Livestock and Products Annual

An Expert's View about Animal Husbandry and Support Services in Hong Kong SAR

Last updated: 19 Feb 2011

Hong Kong is expected to import $870 million worth of pork meat and $850 million of offals in 2010.

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: 9/1/2010 GAIN Report Number: HK0013 Hong Kong Livestock and Products Annual 2010 Approved By: Erich Kuss Prepared By: Caroline Yuen Report Highlights: U.S. pork and offal exports to Hong Kong in 2010 are expected to be $300 million, a 5% decrease from 2009. U.S. pork meat exports to Hong Kong in 2010 are forecast to fall nearly 7 percent in terms of value to an estimated $80 million after reaching a second record high of $86 million in 2009. Hong Kong?s domestic market is expected to maintain modest growth for U.S. pork ranging from expensive cuts like loins and ribs to commodity cuts. However, total U.S. pork meat exports to Hong Kong are expected to decline due to new Chinese policies regarding re-export trade. Trade in offals (variety meats), is expected to decrease from $229 million in 2009 to $220 million in 2010 also due to the expected decline of re-export trade to China. Executive Summary: (Data included in this report is not official USDA data. Official USDA data is available at http://www.fas.usda.gov/psdonlineonline) Hong Kong is expected to import $870 million worth of pork meat and $850 million of offals in 2010. While the mature domestic market is stable, the overall demand is volatile as a result of the large re- export trade that is often affected by unpredictable trade measures imposed by the importing countries. Both the pork meat and variety meat trade in the first half of 2010 witnessed growth by 5% and 19% respectively, growth is unlikely to continue at similar rate in the second half of the year due to the strengthened control of re-export trade by the mainland Chinese government. In addition, about 1.7 million live pigs valued at $242 million are slaughtered annually in Hong Kong. China, Brazil and U.S. are the three largest suppliers for chilled/frozen pork products. China accounted for 92% of all chilled pork supplies, which are considered as a substitute for freshly slaughtered pork. The frozen pork market is mainly a price game with China and Brazil as the two key competitors. Sourcing decision depends largely on prices. The U.S. is the largest supplier of offals, accounting for about 29% of the market share. Germany (19%) and Netherlands (10%) are two other major suppliers. U.S. pork supplies to the Hong Kong market have been increasing steadily in recent years, with market share of U.S. pork supplies gradually expanding from 6% in 2007 to 11% in 2010. U.S. pork sales prospects in the future are promising as commodity cuts have been successfully introduced to Chinese restaurants and fast food chains in recent years; they are price competitive when compared to other competitors; and benefit from the pegged exchange rate between the U.S. and Hong Kong. In the area of live pig supplies, local production accounts for merely 5% in terms of number. Currently there are only 43 farms left in Hong Kong with raising capacity of 75,000 head. Live pig supplies rely almost exclusively on China, which is forecast to supply 1.62 million head of live swine to Hong Kong. Commodities: Meat, Swine Production: In 2010 Hong Kong is forecast to slaughter 1.7 million head, a slight increase of 1.3 percent from 2009. This production figure represents slightly over 24 percent of the estimated overall pork meat supply. Although pig farming is the most important livestock sector in Hong Kong, the value of locally raised pig production was only $17 million in 2009, representing approximately 5 percent of total domestic supplies. The majority of live hogs for slaughter come from China. Local swine production is expected to be maintained at approximately 84,000 in 2010, as local production is restrained by land costs that are too expensive to allow for significant expansion. However, the Hong Kong government (HKG) does not have any intention of launching another round of voluntary license surrender schemes. The scheme was first introduced between 2006 and 2007 to curb pig farming on the grounds of public health and environmental hygiene. Farmers who chose to surrender their operation license were reimbursed by the HKG. As a result of the scheme, the number of farms was drastically reduced from 265 to 43. Over the long term, local production should contract as the current generation leaves the farming industry. Table 1. Hong Kong: Supply and Consumption of Live Pigs, in Number of Head 2008-2009 2006 2007 2008 2009 % 2010 estimates change Local Supply 381,220 269,810 87,240 84,655 -3% 84,000 Imports 1,590,268 1,503,212 1,494,568 1,597,373 6% 1,620,000 Total 1,971,488 1,773,022 1,581,808 1,682,028 6% 1,704,000 Source: Hong Kong Agricultural, Fisheries and Conservation Department China is the only country supplying live pigs to Hong Kong, contributing 94% of total supplies in terms of dressed weight and accounting for a total value of $225 million. The average weight of Chinese pigs sold into Hong Kong is 68.8 kg compared to locally raised pigs which average 86 kg. There are only three authorized agents selling to Hong Kong, with daily supply ranging between 4500 ? 4800 head, and not all farms in China are eligible to export pigs to Hong Kong. The three authorized agents have to buy from ?registered farms? which have been approved by Chinese authorities to export to Hong Kong based on relevant food safety, bio-security and environmental requirements. All registered farms have to raise a minimum of 5000 pigs. Most of the registered farms operate on a large scale; with some raising as many as 600,000 head. There are 300 registered farms in China. The wholesale price of live pigs in the first five months of 2010 averaged $2167/MT. Consumption: Pork consumption is projected to grow less than one percent in 2010 as Hong Kong?s domestic market is mature. Despite this limited growth in the short term, pork remains the most popular meat in Hong Kong compared to beef and chicken. While traditional Chinese dietary preference accounts for the relatively lower consumption of beef when compared to both pork and chicken, pork also maintains a relative advantage over chicken. In comparing consumption patterns, although most local consumers like both pork and chicken, there are two principal factors at play. The first factor is a price advantage for pork as shown in the following table. Table 2. Hong Kong: Average Retail Prices of Pork Relative to Beef and Poultry, (Freshly Slaughtered), in US$/kg 2010 2007 2008 2009 hange Jan - May % c Chicken (whole chicken) 7.11 8.19 9.82 9.98 2% Beef (best quality) 8.59 11.72 12.50 12.56 0% Beef (belly flesh) 6.60 9.09 9.82 9.85 0% Pork (best cut) 6.01 8.11 7.23 7.10 -2% Pork Chop 6.01 8.05 7.19 7.07 -2% Source: Hong Kong Census & Statistics Department Second is the fact that there is a pronounced advantage for freshly slaughtered pork over fresh chickens due to the government?s policy to limit the supply of live chickens as a measure to reduce the risk of avian influenza outbreaks. In the absence of any government restriction, Hong Kong?s consumption of chilled/frozen pork is relatively close to that of chilled/frozen chicken as both meats are demanded by consumers. Table 3. Hong Kong: Pork, Chicken, and Beef Consumption 2009, By Type, in Metric Tons Freshly slaughtered Chilled/Frozen Pork 117,000 284,000 Chicken 12,000 253,000 Beef 8,000 110,000 Source: Hong Kong Agriculture, Fisheries and Conservative Department Hong Kong Census and Statistics Department In terms of the types of pork products being consumed, Hong Kong consumers have been increasingly buying chilled/frozen pork at the expense of fresh pork in recent years. Fresh pork consumption reached a record high in 2001 at 165,000 MT and has since been declining over the years to 117,000 MT in 2009. In contrast, consumption of chilled/frozen pork increased 65 percent between 2001 and 2009, from172,204 MT to 284,028 MT. The shifting trend is expected to continue in the future as consumers become more receptive to chilled/frozen meat. Price and consumers? perception of better hygiene conditions of chilled/frozen pork have been the main contributors to this emerging consumption pattern. Trade: U.S. Pork U.S. pork and offal exports to Hong Kong in 2010 are expected to amount to $300 million, a 5% decrease from 2009. U.S. pork meat exports to Hong Kong in 2010 are forecast to fall nearly 7 percent in terms of value to an estimated $80 million after reaching a second record high of $86 million in 2009. Hong Kong?s domestic market will probably maintain modest growth for U.S. pork ranging from expensive cuts like loins and ribs to commodity cuts. Total U.S. pork exports to Hong Kong, however, are not expected to outperform the 2009 export value. Though June 2010, official statistics show that export value increased by 32% when compared to the corresponding period of last year, but the trade has reported that exports have dropped significantly through the summer months due to new Chinese policies regarding re-export trade. Hong Kong?s re-export trade which comprises over 35% of Hong Kong?s pork meat imports has decreased significantly due to new more strict Chinese policies impacting re-export trade. Since November 2004, all meat re-exports to China through Hong Kong have been required to be pre- inspected by the China Inspection Co. (CIC) in Hong Kong. A new procedure has been instituted since July 20 this year that CIC will no longer be able to endorse re-export shipments to China unless the certificates have been verified by AQSIQ Beijing. Consequently, the number of containers successfully re-exported to China via Hong Kong sharply dropped from over ~100/day to ~10/day. This new verification procedure applies not only to U.S. products but also to products from other supplying countries. Hong Kong importers have complained about losses as thousands of containers initially destined for re- export now have been forced to remain in Hong Kong. The trade has reported that some buyers have walked out of contracts and some packers even gave away low-valued shipments because demurrage charges are so high. Given this new re-export hurdle, Hong Kong buyers will likely become more prudent when placing orders for the coming months, affecting Hong Kong pork imports in the short run, regardless of product origin. U.S. pork supplies to the Hong Kong market has been increasing steadily in recent years, with market share of U.S. pork supplies gradually expanding from 6% in 2007 to 11% in 2010. The U.S. continues to focus on cuts like loins, ribs, and butts with the target consumers being high-end supermarkets and restaurants. However, U.S. brisket bones and offals also are very price competitive too. In 2010 U.S. exports of offals is expected to reach $220 million, decreasing by 4% when compared to 2009. While exports grew by 26 percent in the first half of 2010, the anticipated sluggish re-export trade in the second half of 2010 will likely countervail the remarkable growth in the first half year. The U.S. is the largest supplier of offals to Hong Kong, primarily selling front and hind feet, stomach, kidneys, hearts and tongues. The long term forecast of U.S. pork for the market is bullish for few key factors. First, U.S. products have the advantage of the pegged exchange rate between the U.S. and Hong Kong dollars (US$1 = HK$7.78), when pork prices of other competitors are subject to currency fluctuation. Also, Hong Kong buyers are getting more familiarized with U.S. commodity cuts and the U.S. has successfully introduced commodity cuts to Chinese restaurants and fast food chains in recent years. As this trend continues, the U.S. pork consumption in the mass Chinese restaurants and fast food chains will likely expand. In addition, efficient U.S. farm management and meat processing and high meat-grain ratio will allow U.S. packers to offer more competitive prices for Hong Kong buyers. The commodity cuts trade is primarily determined by prices and U.S. pork is price competitive. Major Suppliers Hong Kong imported $881 million worth of pork meat products from the world in 2009. China, Brazil and the U.S. are the top three suppliers with a market share of 34%, 17% and 11% respectively by value in the first half of 2010. China provides $23 million or 92% of chilled pork supplies in Hong Kong despite only starting shipments in 2006. Supplies are limited to four meat processing plants in China, which have been approved by the Hong Kong food safety authority. China?s chilled pork products are meant to be a substitute for freshly slaughtered pork since they are ready for Hong Kong?s retail shelves within one or two days after being processed, and are not in the same niche market of expensive U.S. pork cuts. Table 4. Hong Kong: Pork Imports in Value by Suppliers, in US$ Million Jan - Dec Jan ? Jun 2008 2009 2009 2010 Market share % change World 957 881 430 450 100% 5% China 248 287 139 151 34% 8% Brazil 193 173 95 75 17% -21% United States 122 86 36 47 11% 32% Germany 75 65 29 31 7% 8% Spain 69 62 32 34 8% 6% Netherlands 41 30 15 14 3% -4% Vietnam 39 29 12 11 3% -8% Canada 33 20 9 11 3% 21% Italy 21 19 9 13 3% 49% Others 117 110 54 62 14% 14% Source : Hong Kong Census & Statistics Department Given the price competitiveness of China?s chilled pork when compared to freshly slaughtered pork ($2.40/lb vs $4.40/lb), China is expected to continue to expand steadily and dominate in this market segment. Frozen pork from China is equally popular particularly among Chinese restaurants. Popular cuts include butt and fillet. Brazilian pork declined by 21% and 30% by value and by volume respectively in the first 6 months of 2010. While Hong Kong buyers favor Brazilian pork because of leaner and better trimmed cuts, 2010 is proving to be a challenging year for Brazilian exporters to Hong Kong because of the appreciation of the Brazilian Real. Hong Kong?s offal imports in 2010 are expected to reach $850 million, increasing by 2% compared to 2009. The U.S. is the largest supplier of offals, followed by Germany and Netherlands, contributing a market share of 29%, 19% and 10% respectively in the first six months of 2010. The European suppliers are very strong in providing hocks, neckbones and soft bones. Table 5. Hong Kong: Pork Offal Imports by Major Suppliers, in US$ Million Jan - Dec Jan ? June 2008 2009 % change 2009 2010 % change World 870 830 -5% 387 460 19% United States 246 229 -7% 105 132 26% Germany 167 165 -1% 81 87 7% Netherlands 92 90 -2% 40 47 18% Brazil 72 81 13% 38 43 13% Canada 86 80 -7% 39 47 21% Denmark 45 39 -13% 20 23 15% Belgium 33 36 9% 14 17 21% United Kingdom 28 26 -7% 12 15 25% Spain 32 25 -22% 12 16 33% Source : Hong Kong Census & Statistics Department Re-export Trade Hong Kong?s re-export trade is a significant component of the overall trade. About 35% and 91% of pork meat and offal imports were re-exported, with China as the major re-export market. Hong Kong?s re-export trade is very volatile depending largely on importing countries? import policy. Table 6. Hong Kong: Percentage of Imports being Re-exported, Jan ? Jun, in Metric Ton Pork Offal Imports 220,741 323,541 Re-export 77,755 292,843 % Re-exported 35% 91% Source : Hong Kong Census & Statistics Department Policy: Ractopamine is not an issue in Hong Kong. The 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. Processed meat products at the retail level are subject to Hong Kong?s new nutritional labeling law effective July 2010. A Food and Agricultural Import Regulation report (FAIRS) provides a general guideline for Hong Kong?s food import regulations (GAIN report #HK9018 issued in August 2009). The report is available at http://gain.fas.usda.gov/Pages/Default.aspx, Table 7. Hong Kong: Swine Meat, Production, Supply and Demand Data Statistics Meat, Swine 2009 2010 2011 Market Year Begin: Jan 2009 Market Year Begin: Jan 2010 Market Year Begin: Jan 2011 Hong Kong USDA Old USDA Old DA Old Official Po New Post st Official Po New Po US st st Official Po New Post st Slaughter (Reference) 0 0 0 0 0 0 0 Beginning 0 0 0 0 0 0 0 Stocks Production 114 114 117 116 116 119 121 Intra-EU 0 0 0 0 0 0 0 Imports Other Imports 369 345 369 370 348 370 380 Total Imports 369 345 369 370 348 370 380 Total Supply 483 459 486 486 464 489 501 Intra EU 0 0 0 0 0 0 0 Exports Other Exports 0 0 0 0 0 0 0 Total Exports 0 0 0 0 0 0 0 Human Dom. 483 459 486 486 464 489 501 Consumption Other Use, 0 0 0 0 0 0 0 Losses Total Dom. 483 459 486 486 464 489 501 Consumption Ending Stocks 0 0 0 0 0 0 0 Total Distribution 483 459 486 486 464 489 501 CY Imp. from 21 21 28 24 24 29 32 U.S. CY. Exp. To 0 0 0 0 0 0 0 U.S. Balance 0 0 0 0 0 0 0 Inventory 0 0 0 0 0 0 0 Balance Weights 0 0 0 0 0 0 0 Production 4 4 4 2 2 2 2 Change Import Change 7 0 7 0 1 0 3 Export Change 0 0 0 0 0 0 0 Trade Balance -369 -345 -369 -370 -348 -370 -380 Consumption 6 1 6 1 1 1 2 Change Population 7,055,071 7,055,071 7,089,705 7,055,071 7,055,071 Per Capita 68 69 69 69 71 Consumption TS=TD 0 0 0 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 8. Hong Kong: Average Wholesale Prices of Live Pigs, in US$/Metric ton 2010 % change 2007 2008 2009 Jan - May Live Pigs 2,226 2,717 2,065 2,167 5% Exchange Rate: US$1.00 = HK$7.78 Source: Hong Kong Census & Statistics Department Table 9. Hong Kong: Pork Imports in Volume by Suppliers, in Metric Ton Jan - Dec Jan ? Jun 2008 2009 2009 2010 Market share % change World 483,068 436,567 210,960 220,741 100% 5% China 91,794 104,982 50,628 55,629 25% 10% Brazil 72,555 76,794 42,065 29,557 13% -30% United States 69,516 48,305 18,327 24,277 11% 32% Germany 54,695 43,846 20,002 21,713 10% 9% Spain 46,550 42,335 22,008 21,256 10% -3% Netherlands 28,110 18,451 9,993 8,550 4% -14% Canada 21,495 13,854 6,565 7,416 3% 13% Italy 14,363 13,285 6,255 9,531 4% 52% Poland 16,301 12,228 5,203 8,802 4% 69% Others 67,689 62,487 29,914 34,010 15% 14% Source : Hong Kong Census & Statistics Department Table 10. Hong Kong: Average C.I.F. Prices of Pork by Major Suppliers, Jan ? June 2008-10, in US$/Metric Ton 2008 2009 2010 % change from 2009 World 1,897 2,040 2,038 0% China 2,599 2,753 2,714 -1% Brazil 2,547 2,249 2,523 12% United States 1,670 1,959 1,952 0% Spain 1,363 1,447 1,590 10% Germany 1,303 1,447 1,439 -1% Netherlands 1,417 1,478 1,651 12% Poland 965 1,426 1,586 11% Italy 1,443 1,447 1,416 -2% Canada 1,469 1,439 1,541 7% Vietnam 4,973 3,344 2,635 -21% Source: Hong Kong Census & Statistics Department Table 11. Hong Kong: Pork Exports by Destination, Jan ? June, in Metric Tons Market Share % % change in volume 2008 2009 2010 2008 2009 2010 Jan-Jun 09 to Jan-Jun 10 World 107,363 69,524 77,851 100.00 100.00 100.00 11.98 China 88,313 31,405 58,625 82.26 45.17 75.30 86.67 Taiwan 12,729 16,807 13,449 11.86 24.17 17.28 - 19.98 Macau 3,699 4,306 3,873 3.45 6.19 4.98 - 10.06 Vietnam 2,573 16,744 1,884 2.40 24.08 2.42 - 88.75 Source: Hong Kong Census & Statistics Department Table 12. Hong Kong: Pork Imports by Categories, in US$ Million Jan - Dec Jan ? June 2008 2009 % change 2009 2010 % change Pork 957 881 -8% 430 450 5% chilled/fresh pork 40 49 23% 23 25 9% frozen pork 600 489 -19% 246 247 0% processed pork 317 343 8% 161 177 10% Variety meat 870 830 -5% 387 460 19% Source: Hong Kong Census & Statistics Department
Posted: 29 November 2010, last updated 19 February 2011

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