2013-03-11 12:26:35 - Recently published research from Business Monitor International, "China Agribusiness Report Q2 2013", is now available at Fast Market Research
China's weight in the global agricultural sector is growing, with the country having an increasing role in international production balances and prices. China will maintain a strong appetite for key commodities, and we see particularly strong production growth potential for sugar, dairy and meat products. High demand growth, strong government support and potential for investment and consolidation in these industries will help them outperform in the coming years. However, the agribusiness sector is going through challenging times, with the GDP slowing down, consumers' trust in food safety dwindling, food ingredients prices rising, labour costs soaring and bank loan requirements for small sized enterprises tightening. This is best seen in the mild pork production forecast for 2012/13, as producers reduce pig
herd expansion on the back of low profitability.
Full Report Details at
- www.fastmr.com/prod/552280_china_agribusiness_report_q2_2013.asp ..
* Soybean consumption growth to 2017: 43.8% to 102.1mn tonnes. Output expansion will be driven by economic growth, which is leading to rising incomes and thus greater meat consumption. Growth will also be driven by strong demand from the livestock sector (for soybean 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 be encouraged by elevated local livestock prices. The increased availability of vaccinations and the ongoing 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 confectionery, dairy, beverage and food processing.
* BMI universe agribusiness market value: US$530.2mn in 2013 (down 2.0% compared with 2012, growth forecast to average 2.5% annually between 2012 and 2017).
* 2013 real GDP growth: 7.5% (from 7.7% in 2012, forecast to average 6.6% between 2012 and 2017).
* 2013 consumer price inflation: 2.8% ave (from 2.7% in 2012, forecast to average 2.8% between 2012 and 2017).
* 2013 central bank policy rate: 5.75% ave (from 6.00% in 2012, forecast to average 5.71% between 2012 and 2017).
Key Revisions To Forecasts
* Cotton production forecast for 2012/13 revised up, to 33.5mn 480lb bales (compared with a previous forecast for 31.4mn bales). High output growth in Xinjiang Autonomous Region, driven by favourable weather, increased planted area and government support, is likely to offset yield reductions in eastern China.
* Corn production forecast for 2012/13 revised up, to 202.0mn tonnes (compared with a previous forecast for 198.0mn tonnes). Favourable weather conditions as well as lower profit margins for soybeans and cotton has led to higher-than-expected yields and area harvested.
China has concluded a number of significant investments in New Zealand's dairy sector in the past couple of years. These investments are being driven by New Zealand's large flow of relatively cheap and high quality milk. Also, the reduction to zero by 2020 of the import tariff on New Zealand's dairy products, according to the free trade agreement between China and New Zealand, is attracting investors. Yashili International Holdings' plan to invest in a milk processing plant in New Zealand will help to boost the company's sales and market share in China, as it will help the company brand its products as 'foreign-made' and tap the growing demand for safe products amid severe concerns regarding health and safety of milk consumption in China.
Despite a slow start to the 2012/13 season, which started in October 2012, we believe China's soybean imports will rebound and reach a new all-time high. Imports will very likely pick up in the coming months on the back of a dismal crop and robust demand growth. Farmers are turning away from soybean to more profitable crops such as corn and rice. Relatively high and resilient domestic soybean prices in Dalian are a clear sign of tightness on the domestic market. The higher production deficit, coupled with a recovery in soybean crushing margins, will favour imports in 2012/13.
Corn yields in China have been steadily rising for the past 10 years, but they remain below other major producers' levels, such as the US, EU and Argentina. The increasing use of higher-yielding hybrid seeds (more drought-, pest- and weed-resistant) and the probable commercialisation of genetically modified (GM) corn in the coming years are likely to boost China's yields. Although the government officially maintains a cautious stance on GM crops owing to the population's food safety concerns, it is investing in GM research and is likely to soon allow imports of GM wheat from Argentina.
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