95
International Grains Summit May 8, 2015 Milan, Italy By Renault Quach (Guo Jia Hua) Donlinks Grain & Oil Co., Ltd [email protected] www.donlinks.cn
International Grains SummitMay 8, 2015
Milan, ItalyBy
Renault Quach (Guo Jia Hua)
Donlinks Grain & Oil Co., [email protected]
www.donlinks.cn
China
Agricultural Reform and Its Repercussion
over
Production, Stock and Import Prospect for 2015-2020
I) China Market - Snap shotII) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its RepercussionV) Import Prospect for 2015 - 2020
International Grain Summit 2015 - Milan
I) China Market - Snap shot- Major Oilseeds- Vegetable Oils- Protein Meals- Feed Grains
II) Current China Market Situation
China Oilseeds Growing Distribution
China Corn CropBumper Crop past 5 Years
Source: CNGOIC
Soybean - Huge Deficit due to Declining Local
Production but Robust Expansion of Crushing Needs
Source: CNGOIC
KMT
0
5
10
15
20
25
30
0
5.000
10.000
15.000
20.000
25.000
Soybean Acres Bu/acres'000 Acreas Bu/Acres
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
03/0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/1414/15
Total Crushing Domestic Supply Total Demand
Canola Seed – Widening Deficit due to Expanding
Demand but Stagnant Local Supply
Source:CNGOIC
0
5
10
15
20
25
30
35
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
18.000
20.000
Rapeseed Acres Bu/Acres'000 Acreas Bu/Acres
0
5.000
10.000
15.000
20.000
25.000
Total Crushing Domestic Supply Total DemandKMT
Groundnut - Steady but Minor Growth
Source: CNGOIC
0
10
20
30
40
50
60
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
08/09 09/10 10/11 11/12 12/13 13/14 14/15
Groundnut Acres Bu/acres'000 Acreas Bu/Acres
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
12.500
13.000
13.500
14.000
14.500
15.000
15.500
16.000
16.500
17.000
17.500
08/09 09/10 10/11 11/12 12/13 13/14 14/15
Crushing (Dom) Domestic Supply Total Demand
Cotton Seed – Stagnant Production
Source: CNGOIC
0
10
20
30
40
50
60
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
08/09 09/10 10/11 11/12 12/13 13/14 14/15
Cotton Seed Acres Bu/acres'000 Acreas Bu/Acres
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
08/09 09/10 10/11 11/12 12/13 13/14 14/15
Crushing (Dom) Domestic Crop Total Demand
SBO – Widening Deficit to be Fulfilled by
More Import of Soy
K Mts
K Mts
Source: CNGOIC
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
K Mts SBO - Soaring Deficit
Supply from Domestic Soy Total Disappearence
0
500
1.000
1.500
2.000
2.500
3.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Declining SBO Import B'cause of Soaring Soy Import
SBO Import
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Soybean Import - Ave Growth @29.6% Past 10 years
Soy Import
RSO – Widening Deficit Being Fulfilled by Higher
Import of Canola Seed
0
1.000
2.000
3.000
4.000
5.000
6.000
04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Canola Import - Soaring Growth @141% past 10 years
Canola Import
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
03/0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/1414/15
RSO Import Declined as Canola Seed Import Soared
RSO Import
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
K Mts RSO - Widening Deficit
Supply from Domestic Rapeseed Total Disappearence
Source: CNGOIC
Palm Olein – Entirely Import with Steady Ave.
Growth @7.8% past 10 Years
K Mts
Source: CNGOIC
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
03/04 04/05 05/06 06/07 07/08 08/0909/10 10/11 11/12 12/13 13/14 14/15
Import
3.000
5.000
7.000
'000 Mts
Domestic Supply Domestic Demand
SFO Deficit – Widening due to Expanding
Demand from High Income Earner
Source: USDA
0
100
200
300
400
500
600
03/0404/0505/0606/0707/08
08/0909/1010/1111/1212/1313/1414/15
SFO Import Growth - Ave 65% past 11 Years
SFO Import
0
200
400
600
800
1.000
1.200
03/04 04/05 05/06 06/07 07/08
08/09 09/10 10/11 11/12 12/13 13/14 14/15
SFO from Domestic Crop Total SFO Disappearance
SFO Import – Impressive Growth
Source: China Custom
K Mt 2013 - 92% of SFO from Ukraine
Widening Deficit of Edible Oils being Fulfilled
by Soaring Import of Oilseeds & Vegoils
Source: CNGOIC
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
Canola Seed Soybean
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
K Mts Widening Deficit from Strong Consumption
Oil Supply from Dom. Oilseeds Domestic Total Oil Demand
0,0
2,0
4,0
6,0
8,0
10,0
12,0
03/0404/0505/0606/0707/08
08/0909/1010/1111/1212/1313/1414/15
Palm Oil Soybean Oil Rape Oil Sunflower Oil
Coconut Oil Peanut Oil Palm Kernel Oil
China Edible Oils Turns to Surplus After Soaring
Import of Oilseeds and Vegoils
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Total Supply Total Disappearence
Widening SBM & RSM Deficit
Source: CNGOIC
0
10.000
20.000
30.000
40.000
50.000
60.000
K Mts SBM Consumption - Ave Growth @15.2% Vs Supply from
Domestic Soy @-6.2% past 11 Years
Supply from Domestic Soy Total Demand
0
2.000
4.000
6.000
8.000
10.000
12.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
K MtsRSM - Demand Ave Growth @+6.1% Vs Supply from
Domestic Rapeseed @+2.6% past 11 Years
Supply from Dom. Rapeseed Total Demand
CSM & GNM – Well Balanced but Gradually
Expanding
Source: CNGOIC
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
5.500
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts CSM - Well Balanced
Supply from Domestic Soy Total disapprearence
1.500
2.000
2.500
3.000
3.500
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts GNM - Well Balanced
Supply from Domestic Soy Total disapprearence
Soaring Meals Deficit – Robust Growth Consumption of Meats & Feed Production
Source: China Statistics Years Book, China Feed Association
& CNGOIC
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
K Mts SBM+RSM+GNM+CSM - Soaring Deficit
Suppy From Domestic Source Total Disappearence
Soaring Meals Deficit – Only Solution => Import
Source: China Custom
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
K Mts Soybean - Ave Grwoth @28.5% Past 10 Years
0
1.000
2.000
3.000
4.000
5.000
6.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
K Mts Canola seed - Soaring Grwoth @95.3% Past 10 Years
0
20
40
60
80
100
120
140
160
08/09 09/10 10/11 11/12 12/13 13/14
Groundnut ImportKMT
Average growth
rate=226%
0
50
100
150
200
250
300
350
400
450
08/09 09/10 10/11 11/12 12/13 13/14
Cotton Seed ImportKMT
Groundnut + Cotton Seed Import - Supplementary
Source: China Custom
Expanding Local Corn Supply – by Expanding
Planting Area and Improving Yield
Source: CNGOIC
K Acres
100
120
140
160
180
200
220
240
Domestic Crop Total Disappearence
50
60
70
80
90
100
110
120
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
100.000
05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Corn Acres Bu/acre Bu/Acre
Corn Import – A Trend or Temporary?
Source: CNGOIC
Mln Mts
Mln Mts
(20)
(10)
0
10
20
30
40
50
China Corn - Stock Re-building as from 06/07
Net Changes to Stock
-20
-15
-10
-5
0
5
10
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
China Turns to Net Importer as from 2009
100
120
140
160
180
200
220
240
Domestic Crop Total Disappearence
Source:CNGOIC
Corn Import to China be Continued?
Mln Mts
-20
-15
-10
-5
0
5
10
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
China Turns to Net Importer as from 2009
0
50
100
150
200
250
Industrial Use Feed Use Total Demand Total Supply
China
Agricultural Reform and Its Repercussion
to
Production, Stock and Import Prospect for 2015-2020
I) China Market - Snap shotII) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its RepercussionV) Import Prospect for 2015 - 2020
Government Agricultural PolicySoybean
1990s：：：：Grain
Purchases &
Sales by Central
Planning
Rmb Acrea
2002：：：：Subsidy to improve quality of
grains; Areas covered 24.7mln Acres;，，，，Subsidy
Rmb 150-200/Acrea
2004: Agri Tax
down from 7% to
4%; Ave subsidy
was rmb3.15/Acre
Subsidy was
rmb35/Acre.
2007: Increased
subsidy to improve
soy quality; Areas
covered expanded to
98.8 mln Acres，，，，
Subsidy was
rmb35/Acre.sell to market by
auction if needed.
2008: Adopt
Temporary Reserve
Policy after food
crisis; Minimum
Procurement price;
Stored by Gov’t & Re-
sell to market by
auction if needed.
price for soy =
rmb4800/mt
2014: Target Price
Policy. Direct subsidy
basis target & market
prices. No subsidy if
Mkt price higher than
target price. Target
price for soy =
rmb4800/mt
YearYearYearYear temporary purchase pricetemporary purchase pricetemporary purchase pricetemporary purchase price
2008200820082008 3700 RMB/ton3700 RMB/ton3700 RMB/ton3700 RMB/ton
2009200920092009 3740 RMB/ton3740 RMB/ton3740 RMB/ton3740 RMB/ton
2010201020102010 3800 RMB/ton3800 RMB/ton3800 RMB/ton3800 RMB/ton
2011201120112011 4000 4000 4000 4000 RMB/tonRMB/tonRMB/tonRMB/ton
2012201220122012----2014201420142014 4600 RMB/ton4600 RMB/ton4600 RMB/ton4600 RMB/ton
Impact of Gov’t Agri Policy onSoybean Production
Gov’t subsidy Procurement for Reserve
Soybean Production Soared in 2004 & 2008
Resulting from Gov’t Policy
Agricultural Tax
Reduction Procurement
for Reserve
Impact of Gov’t Agri Policy on Soybean Stock
Gov’t subsidy
Procurement for Reserve
Impact of Gov’t Agri Policy on Soybean Import
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Soybean Import - Ave Growth @30.6% past 11 years
Soybean
Government Agricultural PolicyCorn
2000: Free Agri
tax. Subsidy to
seed farmers,
hibride seeds and
Agri equipment.
2002: Cancel
export subsidy.
Adopt import
quota system
（（（（Corn 7.2 mln
mts））））
2008: Adopt
Revolving
Temporary
Reserve Program
2013-2014 : Record
corn procurement
for Revolving
Temporary Reserve
programfarmers for Reserve
2013-2014: Only
Sinograin being
authorized to
procure corn from
farmers for Reserve
2015: Linking corn
import quota with
reserve corn
purchases by
auction
MIR 162 was approved by
GAQSIQ on Dec 17, 2014.
SinoGrain monopolised corn procurement for Reserve
Model: Sinograin --- regional Reserve Warehouses
Corn Production Soared in 2004 & 2008 Resulting
from Government Policy
Corn Procurement Soared in 2008 、、、、2014 & 2015 when Support Price above Market Price
Impact of Gov’t Agri Policy on Corn Stock
Impact of Gov’t Agri Policy on Corn Stock
Corn Stock in Reserve at Peak by end of 2014 / 2015
Impact of Gov’t Agri Policy on Corn Import
Positive Import Margin Leaded to Corn
Import
Planting Area Remained Gradual
Expansion after Agri Tax Reduction in 2004
Deteriorating Soybean Return Explained why China
Soybean production Kept on Declining over the Years
China
Agricultural Reform and Its Repercussion
to
Production, Stock and Import Prospect for 2015-2020
I) China Market - Snap shotII) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its RepercussionV) Import Prospect for 2015 - 2020
2015 Gov’t Agricultural Support Policy
• Major Government Policy on Agriculture Sector:
• Strengthen “Farm Land Transferable” Program which allows farm lands to be bought, sold and leased.
• The Government encourages farmers to form “Co-op” to handle agricultural crop marketing.
• The Government encourages large scale farming making use of mechanical equipments to boost crop production.
• Replaced “Corn Procurement for Reserve” Program by “ Direct Subsidy to Farmers of Price Difference of Target Price Vs Market Price ”
• Big Repercussion on Yield in Years Ahead.• Linking Corn Import Quota Allocation to Reserve Corn Auction to
lessen current burden of deteriorating quality of corn in reserve.• Re-application of 13% Export Tax Rebate to corn processing Plants to
boost local corn usage and reduce mountaining corn stock.
China
Agricultural Reform and Its Repercussion
to
Production, Stock and Import Prospect for 2015-2020
I) China Market - Snap shotII) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its RepercussionV) Import Prospect for 2015 - 2020
2015 Gov’t Agricultural PolicyImpact on soybean
• Given better corn return to farmers than soybean farmers, do not expect planting area of Soybean to be increased impressively.
• Expect improvement of soybean yield because of more application of mechanical equipments and large scale farming. However, production is not expected to be increased by such a degree to override expansion demand for protein meals and reversal of current soybean import in years ahead.
• Uncertain over production increase by replacing “Revolving Temporary Reserve Program” by “ Direct Subsidy to Farmers for Difference of Target Price Vs Market Price ”
• Expect soybean import to be at least 80 mln mts by 2020.
Projected Domestic Soybean Import
Source: USDA &Own Estimate
Projected Meat & Feed Production
Source: China Feed Industry Association & China Sta tistical Year book
1、、、、Higher Meat Consumption Due to Increase of Population Size
2、、、、Higher Meat Consumption Due to Higher Urbanization Rate
Grains & Meats Consumption Per Capita – Farms Vs City
3、、、、Higher Meat Consumption Due to Higher
GDP Per Capita or Improvement of Living
Source: USDA
4、、、、National Policy - in favor of Grains
Production instead of Oilseeds
Projected Domestic Soybean Deficit
Source: USDA &Own Estimate
Projected Domestic Soybean Import
Source: USDA &Own Estimate
Widening Deficit of Domestic Supply of Edible Oils
1、、、、Higher Meat Consumption Due to Increase of Population Size
2、、、、Higher Meat Consumption Due to Higher Urbanization Rate
3、、、、Higher Edible Oils Consumption Due to
Higher GDP Per Capita
2015 Gov’t Agricultural Policy Impact on Corn
• Expect domestic corn production to be increased by an average of 4.5% in years ahead resulting from both expansion of planting area (1%) and yield (3%).
• Improvement of corn yield comes from more application of mechanical equipments and large scale farming. Domestic production will exceed expanding total disappearance with corn stock to be accumulated in years ahead.
• However, still see corn import to China because of premium of local corn price to imported corn. Annual import quantity will be limited by the import quota allocated to non-stated owned companies (2.88 mlnmts).
• Expect corn import to be around 2.88 mln mts by during 2016-2020.
Expanding Local Corn Supply in Years Ahead by Planting Area 1% & Yield 3%
Source: CNGOIC
K Acres
Bu/Acre
0,0
50,0
100,0
150,0
200,0
250,0
300,0
China Corn Crop - Growth @ Ave 4.5% coming 5 Years
Domestic Crop
70,0
75,0
80,0
85,0
90,0
95,0
100,0
105,0
110,0
China Corn Yield China Corn Yield China Corn Yield China Corn Yield ---- Grow 2 Ave 3% coming 5 Years Grow 2 Ave 3% coming 5 Years Grow 2 Ave 3% coming 5 Years Grow 2 Ave 3% coming 5 Years
Due to "Land Transferable" ProgramDue to "Land Transferable" ProgramDue to "Land Transferable" ProgramDue to "Land Transferable" Program
Yield Bu/acre
0
20.000
40.000
60.000
80.000
100.000
120.000
China Corn - Planting Area @Ave Growth 1% coming 5
years
Area in '000 Acres
Corn Import – < 3 mln tons in Years Ahead
Source: CNGOIC
Mln Mts
Mln Mts
100
120
140
160
180
200
220
240
260
280
Domestic Crop Total Disappearence
(20)
(10)
0
10
20
30
40
50
01
/02
0
2/0
3
0
3/0
4
0
4/0
5
0
5/0
6
06
/07
0
7/0
8
08
/09
09
/10
10
/11
11
/12
12
/13
13
/14
14
/15
15
/16
16
/17
17
/18
18
/19
19
/20
China Corn - Turns to Surplus as from 06/07 due to Gov't Policy
Net Changes to Stock
-20
-15
-10
-5
0
5
10
China Remains as Net Importers in Years ahead Because of More Expensive Local Corn
China Corn Net Exports(MMT)
Mln Mts
Positive Import Margin Induced Corn Import
Deteriorating Soybean Return Explained why China
Soybean production Kept on Declining over the Years
Expected Repercussion on Production,
Stock and Import Prospect1) Soybean:
* Expect local soybean production on defensive in years ahead because of lower return to farmers and local non-GMO variety soybean mainly for edible purposes.
* Effect of substitution of “Revolving Temporary Reserve Procurement” Program by “Direct Subsidy to Farmers of Price Difference of Target price Vs Market Price” Program is uncertain to production prospect as it is at preliminary stage.
* Expect soybean import to be further increased in years ahead because of room for expansion of meat consumption as a result of urbanization, economic and population growth.
* Current “Farm Land Transferable” Program is not expected to reverse expanding soybean import prospect.
2) Corn:* Current “Farm Land Transferable” Program, encouragement of large scale farming and more
application of mechanical equipment are expected to improve corn yield and hence production in years ahead.* Expect local corn production to exceed total disappearance and stock to increase in years ahead.
However, corn import is expected to be continued but limited by import quota. * Effect of substitution of “Revolving Temporary Reserve Procurement” Program by “Direct Subsidy to Farmers of Difference of Target Price Vs Market Price” Program is uncertain to production prospect as it is at preliminary stage.* Instead, we will see other feed grain import such as feed barley, sorghum to be increased as a substitute to corn use in feed sector.
Reference Information / Import Data
Source: China Statistical Yearbook
Soybean in China
Rapeseed in China
Groundnut in China
Cotton in China
Corn in China
Source: CNGOIC
Corn Deficit over Coastal Region
Deficit
Surplus
Bo Hai
13977
Bo Hai
13977
Eastern
China
11031
South
28650
South
west
356
Source: CNGOIC
North
East
45298
South China - The Major Wheat Import Area
Soybean Import – Brazil Superseded USA as
Major Supplying Origin‘000 mts
Source: China Custom
0
1.000
2.000
3.000
4.000
5.000
6.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Canola Import - Soaring Growth @95% past 11 years
Canola Import
KMT
Explosive Import of oilseeds and Oils resulting from Big Deficit
0
2.000
4.000
6.000
8.000
10.000
12.000
PO SBO RSO GNO SFO
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Soybean Canola Seed
Source: CNGOIC
KMTKMT
Corn Import to China to become Regular Activity
in Years Ahead
-20
-15
-10
-5
0
5
10
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
China Turns to Net Importer as from 2009
KMT
KMT
KMT
KMT
75% of Crushing Capacity is located alongCoastal Regions
Top 13 Crushers Account for 60% of National Crushing Capacity
Source: Own Estimate
China Feed Production Remained Stagnant in 2014 & 2015
72% of Feed Production Capacity Being Distributed Along Coastal Regions
Meat Production by Type
Source: China Statistical Yearbook
62% of Meat Production Being Distributed Along the Coastal Regions
Production Capacity Along Coastal Regions
Meat = 62% Feed = 72% Crushing = 75%
China – 2015 Import Quota
Commodity Stated-Owned Non State-Owned Total
K tons % K tons % K tons %
Corn 4,320 60% 2,880 40% 7,200 100%
Wheat 8,672 90% 964 10% 9,636 100%
Rice 2,660 50% 2,660 50% 5,320 100%
Cotton 295 33% 599 67% 894 100%
Source: China Development & Reform Council
Agri Commodities Allowable for Import to China
by GAQSIQ
Corn Barley soybean rapeseed wheat
Ukraine √ √ √ × ×
USA √ × √ × √
Canada × √ √ √ √
Australia × √ × √ √
Brazil √ × √ × ×
Argentina √ √ √ × ×
Source: GAQSIQ
