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Joint Meeting of the 30th Session of the Intergovernmental Group on Grains and the 41st Session of the Intergovernmental Group on Rice
Rome 10-11 February 2004
CRITICAL REVIEW OF CHINA’S CEREAL SUPPLY & DEMAND AND
IMPLICATIONS FOR WORLD MARKETS
CCP: GR-RI 04/CRS.3
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Overview of the presentation
Background Main issues “Cereals” and Sources Food use estimates Feed use estimates Stocks Implications
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Background
China in global economy Reasons for FAO’s first revision of China’s
cereal balances (2000) Impacts on world numbers Steady decline in China’s stocks since 1999 Need for more detailed review and analysis FAO cereal balances: GIEWS and FAOSTAT Research inputs and main collaborators
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Issues
What do we know about cereal supply and demand in China?
Are domestic cereal supplies adequate to meet demand?
How to determine the “accurate” level of stocks in China and are they falling so massively?
China, a major source of instability in world cereal markets?
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Few words about “cereals” in China . . .
Main cereals grown and consumed in China include: wheat, rice, maize, barley, rye, oats, millet and sorghum;
But cereals are referred to as “grains” in China, which also include soybeans and roots crops (mainly sweet potatoes);
Wheat, rice and maize production amounts to roughly 97% of the total cereal output in China;
Wheat (north) and rice (south) are used mostly for food while maize is used primarily as feed.
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Basic official sources:
Ministry of Agriculture: collects production and price data based on data supplied by the provinces and counties;
The Chinese National Bureau of Statistics (NBS) - formerly the State Statistical Bureau (SSB) - collects production data based on yield sampling survey; consumption data based on household survey; year-end stocks in per capita term for rural households [“China Rural Household Survey Yearbook”, “China Statistical Yearbook”, “Yearbook of China Prices and Survey of Urban Household Expenses”];
Custom: collects monthly trade data; Ministry of Domestic Trade: collects data on state
purchasing and state reserve and quota price data
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S. 7A simple cereal supply & demand balance: what is “official” and what is not! Total Supply
• Production• Opening stocks• Imports
Total Utilization• Domestic Utilization
• Food use• Feed use• Other use
• Exports• Ending Stocks
official
official
official
Unofficial estimates
Unofficial estimates
Unofficial estimates
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FAO/GIEWS NBS * FAO/GIEWS NBS *
( . . . . . . million tonnes . . . . . . ) ( . . . per capita in Kg/year . . . )
1995/96 99 92 82 77
1996/97 100 94 82 77
1997/98 101 92 83 75
1998/99 102 91 82 74
1999/00 102 91 82 73
2000/01 100 91 80 73
2001/02 99 88 78 70
2002/03 98 87 77 69
FAO/GIEWS per capita wheat consumption estimates are above the adjusted NBS figures but both series show a sharp decline
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FAO/GIEWS per capita rice consumption estimates are above the adjusted NBS figures and NBS numbers show faster declines
FAO/GIEWS NBS * FAO/GIEWS NBS *
( . . . . . million tonnes .. . . . . . ) ( . . . per capita in kg. . . . )
1995/96 107 104 90 87
1996/97 109 103 90 85
1997/98 110 101 90 83
1998/99 111 100 90 82
1999/00 112 97 90 78
2000/01 112 100 89 80
2001/02 112 98 89 77
2002/03 112 97 88 77
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Calculating feed use
Two approaches to estimate feed grain utilization:• supply” or “availability” approach (i.e. the
feed use = total grain production-food use-seed use-waste and other uses).
• “utilization” approach (i.e. the feed use = meat production multiplied by corresponding overall feed conversion factor, which are intended to reflect both the intensity and the technical efficiency of the livestock system).
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Low scenario Middle scenario
High scenario
1996 167 207 224
1997 186 216 233
1998 173 207 226
1999 185 212 229
2000 176 194 210
2001 183 202 218
Three different feed requirement scenarios could be considered for the period 1996 to 2001
(million tonnes)
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How much grains are available for livestock production?
Based on FAO/GIEWS estimates, total amount of grains used as feed would be in the range of 150-180mt, which would be closer to the grain feed requirements under the low scenario.
Chinese farmers contribute about 70-100mt and the milling enterprises another 40-50mt. In addition, feed use by larger scale livestock producers (and milling companies) need also to be taken into consideration since they purchase feed ingredients and produce their own compound feed.
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S. 13
Stocks in China
Government stocks:• State (central government); • Special Grain Reserves (SAGR) -
established in 1990s • local government stocks; and
“business” stocks held by the State Owned Enterprises (SOE).
On-farm Stocks
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The adjusted cereal stock estimates would be higher than FAO’s but . . .
Derived Gov. Stocks
Adjusted On-farmStocks
Adjusted Total Cereal Stocks
FAO/GIEWS Total
Stocks
( . . . . . . . . . million tonnes . . . . . . . . . )
1994/95 120 141 261 350
1995/96 166 140 306 358
1996/97 208 111 319 372
1997/98 233 151 384 368
1998/99 259 210 469 375
1999/00 235 155 390 368
2000/01 250 96 346 318
2001/02 204 105 309 265
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300
330
360
390
420
93 94 95 96 97 98 99 00 01 02 03 08
million tonnes
Chart 1: The Widening Gap betweenCereal Production and Utilization
Utilization
Production
* Based on a 3-year moving averageP R O J E C T E D *
China’s cereal production has been falling while utilization seems flat, is the gap real, what about the future?
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S. 16
-100
0
100
200
300
400
500
2000 2002 2004 2006 2008
million tonnes
Chart 2: Cereal Closing Stocks(2000-2008)
95% *
82% *69% *
54% *
37% *26% *
14% *2% *
* Stock-to-use ratio
Can stocks fall to nil?
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Wheat imports have started to rise while maize exports are declining as stocks fall sharply . . .
0
5
10
15
20
Wheat Imports Maize Exports
million tonnes
79/8
0
84/8
5
89/9
0
94/9
5
99/0
0
03/0
4
0
50
100
150
200
Wheat Stocks Maize Stocks
million tonnes
79/8
0
84/8
5
89/9
0
94/9
5
99/0
0
03/0
4
Imports and Exports Stocks
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Domestic cereal prices have started to increase, but
800
1000
1200
1400
1600
1800
2000
2200
Selected Wholesale Cereal Prices in China, 2000-2003
RMB/tonne
Maize
Wheat
Rice (Early Indica)
Rice (Japonica)
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What Next?
It is certain that cereal stocks in China must have fallen substantially in recent years
And that much of the drawdown in world stocks has been due to a sharp decline in China’s cereal stocks
But, we still need to substantiate what may or may not be the real level of stocks in China
As long as FAO does not have reliable and consistent information about the overall level of stocks in China, the Organisation’s assessment of the global cereal market situation will not be reliable
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S. 20
WELCOME TO THE YEAR OF
MONKEY
AND
THANK YOU
A monkey practices acrobatic skills on the horns of a goat in the Changchun Fauna and Flora Garden in the capital of Jilin Province in Northeast China. [China Daily]