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China Agribusiness Report Q4 2010
Business Monitor International, Aug 2010, Pages: 82
China Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on China's agribusiness service.
BMI View: China is continuing to show its agricultural strength, with production growth forecast across all major sectors. Rising incomes and increased urbanisation should lead to significant increases in livestock and milk consumption, which in turn should lead to continued production increases in grains for feed. Despite the positive momentum, persistent safety concerns (especially in the dairy sector) and trade disputes (affecting soy oil imports) remain pertinent risks to the continued growth of certain sectors.
Key Forecasts
Soybean consumption growth to 2014: 30%. Growth will be driven by strong demand from the livestock sector for soybean meal and soybean oil being the most popular edible oil in the country. Pork and poultry consumption growth to 2014: 31% and 39% respectively, due to rising incomes leading to a more diversified diet among lower income consumers.
Milk production growth to 2014: 29%. This growth will be driven by increasing domestic demand, as well as greater consolidation of the sector, along with the entry of foreign firms that will improve efficiency.
2010 Real GDP Growth: 8.8% (up from 8.7% in 2009; predicted to average 8.1% from now until 2014). Consumer Price Inflation: 6.6% y-o-y in June 2010 (up from .71% y-o-y in June 2009).
Industry Developments
The dairy sector remains one of the fastest growing sub-sectors in China's food industry. The production of dairy products in China, especially milk and whole milk powder, has been increasing rapidly in recent years. This is being fuelled by rising disposable incomes, increased urbanisation and improved affordability of domestic cold storage facilities and improved awareness of the health benefits of dairy products.
Since 2003, per capita rice consumption in China has been in decline as consumers have traded up to nonstaple foods in line with their growing affluence and the rapid pace of urbanisation in the country. In 2009, as economic uncertainty continued, consumption rose again, climbing 1.5% year-on-year to 129.3mn tonnes. From 2010 on, however, we expect the trend towards falling rice demand to resume as domestic economic growth continues and consumers again look to trade up their consumption habits. Rising disposable incomes have had a pronounced impact on sugar consumption in China, as growth in the sector is being fuelled by the country's mass market industries, such as soft drinks and confectionary. Over the forecast period through to 2014, we expect consumption to rise by 26.2% to reach 18.7mn tonnes. This will be the result of increases in soft drinks and confectionary consumption, of which we forecast volume sales to increase by 97% and 55% respectively from their 2009 levels.
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