Page 11 - bne IntelliNews monthly magazine December 2023

bne December 2023 Companies & Markets I 11
Mongolia’s meat export dilemma
Antonio Graceffo, Munkh-Orchlon Lkhagvadorj & Lhagvadorj Dorjburegdaa
Mongolia remains a developing country that faces challenges in building its export revenues while at the same time diversifying its economy away from mineral resource dependence.
As things stand, a worryingly large part of its economy
is dependent on exporting minerals to China. However, Mongolia’s giant neighbour does not just need coal and metals, it is also a net food importer, struggling to feed the world’s second-largest population. As part of that, China has a relentless demand for meat. And with Mongolia boasting a staggering 71.1mn head of livestock, vastly outnumbering its human population of 3.3mn, the potential for meat exports amounts to an obvious way to augment the country’s income.
According to Mongolia’s National Statistics Office (NSO), agriculture accounted for 13.1% of the country’s GDP in 2022. Selling more animal products to China helped to expand agricultural exports by 22.6% y/y. Mongolia’s 2023 meat market has an estimated worth of $1.148bn and the market is expected to grow by 13.71% annually over the next five years. This works out to $335.20 per person, a welcome supplement in a country where the average income is less than $5,000 per year.
Unlike coal or metals exports, where much of the revenue goes to large mining companies, meat exports directly benefit the everyday lives of herding families, which comprise around a quarter of Mongolia’s population.
Typically, herders primarily derive their income from two sources: meat and cashmere. The income source varies depending on the specific Soum (administrative division) within the country. In areas where goats are relatively scarce, meat takes precedence as the primary income generator. Conversely, regions with abundant horses provide herders with opportunities to profit from producing airag, a fermented mare's milk, although airag exports rare.
Moreover, families with substantial cattle holdings have the option to sell milk and dairy products, although the profit
Mongolia, a country of 3.3mn, boasts a staggering 71.1mn head of livestock. / ILRI/Stevie Mann, cc-by-2.0
margins are often slim, dissuading many families from doing so. But these products also present their best opportunity to participate in Mongolia’s export market.
Historically, meat has been the cornerstone of the Mongolian diet. Herding families also eat a great deal of dairy and, to a lesser extent, flour-based foods, along with occasional small portions of rice. However, the consumption of fruits and vegetables remains exceptionally rare in their dietary habits. And while fruits, vegetables, bread, rice, and potatoes have increased in popularity in the cities, meat is still the staple. Consequently, city people are very sensitive to changes in the price of meat.
Between 2017 and 2019, Mongolian meat exports surged significantly. By 2020, Ulaanbaatar, Mongolia's capital, faced shortages in meat supply, driving prices to exorbitant levels beyond the means of many low-income families. To
“Mongolia’s giant neighbour does not just need coal and metals, it is also a net food importer, struggling to feed the world’s second-largest population”
ensure meat remained affordable on the domestic market, the government implemented a meat export quota system. This system allocated quotas to meat exporting companies, limiting the volume of meat each could consign abroad. Additionally, the government initiated a programme to sell a restricted quantity of stockpiled meat, often at prices up to 40% below market rates.
Nevertheless, despite these measures, over the past three years, the upswing in meat exports has contributed to meat price inflation, at times surging to levels exceeding 20%. This has hurt domestic consumers, who find that they need more
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