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China Agribusiness Report Q4 2009Published by: Business Monitor International Published: Aug. 6, 2009 - 61 Pages Table of Contents
AbstractIn BMI's China Agribusiness Report for Q4 2009 we look at how the country's dairy industry isrecovering after the devastating melamine adulteration scandal of 2008. Demand for dairy products washit hard in the final quarter of 2008 following the hospitalisation of hundreds of thousands of infants fromdrinking adulterated milk. At the beginning of this year heavy sentences, including two death penalties,were handed down to those convicted of involvement in the scandal. The chairwoman of Sanlu Group,the company considered to have been most seriously at fault, was given a life sentence. Shortly after that,in February, Sanlu declared bankruptcy.Sanlu, however, was not the only company to be hit by the scandal. The release of the major dairycompanies' 2008 reports in the second quarter of 2009 showed that healthy profits of the previous yearshad been turned into large losses by the year's events. Market leader Mengniu, which made a profit ofCNY935.8mn in 2007, reported losses of CNY948.6mn. The second biggest player, Yili, did even worse,revealing losses of CNY1.69bn. The only major player to stay in the black was Sanyuan Food whichmade a profit of CNY40.76mn. Sanyuan was also the only major dairy company whose products were notfound to contain melamine. Sanyuan has made the most of its rivals' difficulties. In March, the company snapped up bankrupt Sanlu'score assets for CNY616.5mn. The other major players were banned from taking part in the bidding for theassets owing to their involvement in the scandal. In April, Sanyuan rolled out new brands of powderedmilk produced at what were previously Sanlu's factory. The products were well received with strong salesin May. The other dairy companies, despite the disgrace of 2008, also reported improving sales in the first half of2009. Yili reported profits in Q108 of double the level seen in Q108. In April. the company said thatdemand for dairy products had recovered to 90% of its pre-scandal level. Mengniu said that demand forits products had fully recovered in the North of the country but was still at only around 60% of prescandallevel in the South. Assuming that the new measures put in place to ensure food safety are effective and there are no newfears over the safety of dairy products, then we expect demand to resume its upward trend. Risingincomes will allow Chinese consumers to spend more on dairy products. We expect demand for bothstaples such as fluid milk and more exotic foods such as imported European cheeses to increase. Elsewhere, grain production in 2009 looks set to be well above last year's level. Early estimates showincreases in production of rice, wheat and corn. Production of key staples wheat and rice has beenincreasing steadily over the last few years after falling rapidly in the first half of the decade. Thegovernment has been making an effort to stem the fall in land area planted to grain crops with somesuccess. Despite this, in the longer term beyond our forecast period, we believe that pressure on land forindustrial and residential uses will once again see the area given to grain fall. Get Full Details About This Report >> |
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