JBS closes meat deal with Chinese WH Group

The world's two largest meat companies have signed a $700 million meat deal. The Brazilian JBS will supply the Chinese WH Group with pork, beef and poultry in the coming years.

The deal will give JBS access to approximately 60.000 points of sale that the WH Group, the world's largest slaughterhouse, operates in China. It is therefore not surprising that the management of JBS is pleased with the deal, which brings in about $700 million annually. The first shipments will depart from the Brazilian quays in the first quarter of 2020.  

The WH Group also benefits from foreign supplies. Pork production in the Chinese home market has fallen sharply. According to the United States Department of Agriculture (USDA) was the contraction nearly 15% in the past year. The contraction is likely to continue this year. The USDA expects a drop of no less than 25% to 34,7 million tons. This is the lowest production since 1996. The production of beef and poultry in China is improving, but it is nowhere near closing the gap.

Foreign supply
China is therefore dependent on foreign suppliers. In 2019, European exporters in particular benefited greatly from this. In the first 11 months, sales to China increased by almost 70% to 2,1 million tons. More than 500.000 tons of this was filled in by the Netherlands. After Spain, Germany and Denmark, our country is the fourth largest European exporter in China.

Although the Chinese shortages will increase further in 2020, European exporters will face more overseas competition. For example, China and the United States recently signed a trade deal, which means that the increased import tariffs on American pork have expired. The deal between the WH Group and JBS is also likely to create additional competition.

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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