China Agribusiness Report Q4 2011
Business Monitor International, September 2011
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.
China's agriculture industry will continue to be strongly affected by government policies in its drive to ensure national food security. However, in our view, the industry will constantly be fraught with food-quality scandals which result in jittery consumer confidence in locally produced products. While rapid consolidation of the livestock and dairy sectors should boost economies of scale in production, we still foresee growing production deficits in dairy and meat products as consumption outstrips demand over our five-year forecast period.
Key Forecasts
- Wheat consumption growth to 2015: 6.0%. The modest growth figure in wheat consumption is a result of low base effects.
- Pork and poultry consumption growth to 2015: 33.5% and 28.4% respectively. Continued consolidation of the Chinese meat industry should support large-scale production and increase economies of scale in production so as to meet the growing demand of a national diet that is increasing its protein intake.
- Whole milk powder consumption growth to 2015: 30.1% to 1.6mn tonnes. Whole milk powder consumption will be the outperformer among the dairy products as more consumers take to the cheap and easily stored milk product.
- 2011 real GDP growth: 9.2%
- 2011 forecast consumer price inflation : 5.6% ave (higher than 2010 at 3.3%)
- 2011 forecast Central Bank policy rate: 6.8% ave (higher than 5.8% in 2010)
Industry Developments
Growing domestic demand-side pressures have prompted us to bump up our corn demand forecast for 2011 by 1.3% to 167.3mn tonnes. There are four main reasons behind our revision. Most significantly, we believe that China Grain Reserves Corporation (Sinograin)'s recent confirmation that US corn sales totaled 1mn tonnes in March this year is an indication of the domestic market tightness surrounding corn.
The recent policies to curb industrial demand for corn and declining domestic corn stocks are additional indicators. Finally, higher domestic corn prices show that demand may be higher than we expect. Local corn prices have been on an upward trend throughout 2011, even in the midst of the government releasing domestic stocks to cool the market.
The Chinese pork market is facing increasingly tight supply conditions. As a result, rising pork prices in China have prompted the government to introduce a slew of measures to ensure a steady domestic supply of the staple meat. On July 27, China's Ministry of Commerce indicated that it will release 200,000 tonnes of pork in state reserves into the market to help ease the supply situation. Based on 2010 consumption estimates, this amounts to a mere two days' worth of nationwide consumption. The government also announced its desire for pork suppliers to increase domestic supply five-fold to be able to store 10 days' worth of the meat. After a cabinet meeting about pork production, officials in mid-July announced that pig farmers will be given CNY100 (US$15.50) for every sow bred. Plans to invest CNY2.5bn in local piggeries and to increase subsidies for veterinarians by 20% to CNY1,200 further reinforce the government's increasing concern over the inability of domestic pork supply to meet demand.
Chinese state-owned China National Cereals, Oils and Foodstuffs Corporation has secured a 90% majority stake in farmer-owned Australian sugar miller Tully Sugar. COFCO's counter bid of US$44/share beat local cane-growers cooperative Mackay Sugar's bid of US$43/share. This is a significant deal as it is an unprecedented example of a large Chinese acquisition of an Australian agriculture business. Given the growing sugar deficits that China is expected to experience over the long term, we believe this is a strategic deal for the country. China currently procures sugar supplies from Brazil, which is significantly further away than Australia and has a higher cost of shipping.
Executive Summary
SWOT Analysis
China Agricultural SWOT
China Political SWOT
China Economic SWOT
China Business Environment SWOT
Supply Demand Analysis
China Sugar Outlook - Q4 2011
Table : China Sugar Production, Consumption & Trade, 2010-2015
Table : China Sugar Production, Consumption & Trade, 2006-2011
China Dairy Outlook
Table : China Milk Production, Consumption & Trade, 2010-2015
Table : China Butter Production, Consumption & Trade, 2010-2015
Table : China Cheese Production, Consumption & Trade, 2010-2015
Table : China Whole Milk Powder Production, Consumption & Trade, 2010-2015
Table : China Milk Production, Consumption & Trade, 2006-2011
Table : China Butter Production, Consumption & Trade, 2006-2011
Table : China Cheese Production, Consumption & Trade, 2006-2011
Table : China Whole Milk Powder Production, Consumption & Trade, 2006-2011
China Soybean Outlook
Table : China Soybean Production, Consumption & Trade, 2010-2015
Table : China Soybean Production, Consumption & Trade, 2006-2011
China Rice Outlook
Table : China Rice Production, Consumption & Trade, 2010-2015
Table : CHINA Rice Production, Consumption & Trade, 2006-2011
China Grains Outlook
Table : China Wheat Production, Consumption & Trade, 2010-2015
Table : China Corn Production, Consumption & Trade, 2010-2015
Table : China Barley Production, Consumption & Trade
Table : China Wheat Production, Consumption & Trade, 2006-2011
Table : China Corn Production, Consumption & Trade, 2006-2011
Table : China Barley Production, Consumption & Trade, 2006-2011
China Livestock Outlook
Table : China Poultry Production, Consumption & Trade, 2010-2015
Table : China Pork Production, Consumption & Trade, 2010-2015
Table : China Beef & Veal Production, Consumption & Trade, 2010-2015
Company Profile
China Mengniu Dairy Company Limited
Sichuan New Hope Agribusiness Co., Ltd
Commodity Price Analysis
Monthly Softs Update
Cocoa
Coffee
Palm Oil
Sugar
Corn
Rice
Soybean
Wheat
Industry Forecast Scenario
Food Production
Instant Noodles
Confectionery
Agriculture
Rice Production
Dairy Industry
Organics
Mass Grocery Retail
Table: China MGR Retail Indicators - Historical Data & Forecasts, 2008-2015
Table: Grocery Retail Sales by Format - Historical Data & Forecasts
Macroeconomic Forecast
Table : China - Economic Activity, 2007-2015
Global Food & Drink View
Food & Drink Roundup Q211: Core Views
BMI Forecast Modelling
How We Generate Our Industry Forecasts
- China Mengniu Dairy Company Limited
- Sichuan New Hope Agribusiness Co., Ltd
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