China Agribusiness Report Q1 2013Published by: Business Monitor International Published: Dec. 5, 2012 - 109 Pages Table of Contents
AbstractAs the Chinese government boosts agriculture productivity in its drive to ensure national food security,we expect government subsidies to continue to grow. In 2011, this spending reached CNY134.5bn(US$21.2bn), with a large portion being channelled into seed, fertiliser and fuel subsidies. That said, webelieve the country will inevitably grow more reliant on imports of key grains such as corn, wheat, sugarand even rice in the long term as consumption growth exceeds production growth. Yield improvementwould be the fastest way to meet growing demand, and we note that the recent verbal acceptance ofgenetically modified (GM) seeds is an acknowledgement of the need to recalibrate the government’spreviously staunch stand against GM products in this respect.Key Forecasts Soybean consumption growth to 2017: 43.8% to 102.1mn tonnes. Output expansion will bedriven by economic growth, which is leading to rising incomes and thus greater meatconsumption. Growth will also be driven by strong demand from the livestock sector (forsoybean meal), and as soybean oil is the most popular edible oil in the country. Pork production growth to 2016/17: 19.4% to 61.6mn tonnes. Production continues to beencouraged by elevated local livestock prices. The increased availability of vaccinations and theongoing commercialisation of the industry are also likely to boost output in the coming years. Sugar consumption growth to 2017: 24.0% to 17.7mn tonnes. Chinese incomes are rising,supporting demand for products in key industries, such as the confectionery, dairy, beverage, andfood processing. BMI universe agribusiness market value: US$433.4mn in 2013. Growth will average 2.7%annually between 2012 and 2017. 2013 real GDP growth: 7.1% (from 7.7% in 2012, forecast to average 6.4% between 2012 and2017). 2013 consumer price inflation: 2.8% ave (from 2.6% in 2012, forecast to average2.7% between 2012 and 2017). 2013 central bank policy rate: 6.00% ave (from 6.00% in 2012, forecast to average5.67% between 2012 and 2017). Rising Feed Costs No.2 Corn Ex-Warehouse Spot Price, Soy Meal Spot Price (CNY/tonne) & PorkWholesale Spot Price (CNY/kg, RHS)Source: BMI, Bloomberg Key Developments Although we forecast slower-than-average pork consumption growth in 2012/13 due to a weakenedeconomy, production will come short of demand for the fourth consecutive year. China should maintain ahealthy appetite for pork imports, with the US being the largest supplier, accounting for 44% of China’stotal imports. In the coming years, we expect China to intensify its imports, as imported pork is becomingincreasingly competitive due to rising production costs, animal disease outbreaks, environmental threatsand food safety concerns. Pork production will remain supported by government policies (setting up afutures market and maintaining an active intervention policy) as well as by the ongoing industrialisationof the sector. However, we believe the industry will remain highly vulnerable to the lack of landavailability, environmental concerns, seasonal consumption and volatile as well as thin margins. Chinese dairy companies are now significant global players, ranking among the world’s largest in termsof market sales. With US$5.8bn each in dairy turnover in 2011, Yili and China Mengniu Dairy evenovertook some of Europe’s and North America’s traditional players, such as Bongrain, Muller andSchreiber Foods. The global dairy market is shifting towards emerging markets, especially Asia, whichwe expect will enjoy strong consumption growth over our forecast period to 2015/16. Fifteen out of thelargest 20 dairy companies globally have investments in manufacturing in China, one of the mostpromising markets in Asia. The presence of foreign groups in the Chinese dairy industry is likely tointensify in the coming years, and China will experience further consolidation among its domestic dairyindustry. Hot weather and an outbreak of fungal disease have limited the 2012/13 wheat crop, which was harvestedin June-July 2012. As a result, we revised down our production forecast to 108.0mn tonnes. Despite beinghigh compared with historic averages, wheat production will not be above consumption in 2012/13 for thefirst time since 2005/06. We expect China’s production surpluses to end in 2013/14 and for the deficit towiden in the coming years on the back of subdued production growth and soaring demand. Outputexpansion is being constrained by a low availability of farming land. Moreover, China already boasts ofhigh wheat production yields, at 4.9tonne/ha in 2011/12, compared to 5.4tonne/ha in the EU. Get full details about this report >> |
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