Required Report - public distribution

**Date:** 9/7/2006

**GAIN Report Number:** CH6074

CH6074

**China, Peoples Republic of**

**Livestock and Products**

**Annual Report**

**2006**

**Approved by:**

![](media/image1.wmf)Maurice House

U.S. Embassy

**Prepared by:**

Casey Bean, Jorge Sanchez, Zhang Jianping and Stephanie Hackenburg

**Report Highlights:**

On June 30, 2006, China unilaterally announced lifting the import ban on
U.S. boneless beef from cattle 30 months of age or younger, then
released a list of inspection and quarantine requirements on U.S. beef
exported to China. Because these announcements are not based on a
bilateral protocol, beef trade cannot be resumed without additional
technical discussions. China\'s beef production in 2007 is forecast to
increase 6 percent to 7.9 MMT due to strong demand. Beef imports are
forecast to increase 33 percent to 4,000 MT during 2007, and could be an
additional 3,000 MT in the first year if China resumes imports of U.S.
beef. Pork production during 2007 is forecast to increase 6 percent to
55.8 MMT driven by consumers\' shift away from poultry due to highly
pathogenic avian influenza in China. Pork imports in 2007 are forecast
to fall 6 percent to 340,000 MT due to abundant supplies, while exports
are forecast to increase slightly.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Beijing \[CH1\]

\[CH\]

Table of Contents

[**Situation and Outlook 3**](#situation-and-outlook)

[U.S. Market Access---China unilaterally announces ban lifting on
boneless U.S. beef from cattle 30 months of age and younger, followed by
a list of inspection and quarantine requirements for U.S. beef exports
to China
3](#u.s.-market-accesschina-unilaterally-announces-ban-lifting-on-boneless-u.s.-beef-from-cattle-30-months-of-age-and-younger-followed-by-a-list-of-inspection-and-quarantine-requirements-for-u.s.-beef-exports-to-china)

[Cattle and Beef 4](#cattle-and-beef)

[China beef production in 2007 forecast to increase 6 percent to 7.9 MMT
4](#china-beef-production-in-2007-forecast-to-increase-6-percent-to-7.9-mmt)

[Selected summary of animal disease in China
5](#selected-summary-of-animal-disease-in-china)

[China's 11^th^ Five-Year-Plan for agriculture, in reference to
livestock production
5](#chinas-11th-five-year-plan-for-agriculture-in-reference-to-livestock-production)

[Beef consumption for 2007 forecast to increase 6 percent to 7.8 MMT
5](#beef-consumption-for-2007-forecast-to-increase-6-percent-to-7.8-mmt)

[Domestic beef prices forecast to remain high
6](#domestic-beef-prices-forecast-to-remain-high)

[Beef imports in 2007 forecast to increase 33 percent to 4,000 MT and
would be significantly higher if China resumes U.S. beef imports
6](#beef-imports-in-2007-forecast-to-increase-33-percent-to-4000-mt-and-would-be-significantly-higher-if-china-resumes-u.s.-beef-imports)

[Live cattle imports in 2007 forecast to decrease 12 percent due to
policy change
7](#live-cattle-imports-in-2007-forecast-to-decrease-12-percent-due-to-policy-change)

[Market access constraints for U.S. beef and bovine products
7](#market-access-constraints-for-u.s.-beef-and-bovine-products)

[Beef exports in 2007 forecast to decrease 5 percent to 8,500 MT, while
live cattle exports forecast to decrease slightly
7](#beef-exports-in-2007-forecast-to-decrease-5-percent-to-8500-mt-while-live-cattle-exports-forecast-to-decrease-slightly)

[PS&D tables for cattle and beef 9](#psd-tables-for-cattle-and-beef)

[Cattle and beef trade matrix 11](#cattle-and-beef-trade-matrix)

[Swine and Pork 13](#swine-and-pork)

[China's pork production in 2007 forecast to increase 5 percent to 55.8
MMT
13](#chinas-pork-production-in-2007-forecast-to-increase-5-percent-to-55.8-mmt)

[Pork consumption in 2007 forecast to increase 6 percent to 55.5 MMT
14](#pork-consumption-in-2007-forecast-to-increase-6-percent-to-55.5-mmt)

[Pork imports in 2007 forecast to decrease 6 percent to 34,000 MT
14](#pork-imports-in-2007-forecast-to-decrease-6-percent-to-34000-mt)

[Repeated pathogen and residue issues for U.S. pork exports to China
14](#repeated-pathogen-and-residue-issues-for-u.s.-pork-exports-to-china)

[Portfolios for food safety and animal health among Chinese government
agencies
15](#portfolios-for-food-safety-and-animal-health-among-chinese-government-agencies)

[Pork exports in 2007 forecast to increase 3 percent to 36,000 MT, China
exports fresh pork to Hong Kong for the fist time in many years
15](#pork-exports-in-2007-forecast-to-increase-3-percent-to-36000-mt-china-exports-fresh-pork-to-hong-kong-for-the-fist-time-in-many-years)

[PS&D tables for swine and pork 16](#psd-tables-for-swine-and-pork)

[Swine and pork trade matrix 18](#swine-and-pork-trade-matrix)

# Situation and Outlook

China has only agreed to open its market to U.S. boneless beef from
cattle of 30 months of age or younger. The import ban was lifted on June
30, 2006, followed by China's announcement of import inspection and
quarantine requirements on U.S. beef. Because these were unilateral
announcements, trade cannot resume until China and the United States
reach a consensus on a trading protocol. The U.S. position remains that
China resume trade for the full range of beef products, per the OIE
guidelines that state all beef products are tradable regardless of the
BSE status of a country.

Despite the presence of foot and mouth disease (FMD) in China, FAS
Beijing forecasts China's beef production in 2007 to increase 6 percent
to 7.9 MMT due to strong consumer demand driven by the shift from
poultry to other meats due to consumer concerns from highly pathogenic
avian influenza (HPAI) in China. Additionally, beef imports in 2007 are
forecast to increase 33 percent to 4,000 MT as domestic supplies cannot
meet the high-end market demand. Strong demand, lagging supply and a
stronger Chinese currency will drive beef imports in 2007. Live cattle
imports in 2007 are forecast to decrease 12 percent to 22,000 head due
to import policy changes. Beef exports are forecast to decrease 5
percent to 85,000 MT. The eventual return of U.S. beef to China's export
markets will increase competition and likely limit China's exports.

Post forecasts China's pork production in 2007 to increase 5 percent to
55.8 MMT due to consumers' shift from poultry to other meats. The pace
of growth for 2007 is forecast slightly smaller than 2006 due to an
increase in swine production and abundant domestic supplies that
deflated pork prices in 2006. As a result, swine production was below
the critical profit point in the first half of 2006. China's pork
imports are expected to decrease 12 percent to 36,000 MT in 2006 and 6
percent to 34,000 MT in 2007 respectively. The return of U.S. beef to
Japan may result in a decrease in Chinese pork exports to Japan, as
Japan is one of China's top three export markets.

## U.S. Market Access---China unilaterally announces ban lifting on boneless U.S. beef from cattle 30 months of age and younger, followed by a list of inspection and quarantine requirements for U.S. beef exports to China 

On June 30, 2006, the Chinese Ministry of Agriculture (MOA) and the
General Administration of Quality Supervision, Inspection and Quarantine
(AQSIQ) jointly released Announcement 678 allowing the conditional
resumption of boneless beef imports from the United States. This
announcement requires that U.S. beef from cattle 30 months of age and
younger be completely free of spinal column, scull, brains, eyes, spinal
cord, tonsils and distal ileum. This announcement was followed by
AQSIQ's Announcement 89, on June 31, which listed detailed inspection
and quarantine requirements. Both were unilateral announcements by China
without an agreed-upon export protocol.

During the 17^th^ meeting of the Joint Commission on Commerce and Trade
(JCCT) last April in Washington D.C., China agreed to reopen its market
to U.S. beef by June 30 based on a science-based trading protocol
consistent with the guidelines of the World Organization for Animal
Health (OIE). Since April, the United States sent three delegations to
China to negotiate the terms of this trade agreement. Although the
United States provided a detailed explanation of safeguards in the U.S.
system and answered numerous questions regarding China's concerns about
beef imports, the two sides were not able to reach an agreement on
resumption of trade. The U.S. position remains that China resume imports
of all bovine products, including boneless, bone-in, variety beef and
offal. According to the OIE guidelines, beef products from cattle 30
months of age or younger are safe regardless of a country's BSE
situation. However, China states it will only consider a wider range of
products after the OIE announces BSE risk levels in 2007.

# Cattle and Beef

## China beef production in 2007 forecast to increase 6 percent to 7.9 MMT

FAS Beijing forecasts China's beef production in 2007 will increase by 6
percent to a record 7.9 MMT from estimated 7.5 MMT in 2006. Post revised
the beef production number for 2005 slightly down to 7.11 MMT from the
last forecast in the semi-annual report CH6002 based on new official
beef production data. Post forecasts China's beef production to increase
about 5 percent in both 2006 and 2007, beef production numbers in the
current beef PS&D table has been adjusted accordingly. The current
estimated pace of growth is 1 percent smaller compared with that of the
average increase in the 2002-2004 period due to foot and mouth disease
(FMD) outbreaks in China. However, FAS Beijing believes that despite FMD
outbreaks, beef production will continue to increase steadily at a 5
percent yearly rate in the next three years due to strong consumer
demand.

![](media/image2.wmf)

The beef share of total Chinese meat production changed from 8 percent
in 2001 to 9 percent in 2005. This trend will continue into the next
year as consumers shift from poultry to other meat in fear of highly
pathogenic avian influenza (HPAI). Although beef prices are the highest
among red meats, an increase in incomes allows consumers the luxury of
purchasing high-priced beef.

![](media/image3.jpeg){width="2.8333333333333335in"
height="2.5840277777777776in"}According to MOA's 11^th^ Five-Year-Plan
for Agriculture (2006-2010), the share of livestock output value is
targeted to increase from 35 to 50 percent of China's total agricultural
output value. Post believes China will level pork and poultry
production, while increasing beef, sheep and goat meat production, due
to strong demand and less feed grain constraints.

Currently, the seven provinces of Henan, Hebei, Shandong, Anhui, Jilin,
Liaoning and Heilongjiang are the center of China's beef production.
Cattle slaughter in these 7 areas accounted for 62 percent of China's
total cattle slaughter in the first quarter of 2006. China also has five
major grassland provinces for cattle production including Inner
Mongolia, Xingjiang, Gansu, Qinghai and Ningxia. It is projected that
China will invest more in the grassland areas for beef production
because of land limitations in inland provinces.

Despite the beef industry's desire to rapidly expand, there are several
factors that constrain beef production. In recent years, beef production
has mainly been a result of animal number increases, not carcass weight
increases. In China, beef carcass weight on average is far below that of
developed countries. According to the Chinese cattle industry, only 5
percent of the total beef cattle are high quality beef cattle, including
both domestic and imported breeds. As a result, the high-end beef market
demand has been met by imports. Although Chinese beef cattle are in need
of genetic improvement, the Government did not implement support
programs as those similarly used in dairy cattle production due to large
beef animal sizes and lower priority than milk. For example, since 2005,
the Ministry of Agriculture (MOA) has been subsiding RMB 20 (\$2.5) to
purchase two straws of frozen semen from high quality Holstein bulls for
artificial insemination of a Holstein cow in 4 major milk producing
provinces. This kind of subsidy is not applied for beef cattle industry.
Land, feed grain and forage resource constraints, combined with a newly
developed ethanol industry, may lead to a short supply of green corn
silage. These factors will limit beef cattle herd expansion in 2006 and
2007.

## Selected summary of animal disease in China 

  ------------ ---------- --------- ----------- ----------- --------- ------------
  Selected                                                            
  Summary of                                                          
  Animal and                                                          
  Poultry                                                             
  Disease in                                                          
  China,                                                              
  2004-2005                                                           
  (Number of                                                          
  Head or                                                             
  Bird)                                                               

               2004                             2005                  

  Disease      Infected   Death     Culled      Infected    Death     Culled

  FMD          n/a        n/a       n/a         612         0         4,744

  HPAI         144,900    129,100   9,045,000   158,200     151,200   22,225,800

  N.C. Disease 455,868    186,981   217,096     1,682,139   697,744   305,368

  Class. SF    41,154     18,363    6,752       94,479      50,465    9,568

  Br Abortus   1,186      4         1,894       2,100       80        1,544

  Source: MOA                                                         
  ------------ ---------- --------- ----------- ----------- --------- ------------

Animal diseases will limit China's raw meat exports in 2006 and 2007.
FMD is a major concern for cattle production. China had a total of 10
FMD outbreaks in 2005, and from January to late August 2006, 12 FMD
outbreaks have been reported. Most outbreaks this year occurred in
remote areas in western China, decreasing the threat to beef production
in heavy cattle areas like Shandong and Hebei provinces. China is
considering several measures to curb the spread of animal diseases. As
backyard production accounts for 80 percent of China's total cattle
production, the first step in this process is educating farmers about
disease prevention and control methods. Farmers are the first line of
defense in preventing animal diseases. Improved veterinary service in
rural areas can also lead to a decrease in the outbreak of infectious
livestock diseases.

## China's 11^th^ Five-Year-Plan for agriculture, in reference to livestock production

Selected agricultural targets for:

  ---------------------- -------- --------- --------- ------------------ ------------
  Index                  Unit     2005      2010      \% Annual Growth,  Status
                                                      Average            

  Total grain planted    1,000 HA 104,280   103,330   -0.18              Restricted
  area                                                                   

  General grain          1,000 MT 484,000   500,000   0.65               Restricted
  production capacity                                                    

  Total meat production  1,000 MT 77,430    84,000    1.64               Forecast

  Total poultry egg      1,000 MT 28,790    30,000    0.82               Forecast
  production                                                             

  Total milk production  1,000 MT 28,650    42,000    7.95               Forecast

  Source: MOA                                                            
  ---------------------- -------- --------- --------- ------------------ ------------

The Government is forecasting no grain production increases, a factor
that could impact swine and poultry production. This table also
indicates that China will focus more on quality rather than on
accelerated expansion. Beef production will likely exceed the targeted
pace of growth for all meats due to strong demand and less feed grain
constraints. An increase in dairy cattle numbers is expected, however,
dairy cow slaughter for the low-end domestic market will absorb the
increase.

## Beef consumption for 2007 forecast to increase 6 percent to 7.8 MMT

Post forecasts China's beef consumption in 2007 to reach a record high
7.8 MMT.

Beef consumption will continue to benefit from the consumption shift
from poultry to red meats in fear of avian influenza (AI). Post revised
the consumption numbers for 2005 and 2006 slightly down from the
previous forecast in the last semi-annual report CH6002 to current
forecast of 7 MMT and 7.5 MMT respectively based on new official data of
2005.

Beef consumption in 2006 has mainly been in the low-end market, since
higher international beef prices constrained imports for high-end cuts.
However, the situation may change as Asian markets reopen to U.S. beef.
Traders believe U.S. market access will help lower beef prices and lead
to increased Chinese imports in 2007.

China's high-end beef consumers prefer U.S. grain-fed beef because of
its tenderness. There are about 200 five-star hotels in various regions
throughout China. High-end restaurants have also blossomed in large
cities, and more are expected in anticipation of the Olympic Games in
2008. Increased incomes make beef affordable for more consumers to dine
out, and a prosperous tourism industry provides a growing market for
imported high quality beef.

Although U.S. beef has been banned since December 25, 2003 due to BSE,
trade resources report that it has been channeled into China from South
China and subsequently smuggled and repacked as beef from other eligible
exporting countries. Local newspapers reported in May and June that
AQSIQ intercepted smuggled beef from the United States in Shanghai,
Dalian and Shenzhen. When U.S. beef is allowed to re-enter China, U.S.
market share is expected to rapidly increase.

## Domestic beef prices forecast to remain high 

![](media/image4.wmf){width="2.875in" height="1.7590277777777779in"}Post
estimates that China's wholesale beef prices in 2007 will remain high.
Traditionally, beef prices increase during the Spring Festival in
January-February and during the public holidays in May and October.
Although domestic beef prices on average have fluctuated since 2005, the
price trend as a whole has increased due to consumers' shift from
poultry to other meat. China's per capita beef is only about 6 kg. Beef
prices will remain high due to strong demand and lagging supply, in
addition to higher labor, energy, water and transportation costs
involved in production.

## Beef imports in 2007 forecast to increase 33 percent to 4,000 MT and would be significantly higher if China resumes U.S. beef imports 

Post forecasts China's beef imports for 2007 to increase 33 percent to
4,000 MT due to strong consumer demand. This number is still 20 percent
below 2004 and 59 percent below average imports during the 2001-2004
period due to higher international prices driven by tight global beef
supplies due to BSE and FMD-related trade restrictions. Since China
banned U.S. beef in December 2003 and Canadian beef in May 2003,
Australia and New Zealand have dominated China's import beef market.
However, according to importers, the quality and taste of Australia and
New Zealand beef does not compare to U.S. beef. The opening of U.S. beef
export markets world wide, the 2006 beef production increase in New
Zealand, the end of the Argentine Government's ban on beef exports,
stronger Chinese currency and lagging domestic supplies for high-end
beef are all factors that will increase the demand for imported beef and
lead to increased beef imports in 2007.

According to trade forecasts, U.S. boneless beef shipments alone could
reach 3,000 MT (approximately \$10 million FOB value) in the first year,
driving China's total beef imports up another 75 percent to 7,000 MT. If
U.S. and China could agree on market access and an export protocol for
the full range of U.S. beef products (boneless, bone-in, variety beef
and offal), U.S. beef exports to China would be boosted another 5,000 MT
in the first year. These estimates are only direct shipments to China;
if indirect shipments via Hong Kong are included, the figures would be
even larger. These estimates are based on trade trends before December
2003 and current market conditions.

## Live cattle imports in 2007 forecast to decrease 12 percent due to policy change 

Post forecasts China's live cattle imports in 2007 to decrease 12
percent to 22,000 head. Almost all imported live cattle are dairy cattle
for breeding. A few years back, China started the program of "Developing
the West Region". As a means to eradicate poverty, dairy producers
enjoyed government subsidies that allowed them to import breeding cows
for local genetics improvement. However, most cows cannot be used for
breeding due to their low quality breed. As a result, the Government
stopped providing subsidies to dairy producers. In 2005, China started
another trial program to provide subsidies for high quality frozen
Holstein semen to be used in dairy genetic improvement. This policy
provides a good opportunity for U.S. companies exporting frozen bovine
semen now that China has reopened its market to bovine genetic
materials.

## Market access constraints for U.S. beef and bovine products

On June 31, 2006, AQSIQ announced 22 requirements for U.S. boneless beef
exports to China in Announcement #89, though USDA has not agreed to any
of these requirements. AQSIQ requests that before resumption of trade,
it must inspect U.S. beef plants. Upon completion of the inspection,
AQSIQ will publish a list of eligible exporting plants on their website
([www.aqsiq.gove.cn](http://www.aqsiq.gove.cn/)). A wider range of beef
products is critical for the U.S. industry because China's market size
for beef offal was about \$39 million in 2003.

The ban on live cattle imports from the United States also remains in
place. China considers North America (Canada, Mexico and the United
States) one market because of free trade agreements and animal movement
across borders. The recent Canadian BSE case was discovered in an animal
that was 50 months old and was born several years after the feed ban in
North America forbid the use of ruminant meat and bone meal (MBM)
contained in ruminant feed.

Additionally, bovine tallow and grease is not permitted entry into
China. According to traders, the international standard for rendered
bovine tallow's impurity does not exceed 0.15 percent. This is not a
foreseeable problem for the industry. However, China requests not only
the 0.15 percent tolerance, but also that it be completely protein free,
which is an impossible requirement.

U.S. bovine tallow and grease exports to China were valued at \$23
million before the 2003 BSE-related bans. Pet foods containing bovine
tallow will face the same problem.

## Beef exports in 2007 forecast to decrease 5 percent to 8,500 MT, while live cattle exports forecast to decrease slightly 

Hong Kong, South Korea and Japan are the three top beef export markets
accounting for 66 percent of China's total beef exports to the world.
The return of U.S. beef to Hong Kong and Japan, and the return of
Canadian beef to Hong Kong and Macau, combined with stronger Chinese
currency, may result in a smaller Chinese beef export market share in
2007.

FAS Beijing adjusted downwards China's beef export estimate for 2006
from 100,000 MT in the previous semi-annual report CH6002. The current
forecast of 90,000 MT is about the same level as 2005. Market access for
U.S. beef in Hong Kong and Macau will mainly impact China's frozen beef
exports. FMD in China is the main factor impacting live cattle exports,
however the Hong Kong and Macau export market has remained unchanged.
These markets account for almost the full share of China's live cattle
exports. This trend is expected to continue into next year.

## PS&D tables for cattle and beef

  ---------------- ---------- ----------------- ---------- ----------------- ---------- ----------------- --------- -------
  **PSD Table**                                                                                                     

  **Country**      **China,                                                                                         
                   Peoples                                                                                          
                   Republic                                                                                         
                   of**                                                                                             

  **Commodity**    **Animal                                                  (1000                                  
                   Numbers,                                                  HEAD)                                  
                   Cattle**                                                                                         

                   2005       Revised           2006       Estimate          2007       Forecast          UOM       

                   USDA       Post              USDA       Post              USDA       Post                        
                   Official   Estimate\[New\]   Official   Estimate\[New\]   Official   Estimate\[New\]             
                   \[Old\]                      \[Old\]                      \[Old\]                                

  **Market Year               01/2005                      01/2006                      01/2007           MM/YYYY   
  Begin**                                                                                                           

  Total Cattle     137818     137818            140718     141575            143411     145349            (1000     
  Beg. Stks                                                                                               HEAD)     

  Dairy Cows Beg.  11080      11080             13700      12161             0          13400             (1000     
  Stks                                                                                                    HEAD)     

  Beef Cows Beg.   65640      65640             68580      68580             0          71800             (1000     
  Stocks                                                                                                  HEAD)     

  Production (Calf 57020      57020             60100      60100             0          63300             (1000     
  Crop)                                                                                                   HEAD)     

  Intra EC Imports 0          0                 0          0                 0          0                 (1000     
                                                                                                          HEAD)     

  Total Imports    50         50                46         25                0          22                (1000     
                                                                                                          HEAD)     

  TOTAL Imports    50         50                46         25                0          22                (1000     
                                                                                                          HEAD)     

  TOTAL SUPPLY     194888     194888            200864     201700            143411     208671            (1000     
                                                                                                          HEAD)     

  Intra EC Exports 0          0                 0          0                 0          0                 (1000     
                                                                                                          HEAD)     

  Total Exports    54         54                51         51                0          51                (1000     
                                                                                                          HEAD)     

  TOTAL Exports    54         54                51         51                0          51                (1000     
                                                                                                          HEAD)     

  Cow Slaughter    0          0                 0          0                 0          0                 (1000     
                                                                                                          HEAD)     

  Calf Slaughter   0          0                 0          0                 0          0                 (1000     
                                                                                                          HEAD)     

  Other Slaughter  53618      52876             56900      55800             0          58800             (1000     
                                                                                                          HEAD)     

  Total Slaughter  53618      52876             56900      55800             0          58800             (1000     
                                                                                                          HEAD)     

  Loss             498        383               502        500               0          350               (1000     
                                                                                                          HEAD)     

  Ending           140718     141575            143411     145349            0          149570            (1000     
  Inventories                                                                                             HEAD)     

  TOTAL            194888     194888            200864     201700            0          208771            (1000     
  DISTRIBUTION                                                                                            HEAD)     

  Calendar Yr.     0          0                 0          0                 0          0                 (1000     
  Imp. from U.S.                                                                                          HEAD)     

  Calendar Yr.     0          0                 0          0                 0          0                 (1000     
  Exp. to U.S.                                                                                            HEAD)     
  ---------------- ---------- ----------------- ---------- ----------------- ---------- ----------------- --------- -------

  ---------------- ---------- ----------------- ---------- ----------------- ----------- ----------------- --------- -------
  **PSD Table**                                                                                                      

  **Country**      **China,                                                                                          
                   Peoples                                                                                           
                   Republic                                                                                          
                   of**                                                                                              

  **Commodity**    **Meat,                                                   (1000 MT                                
                   Beef and                                                  CWE)(1000                               
                   Veal**                                                    HEAD)                                   

                   2005       Revised           2006       Estimate          2007        Forecast          UOM       

                   USDA       Post              USDA       Post              USDA        Post                        
                   Official   Estimate\[New\]   Official   Estimate\[New\]   Official    Estimate\[New\]             
                   \[Old\]                      \[Old\]                      \[Old\]                                 

  **Market Year               01/2005                      01/2006                       01/2007           MM/YYYY   
  Begin**                                                                                                            

  Slaughter        53618      52876             56900      55800             0           58800             (1000     
  (Reference)                                                                                              HEAD)     

  Beginning Stocks 0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  Production       7140       7115              7575       7500              0           7910              (1000 MT  
                                                                                                           CWE)      

  Intra EC Imports 0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  Total Imports    2          3                 3          3                 0           4                 (1000 MT  
                                                                                                           CWE)      

  TOTAL Imports    2          3                 3          3                 0           4                 (1000 MT  
                                                                                                           CWE)      

  TOTAL SUPPLY     7142       7118              7578       7503              0           7914              (1000 MT  
                                                                                                           CWE)      

  Intra EC Exports 0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  Total Exports    91         91                100        90                0           85                (1000 MT  
                                                                                                           CWE)      

  TOTAL Exports    91         91                100        90                0           85                (1000 MT  
                                                                                                           CWE)      

  Human Dom.       7051       7027              7478       7413              0           7829              (1000 MT  
  Consumption                                                                                              CWE)      

  Other Use,       0          0                 0          0                 0           0                 (1000 MT  
  Losses                                                                                                   CWE)      

  TOTAL Dom.       7051       7027              7478       7413              0           7829              (1000 MT  
  Consumption                                                                                              CWE)      

  Ending Stocks    0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  TOTAL            7142       7118              7578       7503              0           7914              (1000 MT  
  DISTRIBUTION                                                                                             CWE)      

  Calendar Yr.     0          0                 0          0                 0           0                 (1000 MT  
  Imp. from U.S.                                                                                           CWE)      

  Calendar Yr.     0          0                 0          0                 0           0                 (1000 MT  
  Exp. to U.S.                                                                                             CWE)      
  ---------------- ---------- ----------------- ---------- ----------------- ----------- ----------------- --------- -------

## Cattle and beef trade matrix 

+----------------+----------+----------+---------+---------+---------+
| China Live     |          |          |         |         |         |
| Cattle         |          |          |         |         |         |
| Imports,       |          |          |         |         |         |
| 2004-2006      |          |          |         |         |         |
|                |          |          |         |         |         |
| (Number of     |          |          |         |         |         |
| Head)          |          |          |         |         |         |
+----------------+----------+----------+---------+---------+---------+
|                | Jan-Dec  | Jan-Dec  | Jan -   |         | Jan -   |
|                |          |          | Jun     |         | Jun     |
+----------------+----------+----------+---------+---------+---------+
|                | Quantity | Quantity | Q       |         | \%      |
|                |          |          | uantity |         | Change  |
|                |          |          | Com     |         |         |
|                |          |          | parison |         |         |
+----------------+----------+----------+---------+---------+---------+
| Origin         | 2004     | 2005     | 2005    | 2006    | 2006/05 |
+----------------+----------+----------+---------+---------+---------+
| World          | 132,446  | 49,586   | 35,257  | 12,606  | -64.25  |
+----------------+----------+----------+---------+---------+---------+
| Australia      | 69,406   | 35,517   | 23,418  | 9,803   | -58.14  |
+----------------+----------+----------+---------+---------+---------+
| New Zealand    | 63,032   | 14,069   | 11,839  | 2,802   | -76.33  |
+----------------+----------+----------+---------+---------+---------+
| United States  | 0        | 0        | 0       | 0       | 0.00    |
+----------------+----------+----------+---------+---------+---------+
| Canada         | 0        | 0        | 0       | 0       | 0.00    |
+----------------+----------+----------+---------+---------+---------+
| Mexico         | 8        | 0        | 0       | 0       | 0.00    |
+----------------+----------+----------+---------+---------+---------+
| HS Code:       |          |          |         |         |         |
| 010210, 010290 |          |          |         |         |         |
|                |          |          |         |         |         |
| Source: WTA    |          |          |         |         |         |
| China          |          |          |         |         |         |
| Statistics     |          |          |         |         |         |
+----------------+----------+----------+---------+---------+---------+

+----------------+----------+----------+---------+---------+---------+
| China Beef and |          |          |         |         |         |
| Veal Imports,  |          |          |         |         |         |
| 2004-2006      |          |          |         |         |         |
|                |          |          |         |         |         |
| (Metric Tons)  |          |          |         |         |         |
+----------------+----------+----------+---------+---------+---------+
|                | Jan-Dec  | Jan-Dec  | Jan -   |         | Jan -   |
|                |          |          | Jun     |         | Jun     |
+----------------+----------+----------+---------+---------+---------+
|                | Quantity | Quantity | Q       |         | \%      |
|                |          |          | uantity |         | Change  |
|                |          |          | Com     |         |         |
|                |          |          | parison |         |         |
+----------------+----------+----------+---------+---------+---------+
| Origin         | 2004     | 2005     | 2005    | 2006    | 2006/05 |
+----------------+----------+----------+---------+---------+---------+
| World          | 3,451    | 1,252    | 601     | 625     | 3.99    |
+----------------+----------+----------+---------+---------+---------+
| Australia      | 2,159    | 1,132    | 579     | 483     | -16.58  |
+----------------+----------+----------+---------+---------+---------+
| New Zealand    | 825      | 10       | 10      | 87      | 770.00  |
+----------------+----------+----------+---------+---------+---------+
| Uruguay        | 2        | 25       | 11      | 47      | 327.27  |
+----------------+----------+----------+---------+---------+---------+
| Brazil         | 422      | 0        | 0       | 7       | 0.00    |
+----------------+----------+----------+---------+---------+---------+
| Argentina      | \-       | 83       | 0       | 0       | 0.00    |
+----------------+----------+----------+---------+---------+---------+
| United States  | 41       | 0        | 0       | 0       | 0.00    |
+----------------+----------+----------+---------+---------+---------+
| Other          | 2        | 2        | 1       | 1       | 0.00    |
+----------------+----------+----------+---------+---------+---------+
| HS Code:       |          |          |         |         |         |
| 020110,        |          |          |         |         |         |
| 020120,        |          |          |         |         |         |
| 020130,        |          |          |         |         |         |
| 020210,        |          |          |         |         |         |
| 020220,        |          |          |         |         |         |
| 020230, 021020 |          |          |         |         |         |
| and 160250     |          |          |         |         |         |
|                |          |          |         |         |         |
| Source: WTA    |          |          |         |         |         |
| China          |          |          |         |         |         |
| Statistics     |          |          |         |         |         |
+----------------+----------+----------+---------+---------+---------+

  ----------------- ---------- ----------- ------------ ---------- ----------
  Hong Kong                                                        
  Re-Exports of                                                    
  Beef and Veal to                                                 
  China, 2004-2006                                                 

  (Metric Tons)                                                    

                    Jan-Dec    Jan-Dec     Jan - Jun               Jan - Jun

                    Quantity   Quantity    Quantity                \% Change
                                           Comparison              

  Origin            2004       2005        2005         2006       2006/05

  World             3,718      729         654          96         85.32

  Brazil            1,193      138         125          42         -66.40

  Canada            194        98          70           26         62.86

  New Zealand       1,020      168         168          0          -100.00

  Australia         27         144         144          0          -100.00

  Argentina         159        109         0            0          0.00

  India             309        25          25           0          100.00

  Ireland           244        25          0            0          0.00

  Austria           0          14          0            0          0.00

  United States     263        1           0            0          0.00

  Other             309        11          122          28         -77.05

  HS Code: 020110,                                                 
  020120, 020130,                                                  
  020210, 020220,                                                  
  020230, 021020                                                   
  and 160250                                                       

  Source: WTA China                                                
  Statistics                                                       
  ----------------- ---------- ----------- ------------ ---------- ----------

+------------------+---------+---------+--------+---------+---------+
| China Live       |         |         |        |         |         |
| Cattle Exports,  |         |         |        |         |         |
| 2004-2006        |         |         |        |         |         |
|                  |         |         |        |         |         |
| (Number of Head) |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
|                  | Jan-Dec | Jan-Dec | Jan -  |         | Jan -   |
|                  |         |         | Jun    |         | Jun     |
+------------------+---------+---------+--------+---------+---------+
|                  | Q       | Q       | Qu     |         | \%      |
|                  | uantity | uantity | antity |         | Change  |
|                  |         |         | Comp   |         |         |
|                  |         |         | arison |         |         |
+------------------+---------+---------+--------+---------+---------+
| Destination      | 2004    | 2005    | 2005   | 2006    | 2006/05 |
+------------------+---------+---------+--------+---------+---------+
| World            | 59,009  | 54,129  | 26,679 | 25,843  | -3.13   |
+------------------+---------+---------+--------+---------+---------+
| Hong Kong        | 47,377  | 48,003  | 23,601 | 22,773  | -3.51   |
+------------------+---------+---------+--------+---------+---------+
| Macau            | 5,278   | 5,746   | 2,758  | 3,040   | 10.22   |
+------------------+---------+---------+--------+---------+---------+
| Korea North      | 330     | 380     | 320    | 0       | -100.00 |
+------------------+---------+---------+--------+---------+---------+
| Jordan           | 6,000   | 0       | 0      | 0       | 0.00    |
+------------------+---------+---------+--------+---------+---------+
| Other            | 24      | 0       | 0      | 30      | 0.00    |
+------------------+---------+---------+--------+---------+---------+
| HS Code: 010210, |         |         |        |         |         |
| 010290           |         |         |        |         |         |
|                  |         |         |        |         |         |
| Source: WTA      |         |         |        |         |         |
| China Statistics |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+

+------------------+---------+---------+--------+---------+---------+
| China Beef and   |         |         |        |         |         |
| Veal Exports,    |         |         |        |         |         |
| 2004-2006        |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
| (Metric Tons)    |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
|                  | Jan-Dec | Jan-Dec | Jan -  |         | Jan -   |
|                  |         |         | Jun    |         | Jun     |
+------------------+---------+---------+--------+---------+---------+
|                  | Q       | Q       | Qu     |         | \%      |
|                  | uantity | uantity | antity |         | Change  |
|                  |         |         | Comp   |         |         |
|                  |         |         | arison |         |         |
+------------------+---------+---------+--------+---------+---------+
| Destination      | 2004    | 2005    | 2005   | 2006    | 2006/05 |
+------------------+---------+---------+--------+---------+---------+
| World            | 37,171  | 54,586  | 22,741 | 26,635  | 17.12   |
+------------------+---------+---------+--------+---------+---------+
| Hong Kong        | 15,876  | 14,862  | 6,320  | 6,960   | 10.13   |
+------------------+---------+---------+--------+---------+---------+
| Korea South      | 3,638   | 12,139  | 5,282  | 6,573   | 24.44   |
+------------------+---------+---------+--------+---------+---------+
| Japan            | 9,062   | 14,747  | 5,113  | 4,455   | -12.87  |
+------------------+---------+---------+--------+---------+---------+
| Jordan           | 739     | 4,558   | 1,947  | 3,757   | 92.96   |
+------------------+---------+---------+--------+---------+---------+
| Kuwait           | 1,657   | 2,606   | 1,161  | 1,574   | 35.57   |
+------------------+---------+---------+--------+---------+---------+
| Malaysia         | 1,293   | 1,186   | 477    | 979     | 105.24  |
+------------------+---------+---------+--------+---------+---------+
| Lebanon          | 403     | 571     | 188    | 627     | 233.51  |
+------------------+---------+---------+--------+---------+---------+
| Indonesia        | 943     | 1,345   | 641    | 608     | -5.15   |
+------------------+---------+---------+--------+---------+---------+
| Korea North      | 492     | 1,142   | 765    | 291     | -61.96  |
+------------------+---------+---------+--------+---------+---------+
| Macau            | 124     | 193     | 66     | 137     | 107.58  |
+------------------+---------+---------+--------+---------+---------+
| Singapore        | 172     | 154     | 58     | 53      | -8.62   |
+------------------+---------+---------+--------+---------+---------+
| Russia           | 1,435   | 219     | 77     | 49      | -36.36  |
+------------------+---------+---------+--------+---------+---------+
| United Arab      | 783     | 270     | 251    | 0       | -100.00 |
| Emirates         |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
| Other            | 554     | 594     | 395    | 572     | 44.81   |
+------------------+---------+---------+--------+---------+---------+
| HS Code: 020110, |         |         |        |         |         |
| 020120, 020130,  |         |         |        |         |         |
| 020210, 020220,  |         |         |        |         |         |
| 020230, 021020   |         |         |        |         |         |
| and 160250       |         |         |        |         |         |
|                  |         |         |        |         |         |
| Source: WTA      |         |         |        |         |         |
| China Statistics |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+

# Swine and Pork

## China's pork production in 2007 forecast to increase 5 percent to 55.8 MMT

FAS Beijing forecasts China's pork production in 2007 will reach a
record high of 55.8 MMT, a 5 percent increase from the estimated 52 MMT
in 2006. Based on new official data, Post revised the pork production
number for 2005 slightly higher to 50 MMT from the previous estimation
of 49.7 MMT in the last semi-annual report CH6002. As Post forecasts
China's pork production increase 6 and 5 percent respectively in 2006
and 2007, pork production numbers for the two years have been adjusted
accordingly in the current PS&D table.

The pace of pork production growth in both 2006 and 2007 is forecast to
be smaller than that of 2005 due to a smaller crop impacted by decreased
profits. According to the Ministry of Agriculture (MOA), in 2006,
China's wholesale swine
prices![](media/image5.wmf){width="2.9930555555555554in"
height="1.4993055555555554in"} from January to July decreased 27 and 26
percent respectively over the same period in 2005 and 2004. The result
can be attributed to the impact of high grain wholesale prices. As a
result, the conversion rate between feed grain and swine on average
dropped to 5.06:1, below the critical point of 5.5:1. As a result, a
farmer lost \$10 raising one head of swine, and some farmers started
slaughtering sows.

The main reason for the change in profit was that pork prices
appreciated considerably during 2003-2004 driven by consumers' shift
from poultry to other meat due to constant outbreaks of highly
pathogenic avian influenza (HPAI) in China. As a result, farmers
increased swine crop production. The PS&D table demonstrates the rapid
pace of growth in sow production, as beginning stocks in 2005 were 2
percent higher than the previous year. The larger crop led to decreasing
swine and pork prices. Pork production trend is concurrent with Post's
forecast in the last semi-annual report CH6002.

Although the pace of growth in the 2007 sow stock is forecast about 1
and 3 percent smaller respectively than that of 2006 and 2005, the sow
stock is still above the rational level (8 percent) out of the total pig
stock, indicating China's swine crop production capacity has
strengthened. Normally, farmers would alternate between raising swine to
raising other livestock or poultry as swine prices depreciated. However,
with uncertainty of HPAI and FMD, raising swine is the least problematic
in terms of risk to farmers. Despite the drop in pork consumption in the
last decade, pork is still the dominant traditional animal protein. In
the last couple of years, constant HPAI outbreaks and reports of human
death infected by HPAI have pushed consumers to shift from poultry to
other meats.

With China's GDP growth at 11 percent, urban income growth at 10 percent
and farmers' cash income growth at 12 percent in the first half of 2006,
meat protein demand will continue strong throughout 2006 and into 2007.
The recent shift in domestic meat consumption is expected to favor pork
exports. China's swine and pork production will grow at a steady 5
percent rate in 2007. However, pork share may continue to decrease in
China's total meat production due to stronger demand for beef, sheep and
goat meat in addition to feed grain constraints.

Swine and pork production will become more concentrated in feed grain
producing areas. According to the industry, in the first half of 2006, 8
provinces accounted for 70 percent of China's total slaughtered swine,
each slaughtering more than 10 million head. These are the top swine
producing provinces are Sichuan, Hunan, Henan, Shandong, Hebei, Guangxi,
Guangdong and Hubei, with the top three accounting for one-third of
China's total slaughtered swine.

## Pork consumption in 2007 forecast to increase 6 percent to 55.5 MMT

Post forecasts China's pork consumption to reach a record high of 55.5
MMT in 2007. Steady pork consumption is attributed to urbanization and
consumers' shift from poultry to other meat due to HPAI outbreaks in the
recent years. Pork also continues to be the most inexpensive meat in
China. Based on new official data, post adjusted China's pork
consumption for 2005 slightly up from the previous estimation in the
semi-annual report CH6002 to 49.8 MMT in the current report. Pork prices
in the second half of 2006 are forecast to rise slightly due to the
slower pace of growth in slaughter.

## Pork imports in 2007 forecast to decrease 6 percent to 34,000 MT 

The decrease in pork imports is due mainly to domestic pork production
increases and low pork prices. Decreased pork imports will be offset by
an increase in pork offal imports. In the first half of 2006, pork offal
imports increased 13 percent valued at \$58 million due to lower
international prices. U.S. export data indicates that U.S. pork export
numbers are higher than Chinese customs data indicate. Post suspects it
is being smuggled through South China. According to traders, expensive
transshipment fee, HK\$5,000 (US\$606) per container for pre-inspection
and dock handling, resulted in traders' preference to ship directly to
China or smuggle meat into China. As pork is more popular in the
northern part of China, direct shipments normally arrive at northern
ports. However, direct shipments to the Shenzhen port opposite to Hong
Kong increasing. CIQ Shenzhen reported that in 2005, the Shenzhen port
handled 72,696 MT of imported frozen meat, 94 percent were U.S.
products.

## Repeated pathogen and residue issues for U.S. pork exports to China

China requires a zero tolerance the pathogens Salmonella, Listeria and
Ecoli (0-157) in 5 samples (total 25 grams) for all kinds of meats. If
these pathogens are detected at entry ports, China will destroy or
return the goods. One option for poultry and meat products held at ports
due to detection of Salmonella pathogens is to treat it with radiation
and sell directly to a poultry or meat processing plant.

The United States does not require zero tolerance for raw meats, except
for ready-to-eat ground beef. Seven U.S. pork plants were delisted for
eligible exports to China at the beginning of 2006. Five of them were
re-listed after AQSIQ conducted a field study in some selected plants in
March. Two are still suspended because of Ractopamine found in pork.
Feed containing Ractopamine is strictly forbidden in China.

Because China's zero tolerance policy on raw meat imports is not a
science-based, the United States initiated several bilateral technical
talks with China. As a result of this cooperation, the two sides signed
a Memorandum of Understanding (MOU) on SPS issues in April 2006 in
Washington, D.C. during the bilateral 17^th^ JCCT meeting. Within this
MOU framework, USDA and AQSIQ initiated a Memorandum of Cooperation
(MOC) last June for a bilateral notification mechanism and coordination
on food safety detections on imported meat products. With all these
efforts, AQSIQ now gives USDA and the meat plants a 45-60 day corrective
period instead of delisting them immediately after food safety
detections.

The U.S. Government continues to encourage Chinese authorities to modify
the zero tolerance policy on raw meat. The two sides agreed to hold a
food safety meeting at least once a year to try to find solutions on
food safety issues of mutual concern. The following chart is a brief
summary of China's main requirements for imported meat products. Chinese
traders can visit the website of the Ministry of Commerce (MOFCOME) to
check food safety requirements of main trading partners, such as the
United States, EU, Australia and China. (http//kjsdrug.mofcom.gov.cn)

+-------------------------------------+--------------------------------+
| Selected Summary of Pathogen and    |                                |
| Residue Requirements for Meat       |                                |
| Products in China                   |                                |
+-------------------------------------+--------------------------------+
| Item for pathogens                  | Maximum Level                  |
+-------------------------------------+--------------------------------+
| Salmonella                          | "0" for a 25-gram sample       |
|                                     |                                |
| Listeria                            | "0" for a 25-gram sample       |
|                                     |                                |
| Ecoli (0-157)                       | "0" for a 25-gram sample       |
+-------------------------------------+--------------------------------+
| Items for heavy metals in meat      | Maximum Level (MLs)/(mg/kg)    |
+-------------------------------------+--------------------------------+
| Lead                                | 0.2                            |
+-------------------------------------+--------------------------------+
| Cadmium in animal meat              | 0.1                            |
|                                     |                                |
| Cadmium in animal liver             | 0.5                            |
|                                     |                                |
| Cadmium in animal kidney            | 1.0                            |
+-------------------------------------+--------------------------------+
| Total mercury (Hg)                  | 0.05                           |
+-------------------------------------+--------------------------------+
| Arsenic                             | 0.05                           |
+-------------------------------------+--------------------------------+
| Chromium (including liver, kidney)  | 1.0                            |
+-------------------------------------+--------------------------------+
| Selenium for meat                   | 0.5                            |
|                                     |                                |
| Selenium for kidney                 | 3.0                            |
+-------------------------------------+--------------------------------+
| Nitrite                             | 3.0                            |
+-------------------------------------+--------------------------------+
| Items for animal drug forbidden to  | "0" Tolerance                  |
| use                                 |                                |
+-------------------------------------+--------------------------------+
| Ractopamine                         |                                |
+-------------------------------------+--------------------------------+
| Clenbuterol                         |                                |
+-------------------------------------+--------------------------------+

## Portfolios for food safety and animal health among Chinese government agencies

Food safety and animal health mainly fall under the jurisdiction of
three Chinese Government Agencies: MOA, AQSIQ and the Ministry of Health
(MOH). MOA is responsible for drafting policy and regulations on animal
drug standards, foreign animal disease risk assessment, import feed
registration including pet food, animal disease control and notification
of epidemic animal diseases to the OIE. MOH is responsible for the laws
and regulations regarding finished food products for domestic human
consumption and reports human infection of epidemic diseases, including
human infections of animal diseases, to the World Health Organization
(WHO). AQSIQ is an enforcement body of laws and regulations for imports
and exports. AQSIQ also negotiates trade protocols with partner
countries. Normally, MOA and AQSIQ jointly announce a ban or the lifting
of a ban on imported animal and animal products. It will take time for
China to change its zero tolerance policy on imported meat products.
Trading partners should send letters to China Administration of
Standardization (SAC) requesting a standard change. If SAC accepts the
request, it will establish a project and then call experts of various
agencies to evaluate the request. Note that it takes time to coordinate
among the Chinese government agencies.

## Pork exports in 2007 forecast to increase 3 percent to 36,000 MT, China exports fresh pork to Hong Kong for the fist time in many years 

In 2005, Hong Kong, Japan and North Korea accounted for 67 percent of
China's total pork exports to the world. Russia dropped from one of the
top markets in 2003 to the six largest market due to problems
controlling animal disease outbreak in China. The return of U.S. beef to
Japan may result in a decrease in Chinese pork and poultry exports to
Japan. China successfully delivered fresh pork to Hong Kong for the
first time in August 2006. Because transportation between Hong Kong and
China is inexpensive and convenient, China's fresh pork exports will be
highly competitive in the HK market. China's fresh pork exports may also
lead to decreased exports of live swine to Hong Kong.

## PS&D tables for swine and pork

  ---------------- ---------- ----------------- ---------- ----------------- ---------- ----------------- --------- -------
  **PSD Table**                                                                                                     

  **Country**      **China,                                                                                         
                   Peoples                                                                                          
                   Republic                                                                                         
                   of**                                                                                             

  **Commodity**    **Animal                                                  (1000                                  
                   Numbers,                                                  HEAD)                                  
                   Swine**                                                                                          

                   2005       Revised           2006       Estimate          2007       Forecast          UOM       

                   USDA       Post              USDA       Post              USDA       Post                        
                   Official   Estimate\[New\]   Official   Estimate\[New\]   Official   Estimate\[New\]             
                   \[Old\]                      \[Old\]                      \[Old\]                                

  **Market Year               01/2005                      01/2006                      01/2007           MM/YYYY   
  Begin**                                                                                                           

  TOTAL Beginning  481891     481891            500324     503348            519052     519052            (1000     
  Stocks                                                                                                  HEAD)     

  Sow Beginning    42200      42900             43800      44900             0          46600             (1000     
  Stocks                                                                                                  HEAD)     

  Production (Pig  675000     685399            700000     720000            0          750000            (1000     
  Crop)                                                                                                   HEAD)     

  Intra EC Imports 0          0                 0          0                 0          0                 (1000     
                                                                                                          HEAD)     

  Total Imports    3          3                 3          3                 0          3                 (1000     
                                                                                                          HEAD)     

  TOTAL Imports    3          3                 3          3                 0          3                 (1000     
                                                                                                          HEAD)     

  TOTAL SUPPLY     1156894    1167293           1200327    1223351           519052     1269055           (1000     
                                                                                                          HEAD)     

  Intra EC Exports 0          0                 0          0                 0          0                 (1000     
                                                                                                          HEAD)     

  Total Exports    1769       1769              2000       1700              0          1600              (1000     
                                                                                                          HEAD)     

  TOTAL Exports    1769       1769              2000       1700              0          1600              (1000     
                                                                                                          HEAD)     

  Sow Slaughter    0          0                 0          0                 0          0                 (1000     
                                                                                                          HEAD)     

  OTHER SLAUGHTER  653670     660986            678475     701399            0          740201            (1000     
                                                                                                          HEAD)     

  Total Slaughter  653670     660986            678475     701399            0          740201            (1000     
                                                                                                          HEAD)     

  Loss             1131       1190              800        1200              0          800               (1000     
                                                                                                          HEAD)     

  Ending           500324     503348            519052     519052            0          526454            (1000     
  Inventories                                                                                             HEAD)     

  TOTAL            1156894    1167293           1200327    1223351           0          1269055           (1000     
  DISTRIBUTION                                                                                            HEAD)     

  Calendar Yr.     2          2                 2          2                 0          2                 (1000     
  Imp. from U.S.                                                                                          HEAD)     

  Calendar Yr.     0          0                 0          0                 0          0                 (1000     
  Exp. to U.S.                                                                                            HEAD)     
  ---------------- ---------- ----------------- ---------- ----------------- ---------- ----------------- --------- -------

  ---------------- ---------- ----------------- ---------- ----------------- ----------- ----------------- --------- -------
  **PSD Table**                                                                                                      

  **Country**      **China,                                                                                          
                   Peoples                                                                                           
                   Republic                                                                                          
                   of**                                                                                              

  **Commodity**    **Meat,                                                   (1000 MT                                
                   Swine**                                                   CWE)(1000                               
                                                                             HEAD)                                   

                   2005       Revised           2006       Estimate          2007        Forecast          UOM       

                   USDA       Post              USDA       Post              USDA        Post                        
                   Official   Estimate\[New\]   Official   Estimate\[New\]   Official    Estimate\[New\]             
                   \[Old\]                      \[Old\]                      \[Old\]                                 

  **Market Year               01/2005                      01/2006                       01/2007           MM/YYYY   
  Begin**                                                                                                            

  Slaughter        653670     660986            678475     701399            0           740201            (1000     
  (Reference)                                                                                              HEAD)     

  Beginning Stocks 0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  Production       49685      50106             52000      53000             0           55800             (1000 MT  
                                                                                                           CWE)      

  Intra EC Imports 0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  Total Imports    41         41                50         36                0           34                (1000 MT  
                                                                                                           CWE)      

  TOTAL Imports    41         41                50         36                0           34                (1000 MT  
                                                                                                           CWE)      

  TOTAL SUPPLY     49726      50147             52050      53036             0           55834             (1000 MT  
                                                                                                           CWE)      

  Intra EC Exports 0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  Total Exports    331        331               300        350               0           360               (1000 MT  
                                                                                                           CWE)      

  TOTAL Exports    331        331               300        350               0           360               (1000 MT  
                                                                                                           CWE)      

  Human Dom.       49395      49816             51750      52686             0           55474             (1000 MT  
  Consumption                                                                                              CWE)      

  Other Use,       0          0                 0          0                 0           0                 (1000 MT  
  Losses                                                                                                   CWE)      

  TOTAL Dom.       49395      49816             51750      52686             0           55474             (1000 MT  
  Consumption                                                                                              CWE)      

  Ending Stocks    0          0                 0          0                 0           0                 (1000 MT  
                                                                                                           CWE)      

  TOTAL            49726      50147             52050      53036             0           55834             (1000 MT  
  DISTRIBUTION                                                                                             CWE)      

  Calendar Yr.     53         49                48         42                0           40                (1000 MT  
  Imp. from U.S.                                                                                           CWE)      

  Calendar Yr.     0          0                 0          0                 0           0                 (1000 MT  
  Exp. to U.S.                                                                                             CWE)      
  ---------------- ---------- ----------------- ---------- ----------------- ----------- ----------------- --------- -------

## Swine and pork trade matrix

+------------------+---------+---------+--------+---------+---------+
| China Swine      |         |         |        |         |         |
| Imports,         |         |         |        |         |         |
| 2004-2006        |         |         |        |         |         |
|                  |         |         |        |         |         |
| (Number of Head) |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
|                  | Jan-Dec | Jan-Dec | Jan -  |         | Jan -   |
|                  |         |         | Jun    |         | Jun     |
+------------------+---------+---------+--------+---------+---------+
|                  | Q       | Q       | Qu     |         | \%      |
|                  | uantity | uantity | antity |         | Change  |
|                  |         |         | Comp   |         |         |
|                  |         |         | arison |         |         |
+------------------+---------+---------+--------+---------+---------+
| Origin           | 2004    | 2005    | 2005   | 2006    | 2006/05 |
+------------------+---------+---------+--------+---------+---------+
| World            | 1,898   | 3,238   | 1,303  | 1,383   | 6.14    |
+------------------+---------+---------+--------+---------+---------+
| United States    | 840     | 1,892   | 741    | 1,038   | 40.08   |
+------------------+---------+---------+--------+---------+---------+
| Denmark          | 578     | 0       | 0      | 562     | 0.00    |
+------------------+---------+---------+--------+---------+---------+
| Canada           | 480     | 1,032   | 562    | 165     | -70.64  |
+------------------+---------+---------+--------+---------+---------+
| France           | 0       | 314     | 0      | 0       | 0.00    |
+------------------+---------+---------+--------+---------+---------+
| HS Code: 0103    |         |         |        |         |         |
|                  |         |         |        |         |         |
| Source: WTA      |         |         |        |         |         |
| China Statistics |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+

+------------------+---------+---------+--------+---------+---------+
| China Pork       |         |         |        |         |         |
| Imports,         |         |         |        |         |         |
| 2004-2006        |         |         |        |         |         |
|                  |         |         |        |         |         |
| (Metric Tons)    |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
|                  | Jan-Dec | Jan-Dec | Jan -  |         | Jan -   |
|                  |         |         | Jun    |         | Jun     |
+------------------+---------+---------+--------+---------+---------+
|                  | Q       | Q       | Qu     |         | \%      |
|                  | uantity | uantity | antity |         | Change  |
|                  |         |         | Comp   |         |         |
|                  |         |         | arison |         |         |
+------------------+---------+---------+--------+---------+---------+
| Origin           | 2004    | 2005    | 2005   | 2006    | 2006/05 |
+------------------+---------+---------+--------+---------+---------+
| World            | 70,683  | 31,254  | 17,728 | 11,194  | -36.86  |
+------------------+---------+---------+--------+---------+---------+
| Canada           | 23,968  | 19,178  | 11,049 | 8,283   | -25.03  |
+------------------+---------+---------+--------+---------+---------+
| United States    | 29,585  | 6,750   | 4,217  | 1,001   | -76.26  |
+------------------+---------+---------+--------+---------+---------+
| Denmark          | 17,000  | 4,654   | 2,298  | 228     | -90.08  |
+------------------+---------+---------+--------+---------+---------+
| France           | 2       | 577     | 86     | 1,133   | 1217.44 |
+------------------+---------+---------+--------+---------+---------+
| Other            | 128     | 95      | 78     | 549     | 603.85  |
+------------------+---------+---------+--------+---------+---------+
| HS Code: 020311, |         |         |        |         |         |
| 020312, 020319,  |         |         |        |         |         |
| 020321, 020322,  |         |         |        |         |         |
| 020329, 021011   |         |         |        |         |         |
| 021012, 021019,  |         |         |        |         |         |
|                  |         |         |        |         |         |
| 160241, 160242   |         |         |        |         |         |
| and 160249       |         |         |        |         |         |
| (160249 excluded |         |         |        |         |         |
| from the PS&D    |         |         |        |         |         |
| table)           |         |         |        |         |         |
|                  |         |         |        |         |         |
| Source: WTA      |         |         |        |         |         |
| China Statistics |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+

+------------------+---------+---------+--------+---------+---------+
| Hong Kong Pork   |         |         |        |         |         |
| Re-Exports to    |         |         |        |         |         |
| China, 2004-2006 |         |         |        |         |         |
| (Metric Tons)    |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
|                  | Jan-Dec | Jan-Dec | Jan -  |         | Jan -   |
|                  |         |         | Jun    |         | Jun     |
+------------------+---------+---------+--------+---------+---------+
|                  | Q       | Q       | Qu     |         | \%      |
|                  | uantity | uantity | antity |         | Change  |
|                  |         |         | Comp   |         |         |
|                  |         |         | arison |         |         |
+------------------+---------+---------+--------+---------+---------+
| Origin           | 2004    | 2005    | 2005   | 2006    | 2006/05 |
+------------------+---------+---------+--------+---------+---------+
| -The World-      | 59,655  | 5,997   | 3,019  | 5,434   | 79.99   |
+------------------+---------+---------+--------+---------+---------+
| Spain            | 4,261   | 657     | 295    | 1,174   | 297.97  |
+------------------+---------+---------+--------+---------+---------+
| Canada           | 9,899   | 1,589   | 799    | 1,065   | 33.29   |
+------------------+---------+---------+--------+---------+---------+
| Denmark          | 11,158  | 727     | 572    | 791     | 38.29   |
+------------------+---------+---------+--------+---------+---------+
| Germany, Fed Rep | 8,068   | 525     | 449    | 687     | 53.01   |
+------------------+---------+---------+--------+---------+---------+
| Brazil           | 3,422   | 516     | 193    | 293     | 51.81   |
+------------------+---------+---------+--------+---------+---------+
| France           | 2,600   | 411     | 119    | 290     | 143.70  |
+------------------+---------+---------+--------+---------+---------+
| Netherlands      | 5,381   | 345     | 161    | 243     | 50.93   |
+------------------+---------+---------+--------+---------+---------+
| United States    | 8,800   | 581     | 266    | 122     | -54.14  |
+------------------+---------+---------+--------+---------+---------+
| Other            | 6,066   | 646     | 165    | 769     | 366.06  |
+------------------+---------+---------+--------+---------+---------+
| HS Code: 020311, |         |         |        |         |         |
| 020312, 020319,  |         |         |        |         |         |
| 020321, 020322,  |         |         |        |         |         |
| 020329, 021011   |         |         |        |         |         |
| 021012, 021019,  |         |         |        |         |         |
|                  |         |         |        |         |         |
| 160241, 160242   |         |         |        |         |         |
| and 60249        |         |         |        |         |         |
| (160249 excluded |         |         |        |         |         |
| from the PS&D    |         |         |        |         |         |
| table)           |         |         |        |         |         |
|                  |         |         |        |         |         |
| Source of data:  |         |         |        |         |         |
| WTA Hong Kong    |         |         |        |         |         |
| Census and       |         |         |        |         |         |
| Statistics       |         |         |        |         |         |
| Department       |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+

+------------------+---------+---------+--------+---------+---------+
| China Swine      |         |         |        |         |         |
| Exports,         |         |         |        |         |         |
| 2004-2006        |         |         |        |         |         |
|                  |         |         |        |         |         |
| (Numer of Head)  |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
|                  | Jan-Dec | Jan-Dec | Jan -  |         | Jan -   |
|                  |         |         | Jun    |         | Jun     |
+------------------+---------+---------+--------+---------+---------+
|                  | Q       | Q       | Qu     |         | \%      |
|                  | uantity | uantity | antity |         | Change  |
|                  |         |         | Comp   |         |         |
|                  |         |         | arison |         |         |
+------------------+---------+---------+--------+---------+---------+
| Destination      | 2004    | 2005    | 2005   | 2006    | 2006/05 |
+------------------+---------+---------+--------+---------+---------+
| World            | 1,      | 1,      | 8      | 823,554 | -5.63   |
|                  | 972,911 | 768,772 | 72,650 |         |         |
+------------------+---------+---------+--------+---------+---------+
| Hong Kong        | 1,      | 1,      | 8      | 763,805 | -6.28   |
|                  | 853,771 | 646,605 | 15,028 |         |         |
+------------------+---------+---------+--------+---------+---------+
| Macau            | 118,899 | 120,869 | 57,522 | 58,989  | 2.55    |
+------------------+---------+---------+--------+---------+---------+
| Korea North      | 75      | 1,198   | 0      | 594     | 0.00    |
+------------------+---------+---------+--------+---------+---------+
| Other            | 166     | 100     | 100    | 166     | 66.00   |
+------------------+---------+---------+--------+---------+---------+
| HS Code: 010310, |         |         |        |         |         |
| 010391, 010392   |         |         |        |         |         |
|                  |         |         |        |         |         |
| Source: GTA      |         |         |        |         |         |
| China Statistics |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+

+------------------+---------+---------+--------+---------+---------+
| China Pork       |         |         |        |         |         |
| Exports,         |         |         |        |         |         |
| 2004-2006        |         |         |        |         |         |
|                  |         |         |        |         |         |
| (Metric Tons)    |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+
|                  | Jan-Dec | Jan-Dec | Jan -  |         | Jan -   |
|                  |         |         | Jun    |         | Jun     |
+------------------+---------+---------+--------+---------+---------+
|                  | Q       | Q       | Qu     |         | \%      |
|                  | uantity | uantity | antity |         | Change  |
|                  |         |         | Comp   |         |         |
|                  |         |         | arison |         |         |
+------------------+---------+---------+--------+---------+---------+
| Origin           | 2004    | 2005    | 2005   | 2006    | 2006/05 |
+------------------+---------+---------+--------+---------+---------+
| World            | 413,321 | 385,967 | 1      | 198,638 | 2.89    |
|                  |         |         | 93,065 |         |         |
+------------------+---------+---------+--------+---------+---------+
| Hong Kong        | 116,810 | 114,375 | 54,186 | 62,681  | 15.68   |
+------------------+---------+---------+--------+---------+---------+
| Japan            | 53,139  | 68,714  | 27,983 | 35,614  | 27.27   |
+------------------+---------+---------+--------+---------+---------+
| Korea North      | 87,031  | 61,609  | 37,189 | 34,140  | -8.20   |
+------------------+---------+---------+--------+---------+---------+
| Vietnam          | 23      | 874     | 24     | 15,179  | 6       |
|                  |         |         |        |         | 3145.83 |
+------------------+---------+---------+--------+---------+---------+
| Singapore        | 21,319  | 16,327  | 9,256  | 6,855   | -25.94  |
+------------------+---------+---------+--------+---------+---------+
| Russia           | 70,526  | 43,275  | 30,229 | 6,528   | -78.40  |
+------------------+---------+---------+--------+---------+---------+
| Korea South      | 1,887   | 6,715   | 2,154  | 6,226   | 189.04  |
+------------------+---------+---------+--------+---------+---------+
| Philippines      | 8,197   | 9,354   | 4,065  | 5,253   | 29.23   |
+------------------+---------+---------+--------+---------+---------+
| Kazakhstan       | 248     | 7,686   | 1,326  | 4,376   | 230.02  |
+------------------+---------+---------+--------+---------+---------+
| Malaysia         | 14,656  | 12,249  | 6,561  | 4,235   | -35.45  |
+------------------+---------+---------+--------+---------+---------+
| Kyrgyzstan       | 0       | 1,023   | 49     | 3,668   | 7385.71 |
+------------------+---------+---------+--------+---------+---------+
| Macau            | 4,403   | 5,411   | 2,488  | 2,976   | 19.61   |
+------------------+---------+---------+--------+---------+---------+
| Albania          | 3,571   | 6,224   | 3,491  | 2,634   | -24.55  |
+------------------+---------+---------+--------+---------+---------+
| Indonesia        | 2,877   | 3,038   | 1,286  | 1,810   | 40.75   |
+------------------+---------+---------+--------+---------+---------+
| Moldova          | 11,048  | 13,512  | 3,431  | 889     | -74.09  |
+------------------+---------+---------+--------+---------+---------+
| Ukraine          | 7,992   | 5,245   | 4,062  | 630     | -84.49  |
+------------------+---------+---------+--------+---------+---------+
| Other            | 9,594   | 10,336  | 5,285  | 4,944   | -6.45   |
+------------------+---------+---------+--------+---------+---------+
| HS Code: 020311, |         |         |        |         |         |
| 020312, 020319,  |         |         |        |         |         |
| 020321, 020322,  |         |         |        |         |         |
| 020329, 021011   |         |         |        |         |         |
| 021012, 021019,  |         |         |        |         |         |
|                  |         |         |        |         |         |
| 160241, 160242   |         |         |        |         |         |
| and 160249       |         |         |        |         |         |
| (160249 excluded |         |         |        |         |         |
| in PS\*D table)  |         |         |        |         |         |
|                  |         |         |        |         |         |
| Source: WTA      |         |         |        |         |         |
| China Statistics |         |         |        |         |         |
+------------------+---------+---------+--------+---------+---------+

  ------------------ ----------- ----------- ----------- -----------------
  China Wholesale                                        
  Pork Prices On                                         
  Average, 2004-2006                                     
  (US\$/KG)                                              

                                                         \% Change

                     2004        2005        2006        2006/05

  January            1.40        1.65        1.52        -7.88

  February           1.45        1.69        1.43        -15.38

  March              1.49        1.63        1.36        -16.56

  April              1.56        1.60        1.29        -19.38

  May                1.57        1.59        1.23        -22.64

  June               1.62        1.59        1.22        -23.27

  July               1.66        1.61        1.35        -16.15

  August             1.72        1.59                    

  September          1.75        1.55                    

  October            1.75        1.48                    

  November           1.67        1.42                    

  December           1.66        1.43                    

  Source: The                                            
  Ministry of                                            
  Agriculture                                            
  ------------------ ----------- ----------- ----------- -----------------

  ------------------ ----------- ----------- ----------- -----------------
  China Wholesale                                        
  Hog Prices On                                          
  Average, 2004-2006                                     
  (US\$/KG)                                              

                                                         \% Change

                     2004        2005        2006        2006/05

  January            0.84        1.05        0.82        -21.90

  February           0.88        1.05        0.75        -28.57

  March              0.92        0.99        0.71        -28.28

  April              0.96        0.94        0.57        -39.36

  May                0.96        0.94        0.68        -27.66

  June               1.02        0.89        0.65        -26.97

  July               1.06        0.86        0.75        -12.79

  August             1.10        0.87                    

  September          1.13        0.87                    

  October            1.12        0.77                    

  November           1.05        0.74                    

  December           1.02        0.76                    

  Source: The                                            
  Ministry of                                            
  Agriculture                                            
  ------------------ ----------- ----------- ----------- -----------------

  ------------------ ----------- ----------- ----------- -----------------
  China Wholesale                                        
  Piglet Prices On                                       
  Average, 2004-2006                                     
  (US\$/KG)                                              

                                                         \% Change

                     2004        2005        2006        2006/05

  January            1.20        1.44        0.97        -32.64

  February           1.05        2.05        0.74        -63.90

  March              1.13        1.71        1.00        -41.52

  April              1.71        1.13        0.68        -39.82

  May                1.21        1.25        0.63        -49.60

  June               1.31        1.56        0.60        -61.54

  July               1.48        1.32        0.60        -54.55

  August             1.51        1.29                    

  September          1.66        0.87                    

  October            1.59        0.76                    

  November           1.50        0.76                    

  December           1.52        0.79                    

  Source: The                                            
  Ministry of                                            
  Agriculture                                            
  ------------------ ----------- ----------- ----------- -----------------