BMI View: China's weight in the global agricultural sector is growing, as the country has an increasing impact on international production balances and prices. China will maintain its appetite for key commodities for the foreseeable future , with particular potential for production growth in sugar, dairy and livestock . High demand growth, strong government support and the potential for investment and consolidation in these industries will help them outperform in the coming years. However, the agribusiness sector is experiencing challenging times, seen in the slowdown in meat and milk powder consumption in 2015 .
|Renewed Growth Ahead|
|China - Agribusiness Market Value|
|e/f = BMI estimates/forecasts. Sources: China Agricultural Statistics, FAO, BMI|
Soybean production growth to 2019/20: 0.9% to 12.3mn tonnes. In spite of the increase in production in 2016/17, soybean production will remain low in China as the crop lack attractiveness for farmers.
Pork production growth to 2019/20: 9.9% to 60.4mn tonnes. China's pork production will be supported by the ongoing modernisation and industrialisation of the supply chain. Production will go through a period of adaptation first, as millions of small producers exit the market over the 2015-2016 period, after over-expansion between 2011 and 2013 reduced profits.
Corn production growth to 2020: 16.7% to 19.6mn tonnes. China has been releasing further details of its new corn production policy and they point to fewer incentives for corn farming in many provinces, which will limit production expansion in the coming years. The domestic deficit will grow at a fast pace out to 2019/20.
BMI universe agribusiness market value: USD1,3 60.2m n in 201 7 (up 5.5% compared with 2016, growth forecast to average 5.0% annually between 2017 and 2020).
2017 real GDP growth: 6.3%, down from 6.6% expected in 2016, forecast to average 5.8% between 2017 and 2020.
2017 consumer price inflation: 2.3% y-o-y ave, up from 1.8% expected in 2016, forecast to average 2.5% between 2017 and 2020.
2017 Central Bank policy rate: 4.10% eop, down from 4.35% expected in 2016; forecast to average 4.10% eop between 2017 and 2020.
Under its new 13th Five-Year Plan, which was finalised and approved at the annual National People's Congress in March 2016, China will carry on reforming its agricultural sector. With these reforms, China aims to address mounting challenges and deficiencies in its agricultural sector - which include grains overproduction, elevated prices far above international levels, excessive government stockpiling and environmental degradation. Authorities are now aiming to boost yields to offset the stagnation in arable land, but without sacrificing the environment. Moreover, China plans to diversify production towards commodities in increasing demand (including meat and milk), while accepting imports of a larger volume of staples when needed.
In order to achieve these goals, the government will foster on changes in farm structure, the partial liberalisation of agricultural prices and rebalancing the mix of commodities. It will also intensify its mechanisation efforts and focus on innovation to boost the country's own seed technology in order to eventually commercialise genetically modified corn seeds. Although the government has mentioned plans to commercialise GM soybean in the next five years in the Five-year plan for science and technology to 2020, published in August 2016, the process will be lengthy, and China will most likely allow domestic GM corn first.
China has been releasing further details of its new corn production policy and they point to fewer incentives for corn farming in many provinces. We have revised down our forecasts for corn production in the medium term and now see output declining for a second consecutive year in the 2017/18 season. Large stockpiles will keep import demand low in 2017 and 2018, but import demand will reaccelerate on a two-to-three year horizon, as local corn consumption will far exceed production in the coming years and slowly absorb stockpiles.
We remain bullish on the dairy story in China, for both production and consumption. The largest Chinese dairy players will increasingly focus on producing quality milk, in order to gain consumers' trust and secure stable revenue growth. The acquisition by Inner Mongolia Yili Industrial of a 37% stake of Shengmu Organic Milk in October 2016 is a sign of this trend. Shengmu is China's largest organic milk producer and the only one in the country currently certified to meet European standards.
China's meat imports are swelling as local production is under pressure from stricter production regulations and low prices (pork) and from the import ban on grandparent stocks imposed in 2015 on its main suppliers (poultry). China will import record volumes of pork, beef and close to record volumes poultry meat. The country turned into the world's largest pork importer in 2016 and is only second to the US regarding beef imports. While we are more positive on pork production in 2017 based on the rally in domestic meat prices and lower feed costs, poultry output will remain constrained by the lack of grandparent stocks.
The domestic meat production deficit will remain very elevated in 2017 which will support import demand in the coming quarters. This will benefit the EU and North American pork exporting countries, and Latin American beef and poultry exporters, in particular Brazil. Competition from lower-cost beef suppliers has been growing at a faster pace than anticipated by Australian suppliers in recent years and the country lost its status as the largest beef exporter to China in 2016.
The China Agribusiness Report features BMI Research's market assessment and independent forecasts for production, consumption and trade across core agricultural commodities.
BMI's China Agribusiness Report includes independent commodity price forecasting and analysis for key agricultural outputs, an overview of the agribusiness competitive landscape and a discussion of the downstream context of agricultural production in relation to country food consumption forecasts and composite food and beverage trade forecasts.
- Use BMI's independent industry forecasts to test other views - a key input for successful planning in dynamic agribusiness markets.
- Apply BMI's medium-term commodity price analysis to assist with budgetary planning and the identification of investment opportunities and potential risks.
- Assess the activities and market position of your competitors, partners and clients.
BMI Industry View
Summary of BMI’s key industry forecasts and views, highlighting recent changes and key risks to the industry outlook.
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the wider agricultural industry.
BMI Supply & Demand Forecasts
Divided into sections based on various diverse sectors in the agriculture market, the chapter provides insight into each market’s agricultural industry, centred on sector forecasts to end-2019 for the consumption, production and trade of key commodities.
- Consumption Forecasts: Accompanied by a discussion of the main drivers of consumption growth: macroeconomic factors, food processing trends, price movements and increasingly, demand from the non-food sector.
- Production Forecasts: Examine the trends influencing BMI’s production outlook: global demand, price increases, public and private sector investment and agricultural efficiency improvements.
- Trade Forecasts: Accompanied by a discussion of the factors influencing a country’s trade in agricultural goods, including domestic demand, global prices and government trade policies.
- BMI’s Forecasts: Accompanied by a risks-to-outlook assessment, which examines potential factors that could affect our existing forecast picture and the likelihood of their occurrence.
BMI’s Commodity Price Analysis
Fundamental and technical analysis of the short- and medium-term price outlook for eight agricultural commodities based on globally recognised benchmarks.
Analysis of headline food and drink forecasts, including total food consumption, per capita food consumption and total sector trade, which provide important downstream intelligence for primary agricultural producers.
Includes relevant articles from BMI’s daily analysis service. These can include: long-term projections on agricultural imports and exports; our perceptions of the impacts of economic slowdown on key companies and subsectors within the Agribusiness industry in a given country; our analysis of fertilizer production; as well as other relevant analysis of recent news and events.
The reports contain information on prominent companies operating in each market.
Key Commodities Covered By The Agribusiness Market
Reports Include: Grains, Dairy, Livestock, Rice, Sugar, Palm Oil, Edible Oils, Coffee, Cocoa, Cotton, Soybean
Please note – not all reports cover all commodities.
The Agribusiness reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.