaching $147 million, while its exports to Hong Kong declined by 55 percent shrinking to $67 million. As a large portion of Hong Kong?s imports are re-exported, (28 percent and 75 percent for pork and offals, respectively) any decline in re-exports will inevitably affect total imports significantly. Table 5. United States: Pork and Offals Exports, US$ million Year To Date Partner Country 2008 2009 2010 06/2010 06/2011 % change World 4,572 4,030 4,514 2,229 2,684 20.45 Hong Kong 350 305 221 147 67 -54.77 China 259 41 131 6 147 2,234 Source : GTI - Department of Commerce, U.S. Census Bureau, foreign Trade Statistics Table 6. Hong Kong: Percentage of Imports being Re-exported, Jan ? Jun, in Metric Ton Pork Offal Imports 209,182 234,196 Re-exports 58,073 176,783 % Re-exported 28% 75% Source : Hong Kong Census & Statistics Department As of 2010, the U.S. was the third largest pork supplier to Hong Kong. As a result of the increasing direct exports to China, the U.S. is now the fifth largest supplier to Hong Kong after China, Brazil, Spain and Germany. In the first half year of 2011, Hong Kong imported a total of $27 million in pork products but the import value of offal was as high as $67 million. Both chilled pork and processed pork, primarily consumed in Hong Kong, showed a remarkable increase. On the other hand, Hong Kong?s imports of U.S. frozen pork and variety meats declined as they are most affected by the changes in re-export trade. Table 7. Hong Kong: Pork Imports in Value by Suppliers, in US$ Million Year To Date Partner Country 2008 2009 2010 06/2010 06/2011 Market share %Change World 957 881 892 450 500 100% 11.23 China 248 287 323 151 169 34% 12.09 Brazil 193 173 153 75 94 19% 26.12 U.S. 122 86 73 47 27 5% -42.63 Spain 69 62 61 34 35 7% 3.15 Germany 75 65 51 31 37 7% 18.44 Netherlands 41 30 36 14 25 5% 75.54 Vietnam 39 29 28 11 10 2% -8.93 Poland 17 18 26 14 19 4% 36.56 Italy 21 19 24 13 18 4% 31.89 Canada 33 20 20 11 9 2% -25.52 Source : Hong Kong Census & Statistics Department Table 8. Hong Kong: Offal Imports by Major Suppliers, in US$ Million Year To Date Partner Country 2008 2009 2010 06/2010 06/2011 Market share %Change World 870 830 831 460 373 100% -18.98 U.S. 246 229 205 132 67 18% -49.13 Germany 167 165 169 87 84 23% -3.55 Netherlands 92 90 92 47 47 13% -0.54 Brazil 72 81 83 43 43 11% -0.57 Canada 86 80 75 47 16 4% -66.61 Denmark 45 39 40 23 20 5% -14.48 Belgium 33 36 35 17 19 5% 11.17 Spain 32 25 34 16 19 5% 17.43 U.K. 28 26 29 15 19 5% 25.42 France 21 19 15 10 5 1% -42.42 Source : Hong Kong Census & Statistics Department Table 9 Hong Kong: Pork Imports from the U.S. by Categories, in US$ million Year To Date 2008 2009 2010 06/2010 06/2011 %Change Pork 122 86 73 47 27 -42.63 chilled pork 1 1 2 1 2 112.99 frozen pork 101 61 50 36 13 -63.5 processed pork 20 24 21 10 12 19.6 Variety meat 246 229 205 132 67 -49.13 Source : Hong Kong Census & Statistics Department Removing the re-export trade, U.S. pork products have performed very well in the domestic market. U.S. exports have benefited tremendously by the pegged exchange rate, particularly when the Hong Kong currency has depreciated against the currency of other major suppliers such as China and Brazil. From January through -June 2011, Hong Kong?s imports of U.S. chilled pork rose to $2 million or 113 percent compared to the same period in 2010. The strength of U.S. pork is rooted in its established market image of high quality and food safety, in addition to the benefited the stable exchange rate with the Hong Kong currency. U.S. chilled pork sell primarily to high-end retail outlets and five-star hotels. As mentioned in the previous section, U.S. pork is facing competition from high quality pork supplied from Spain, Australia, and Canada. Industry sources indicated that Canadian pork is also doing very well as a beginner in the market. Despite their slow acceptance in the market, industry sources believe Canadian pork has great potential. It is also worth noting that chilled pork from Thailand has enjoyed significant growth. Given the more economical pricing and comparable quality, importers view it as a good value for their money. Table 10. Hong Kong: Chilled Pork Imports in Value, US$ thousand Year To Date Partner Country 2008 2009 2010 06/2010 06/2011 %Change World 39,761 48,905 46,596 25,066 23,936 -4.51 China 30,788 44,438 41,688 22,901 20,509 -10.45 United States 1,276 1,340 1,930 835 1,778 112.99 Australia 1,532 1,455 1,468 797 805 0.95 Canada 202 173 385 149 256 71.35 Thailand 5,576 1,029 413 133 228 71.39 France 60 74 275 73 215 194.74 Japan 170 332 423 175 133 -24.1 Spain 80 0 0 0 9 n/a Source : Hong Kong Census & Statistics Department U.S. frozen pork products, including premium frozen pork parts and commodity cuts, are expected to perform well for the remainder of 2011 and 2012. In addition to the high value U.S. loin cuts which have been traditionally well accepted by the high-end catering industry, other cuts like butts are being gradually introduced to Chinese restaurants. For example, pork butts are being used to prepare traditional Chinese pork roast. Wider acceptance of U.S. pork by Chinese restaurants offers good opportunities for U.S. pork exports. After all, Hong Kong?s catering industry is dominated by restaurants highlighting Chinese cuisine. Other Suppliers China is the largest supplier of pork to Hong Kong. It accounts for over 86 percent of all chilled pork supplies to Hong Kong. Chinese chilled pork is primarily used as an alternative for freshly slaughtered pork and is not a direct competitor of U.S. chilled pork. Despite the increasing substitution of freshly slaughtered pork for chilled pork, Chinese chilled pork is expected to decline in 2011. This decline is partly due to some consumers and catering services replacing chilled pork with frozen pork as a result of escalating pork prices from China. Presently, there is not a significant amount of Chinese pork coming into Hong Kong because it is considered too expensive. This trend will continue for the remainder of 2011 and is likely to continue in 2012 because Chinese pork prices are not expected to drop significantly in the near future. Chinese frozen butts used to be very popular for making Chinese pork roast, but many end-users are now opting to use Brazilian products. A similar shift is happening with many other cuts. On the whole, prices are a determining factor in all purchasing decisions particularly for commodity cuts. Brazil is the second largest supplier of pork to Hong Kong. Just in the first half of 2011 Brazil had a 26 percent increase and sales are expected to continue to rise in the near future. There are several underlining reasons for the success of Brazilian pork. According to industry sources, as a result of the Russian ban on Brazilian pork they saw an influx of Brazilian pork products enter Hong Kong at very competitive prices. This surge in Brazilian supplies has made up for the limited supplies of Chinese pork. Furthermore, Hong Kong buyers are very familiar and comfortable with Brazilian cuts. Brazilian pork is considered to be lean and well- trimmed. Re-exports Hong Kong continues to serve as a center for re-exporting products to China. Over 28 and 75 percent of pork and offals imports to Hong Kong were re-exported and China is the key market. Hong Kong?s re-export trade to China is dominated by offals. The U.S. is a key supplier of pork offals to Hong Kong. A distinct advantage of U.S. products is their abundant supplies. When buying from a U.S supplier an importer can place a large order from one U.S. plant, whereas the importer would have to deal with several European buyers in order to source the same quantity. Therefore, importers prefer to go to U.S. suppliers. This advantage has also allowed U.S. offals to sell well in Hong Kong. Nonetheless, in the near future, European pork offals exports to Hong Kong are expected to increase because the Chinese government is increasingly approving more European pork products and registering more plants. While importers noted that this trend does not necessarily reduce the demand for U.S. offals because of the large scale of the Chinese the market, Hong Kong?s imports of U.S. products are highly affected by direct exports to China. Table 11. Hong Kong: Pork Exports in Value, US$ million Year To Date Partner Country 2008 2009 2010 06/2010 06/2011 % Change World 304 213 215 103 89 -14.03 China 232 92 146 66 62 -7.28 Taiwan 44 74 23 23 0 -99.7 Vietnam 6 23 23 2 13 411.3 Macau 22 22 23 11 14 26.27 Source : Hong Kong Census & Statistics Department Table 12. Hong Kong: Offal Exports in Value, US$ million Year To Date Partner Country 2008 2009 2010 06/2010 06/2011 % Change World 619 552 653 306 218 -28.91 China 473 260 545 213 187 -12.29 Taiwan 123 205 64 62 5 -92.55 Vietnam 19 84 41 30 25 -16.42 Macau 3 3 2 1 1 -7.81 Hong Kong Census & Statistics Department Policy: Ractopamine is not an issue in Hong Kong. Hong Kong food laws do not prohibit or restrict the presence of ractopamine in meat products. As such, pork trade has not been affected by this issue. Table 13. Hong Kong: Swine Meat, Production, Supply and Demand Data Statistics Meat, Swine 2010 2011 2012 Hong Kong Market Year Begin: Market Year Begin: Jan Market Year Begin: Jan Jan 2010 2011 2012 USDA USDA USDA New Post New Post New Post Official Official Official Slaughter (Reference) 0 0 Beginning Stocks 0 0 0 0 0 Production 119 120 121 114 116 Intra-EU Imports 0 0 0 0 0 Other Imports 347 347 360 370 390 Total Imports 347 347 360 370 390 Total Supply 466 467 481 484 506 Intra EU Exports 0 0 0 0 0 Other Exports 0 0 0 0 0 Total Exports 0 0 0 0 0 Human Dom. 466 467 481 484 506 Consumption Other Use, Losses 0 0 0 0 0 Total Dom. 466 467 481 484 506 Consumption Ending Stocks 0 0 0 0 0 Total Distribution 466 467 481 484 506 1000 HEAD, 1000 MT CWE, PERCENT, PEOPLE, KG Not Official USDA Data Note: PS&D production figures include local and imported pigs slaughtered in Hong Kong. All numbers used in the PS&D table are in carcass-weight equivalent, using a conversion factor of 1.30. Imports are calculated as Imports minus Re-exports. Exports are calculated as Exports minus Re-exports. Table 14. Hong Kong: Pork Imports in Volume by Suppliers, in Metric Ton Year To Date Partner Market Country 2008 2009 2010 06/2010 06/2011 % Change share World 483,068 436,567 420,852 220,741 209,182 100% -5.24 China 91,794 104,982 119,467 55,629 56,119 27% 0.88 Brazil 72,555 76,794 59,083 29,557 31,295 15% 5.88 Spain 46,550 42,335 37,876 21,256 18,444 9% -13.23 Germany 54,695 43,846 35,895 21,713 22,717 11% 4.62 United States 69,516 48,305 33,851 24,277 8,891 4% -63.38 Netherlands 28,110 18,451 20,463 8,550 13,004 6% 52.08 Poland 16,301 12,228 17,727 8,802 12,708 6% 44.37 Italy 14,363 13,285 16,443 9,531 9,046 4% -5.09 Canada 21,495 13,854 12,029 7,416 3,731 2% -49.7 Vietnam 8,328 9,319 9,959 4,287 2,435 1% -43.19 Source: Hong Kong Census & Statistics Department Table 15. Hong Kong: Pork Exports by Destination, Jan ? June, in Metric Tons Partner Year To Date Country 2008 2009 2010 06/2010 06/2011 %Change Market Share World 217,196 152,694 154,250 77,851 58,073 -25.41 100% China 172,380 72,757 118,879 58,625 43,511 -25.78 75% Taiwan 33,827 53,741 13,863 13,449 76 -99.43 17% Vietnam 3,500 17,623 13,543 1,884 9,731 416.65 2% Macau 7,363 8,276 7,904 3,873 4,703 21.42 5% Hong Kong Census & Statistics Department Table 16. Hong Kong: Average C.I.F. Prices of Pork by Major Suppliers, in US$/Metric Ton Partner Year To Date Country 2008 2009 2010 06/2010 06/2011 % Change World 1,980 2,019 2,119 2,038 2,392 17.38 China 2,699 2,733 2,702 2,714 3,016 11.11 Brazil 2,653 2,257 2,597 2,523 3,005 19.11 U.S. 1,756 1,782 2,170 1,952 3,058 56.64 Germany 1,366 1,490 1,426 1,439 1,629 13.2 Netherlands 1,442 1,630 1,746 1,651 1,905 15.42 Poland 1,050 1,442 1,448 1,586 1,500 -5.41 Italy 1,478 1,435 1,485 1,416 1,968 38.97 Canada 1,528 1,408 1,678 1,541 2,282 48.07 Vietnam 4,659 3,070 2,817 2,635 4,225 60.32 Source: Hong Kong Census & Statistics Department Table 17. Hong Kong: Pork Imports from the World by Categories, in US$ million Year To Date 2010 06/2010 06/2011 % Change 2008 2009 Pork 957 881 892 450 500 11.23 chilled pork 40 49 47 25 24 -4.51 frozen pork 600 489 495 247 266 7.49 processed pork 317 343 350 177 211 18.68 Variety meat 870 830 831 460 373 -18.98 Source: Hong Kong Census & Statistics Department
Posted: 14 September 2011, last updated 15 September 2011