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China Agribusiness Report Q3 2011
Business Monitor International, June 2011, Pages: 66
Business Monitor International's 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's agriculture industry will continue to be strongly driven by government policies in its drive to ensure national food security, especially in grains self-sufficiency. A dominant trend as a result of that would be in a more aggressive pursuit of overseas farmland acquisitions. Indeed, we note that the trend of 'going global' has featured strongly in the government's 12th Five Year Plan (2010-2015) and we expect a rise in such activity in Western African states as well as in Latin America. Securing farmland for the production of grains and livestock will be the top priority.
Key Forecasts
- Corn consumption growth to 2015: 19.5%. Growth will be fuelled by demand growth in the livestock sector. Increased use of corn in the industrial sector (corn starch and ethanol), will hinge on corn demand for the feed sector.
- Pork and poultry production growth to 2015: 22.3% and 24.7% respectively. Continued consolidation of the Chinese meat industry should support large-scale production and increase efficiencies of scale in production so as to meet the growing demand of a national diet that is increasing its protein intake.
- Soybean consumption growth to 2015: 71.6%. The livestock sector will continue to drive consumption for the grain. At present, approximately 70% of soybean consumption is allocated to the livestock industry.
- 2011 Forecast Real GDP Growth: 8.9% ?? 2011 Consumer Price Inflation Forecast: 4.3% ave (Higher than 2010 at 3.3%)
Industry Developments
On March 16, Chinese state news agency Xinhua reported that pork produced by the subsidiary of meat major Henan Shuanghui Investment & Development had been found to contain the banned chemicals Clenbuterol and Ractopamine. These chemicals tend to be used in order to produce leaner meat in pigs. The drugs are also used as illegal performance enhancers among athletes and are known to cause nausea and heart palpitations. Chinese authorities have closed 16 pig farms and sealed 134 tonnes of pork products in response to allegations. A total of 30 officials have also been detained in the affected provinces.
According to reports from Xinhua, 533 dairy farms out of the country's total 1,176 milk enterprises have failed inspection tests conducted by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). As a result, they have been ordered to halt production immediately until they are awarded the license to continue production again. Although this represents about 47% of the total number of registered dairy farms, The Dairy Association estimates that only small farms accounting for approximately 10% of total dairy production will be forced out of the market as they would be unable to afford the upgrades required to comply with tighter safety standards.
Indeed, health and safety concerns still remain on top of the government's agenda in improving the industry. A recent national survey which revealed that nearly 70% of the Chinese public does not feel confident about food safety underscores this need.
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