China plans to restructure meat supply system after triple health scares sparked by animal virus: Jefferies

 

A woman wearing a mask buys vegetables at an open market in Beijing on February 2, after an outbreak of virus similar to the SARS pathogen. Photo: AFP
A woman wearing a mask buys vegetables at an open market in Beijing on February 2, after an outbreak of virus similar to the SARS pathogen. Photo: AFP

China is likely to restructure its meat production and distribution system by doing away with smaller producers in favour of large-scale animal farming once the coronavirus outbreak recedes, according to analysts at Jefferies. Producers of plant-based meat substitutes could benefit too, it said.

The government is approaching some meat importers and offering them the opportunity to set up state-of-the-art meat and animal processing factories on the mainland, the analysts said in the February 10 report, citing sources. It is also bringing in specialists in setting up meat processing production lines to advise on international best practices for food safety, the report added.

“We expect that in the wake of recent issues, the government will make further announcements ending, once and for all, the practice of butchering animals in cities/markets,” its Hong Kong-based analysts wrote. This will put protein production “in the hands of large corporations and SOEs.”

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The thinking follows a series of health scares that have plagued the nation’s meat supply and security, with the latest coronavirus epidemic adding to recent outbreaks of African Swine Fever and Avian flu. Five Chinese provinces have temporarily closed live poultry trading and slaughtering locations, according to Jefferies, while the swine fever has forced the government to cull most of its hog herd in 2019, stoking inflation.

“We believe that the current senior party officials do not want this to be seen as their legacy,” according to the Jefferies report.

“The pace is going to accelerate with these unfortunate situations,” said Christian Cadeo, Singapore-based managing partner of Big Idea Ventures, which focuses on alternative-protein investments. “Eventually, with enough shocks of this magnitude, consumers will just say enough, and switch over.”

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The conversion may take time, according to Arun Sundaram of CFRA Research, an independent investment research firm. He estimates that it would take more than five years for China to restore animal protein levels after the African Swine Fever, with consumption of pork suffering for even longer.

McKinsey estimated that the global market for alternative protein was about US$2.2 billion, against a global meat market of US$1.7 trillion, according to a report it published in May 2019. The market for alternative meat products could reach between US$90 billion and US$470 billion by 2040, Jefferies estimated in a separate report in September last year.

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