Imports by the PRC from major international suppliers are poised for decline during the first half of 2020 as a result of the economic disruption caused by the Covid-19 epidemic, according to the Rabobank Beef Quarterly Q1 2020 report issued on February 27.
“The outbreak of the coronavirus in China has had a major impact on foodservice and trade. With foodservice as the main channel for sales, beef is expected to feel the impact more than others. Indications from the 2003 SARS outbreak suggest that once the virus is contained, sales and trade should rebound quickly. However, the timeframe for control remains uncertain,” said Angus Gidley-Baird, senior animal protein analyst for the Utrecht, Netherlands-headquartered bank’s RaboResearch department.
Much of the frozen beef stock built up prior to the Lunar New Year has not yet been consumed as lockdowns in major urban areas, closures of restaurants and general fear of the contagion among the populace has drastically curtailed dining out occasions in the PRC.
“This lower sales volume means beef demand will be weaker than normal years in the first half,” the report said. “Quick service restaurants may be impacted the least, while hotpot and full-service restaurants will see sales decline markedly in the first quarter.”
Meanwhile, in other beef market developments covered in the Rabobank report, progress was made on the USMCA and the Japan/US trade deal was approved in December. These were closely followed by the signing of the Phase One US-China trade agreement in January. Although questions remain on details of the US-China agreement, there is now concern that the coronavirus will delay Chinese purchases of US commodities.
On a positive note since the Rabobank report was published , Wei Jianguo, a former deputy minister responsible for foreign trade at the China’s Ministry of Commerce, on February 28 told reporters attending a press government-organized conference in Beijing that the PRC remains fully committed to agricultural purchase commitments (which amount to $32 billion in imports) in phase one of the trade deal.
“I would like to emphasize that after the coronavirus epidemic in China, the cooperation between China and the US in the agriculture sector will definitely deepen,” he said. “China will definitely honor the phase one trade deal.”
However, no mention was made of non-agricultural products that are within the scope of China’s promise to buy US $200 billion worth of American goods and services over the year two years.
Brexit and Other Report Issues
Brexit, new export taxes in Argentina and other issues were also addressed in Rabobank report.
The United Kingdom officially left the EU on January 31, 2020, initiating a transition period that will last until January 1, 2021. Rabobank expects the impact on the beef industry to be limited within this period, as the UK remains a member of the EU single market. However, it does allow global beef exporters, including major players in the United States, Brazil, Argentina, Uruguay, Australia, and New Zealand, to negotiate new trade deals with Britain.
New tax measures designed to reduce the rate of inflation and alleviate poverty were announced by the Argentine government in early December. Taxes were imposed on a range of agricultural exports, including an increase in the beef tariff from 7% to 9%.
Seven-Nation Cattle Price Index
After a major jump in the Rabobank Seven-Nation Index in late 2019 driven by increases across most countries (particularly the US and Brazil), prices eased in January, with Brazil and New Zealand experiencing big falls in cattle prices.
