Sunday, November 11, 2012

High Beef Price Not Bringing More Supply

Beef prices in China are rising skyward, but the high prices are not encouraging farmers to raise more cattle.

According to the Ministry of Agriculture beef prices are up over 20 percent and many cities have beef prices exceeding 30 yuan/500g (about $4.30/lb.) The price of beef is double the price of pork and triple the price of chicken.

Behind the rising beef prices is an exodus of farmers from the cattle industry. A farmer in Hebei Province named Shi has been raising cattle since 2003. He recalls a golden period during 2005-06 when you could earn 600 yuan per head when the price of a calf was 3.5 yuan/500g. But he says the cattle industry has been less lucrative since 2007 due to rising feed prices and better earning opportunities working off-farm.

Mr. Shi says the price of a calf is now 15 yuan/500g and it costs 6000 yuan to buy one. Raising a calf half a year nets 2000 yuan per head after paying labor costs of 1000 yuan, feed cost of 4000 yuan plus electricity, water, and rent. While this is a lot more than he says he earned in 2005-06, Mr. Shi thinks this profit is not enough to justify the trouble and risk. The higher earnings from working off-farm makes the earnings from raising cattle less attractive.

The lengthy production cycle for cattle discourages farmers from raising heifers. It takes two or three years before a cow can be bred and they can only give birth once a year. Farmers don't want to wait so long to get a return on their investment, so fewer farmers are breeding cattle. Mr. Shi only raises one heifer now and fattens about 50 calves.

Mr. Shi said there used to be 30 farmers in his village raising 700 cattle, but now only five or six farmers raise less than 100 cattle. Many have quit and more are thinking about it, said Mr. Shi.

The director of a livestock information web site said he understands that beef cattle numbers have been on a downward trend, falling by as much as 30 percent. Yet the demand for beef is rising. He says the deficit between supply and demand will grow and the price will go higher if farmers don't raise more cattle.

An anonymous source blamed the cattle shortage on lack of support from the government. He says beef cattle only get a 20 yuan subsidy for improved breeds while sows get a 100-yuan subsidy. According to this source, the government needs to "stop just staring at pork" and pay more attention to cattle and sheep.

No mention of why chicken is the cheapest type of meat with virtually no subsidies at all.

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