International Grains Summit

Transcription

1 International Grains Summit May 8, 2015 Milan, Italy By Renault Quach (Guo Jia Hua) Donlinks Grain & Oil Co., Ltd

2 China Agricultural Reform and Its Repercussion over Production, Stock and Import Prospect for I) China Market - Snap shot II) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its Repercussion V) Import Prospect for

3 International Grain Summit Milan I) China Market - Snap shot - Major Oilseeds - Vegetable Oils - Protein Meals - Feed Grains II) Current China Market Situation

4 China Oilseeds Growing Distribution

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6 China Corn Crop Bumper Crop past 5 Years Source: CNGOIC

7 Soybean - Huge Deficit due to Declining Local Production but Robust Expansion of Crushing Needs KMT Total Crushing Domestic Supply Total Demand '000 Acreas Soybean Acres Bu/acres Bu/Acres /0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/1414/ Source: CNGOIC

8 Canola Seed Widening Deficit due to Expanding Demand but Stagnant Local Supply KMT Total Crushing Domestic Supply Total Demand '000 Acreas Rapeseed Acres Bu/Acres Bu/Acres Source:CNGOIC

9 Groundnut - Steady but Minor Growth Crushing (Dom) Domestic Supply Total Demand '000 Acreas Groundnut Acres Bu/acres Bu/Acres /09 09/10 10/11 11/12 12/13 13/14 14/ /09 09/10 10/11 11/12 12/13 13/14 14/15 0 Source: CNGOIC

10 Cotton Seed Stagnant Production Crushing (Dom) Domestic Crop Total Demand '000 Acreas Cotton Seed Acres Bu/acres Bu/Acres /09 09/10 10/11 11/12 12/13 13/14 14/ /09 09/10 10/11 11/12 12/13 13/14 14/15 0 Source: CNGOIC

11 SBO Widening Deficit to be Fulfilled by More Import of Soy K Mts SBO - Soaring Deficit Supply from Domestic Soy Total Disappearence K Mts K Mts Declining SBO Import B'cause of Soaring Soy Import 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 SBO Import Soybean Import - Ave Past 10 years Soy Import 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Source: CNGOIC

12 RSO Widening Deficit Being Fulfilled by Higher Import of Canola Seed RSO Import Declined as Canola Seed Import Soared K Mts RSO - Widening Deficit RSO Import /0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/1414/ Canola Import - Soaring past 10 years Canola Import Supply from Domestic Rapeseed Total Disappearence /05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Source: CNGOIC

13 Palm Olein Entirely Import with Steady Ave. past 10 Years '000 Mts K Mts /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Import Domestic Supply Domestic Demand Source: CNGOIC

14 SFO Deficit Widening due to Expanding Demand from High Income Earner SFO from Domestic Crop Total SFO Disappearance SFO Import Growth - Ave 65% past 11 Years SFO Import /09 09/10 10/11 11/12 12/13 13/14 14/15 03/04 04/05 05/06 06/07 07/ /0909/1010/1111/1212/1313/1414/15 03/0404/0505/0606/0707/08 Source: USDA

15 SFO Import Impressive Growth K Mt % of SFO from Ukraine Source: China Custom

16 Widening Deficit of Edible Oils being Fulfilled by Soaring Import of Oilseeds & Vegoils 12,0 10,0 K Mts Widening Deficit from Strong Consumption 8,0 6,0 4, ,0 0,0 08/0909/1010/1111/1212/1313/1414/15 03/0404/0505/0606/0707/08 Palm Oil Soybean Oil Rape Oil Sunflower Oil Coconut Oil Peanut Oil Palm Kernel Oil Canola Seed Soybean Oil Supply from Dom. Oilseeds Domestic Total Oil Demand Source: CNGOIC

17 China Edible Oils Turns to Surplus After Soaring Import of Oilseeds and Vegoils Total Supply Total Disappearence /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

18 Widening SBM & RSM Deficit K Mts SBM Consumption - Ave Vs Supply from Domestic past 11 Years K Mts RSM - Demand Ave Vs Supply from Domestic past 11 Years /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Supply from Domestic Soy Total Demand Supply from Dom. Rapeseed Total Demand Source: CNGOIC

19 CSM & GNM Well Balanced but Gradually Expanding K Mts CSM - Well Balanced K Mts GNM - Well Balanced /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/ /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Supply from Domestic Soy Total disapprearence Supply from Domestic Soy Total disapprearence Source: CNGOIC

20 Soaring Meals Deficit Robust Growth Consumption of Meats & Feed Production K Mts SBM+RSM+GNM+CSM - Soaring Deficit Suppy From Domestic Source Total Disappearence Source: China Statistics Years Book, China Feed Association & CNGOIC

21 Soaring Meals Deficit Only Solution => Import K Mts Soybean - Ave Past 10 Years K Mts Canola seed - Soaring Past 10 Years /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Source: China Custom

22 Groundnut + Cotton Seed Import - Supplementary KMT Groundnut Import KMT Cotton Seed Import Average growth rate=226% /09 09/10 10/11 11/12 12/13 13/ /09 09/10 10/11 11/12 12/13 13/14 Source: China Custom

23 Expanding Local Corn Supply by Expanding Planting Area and Improving Yield 240 Domestic Crop Total Disappearence K Acres Corn Acres Bu/acre Bu/Acre /06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 50 Source: CNGOIC

24 Corn Import A Trend or Temporary? Mln Mts 50 China Corn - Stock Re-building as from 06/ Domestic Crop Total Disappearence Net Changes to Stock (10) 160 (20) 140 Mln Mts 10 China Turns to Net Importer as from Source: CNGOIC

25 Mln Mts Corn Import to China be Continued? China Turns to Net Importer as from 2009 Industrial Use Feed Use Total Demand Total Supply Source:CNGOIC

26 China Agricultural Reform and Its Repercussion to Production, Stock and Import Prospect for I) China Market - Snap shot II) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its Repercussion V) Import Prospect for

27 Government Agricultural Policy Soybean 1990s:Grain Purchases & Sales by Central Planning 2002:Subsidy to improve quality of grains; Areas covered 24.7mln Acres;,Subsidy Rmb /Acrea 2004: AgriTax down from 7% to 4%; Ave subsidy was rmb3.15/acre 2014: Target Price Policy. Direct subsidy basis target & market prices. No subsidy if Mktprice higher than target price. Target price for soy = rmb4800/mt 2008: Adopt Temporary Reserve Policy after food crisis; Minimum Procurement price; Stored by Gov t& Resell to market by auction if needed. Year temporary purchase price RMB/ton RMB/ton RMB/ton RMB/ton RMB/ton 2007: Increased subsidy to improve soy quality; Areas covered expanded to 98.8 mln Acres, Subsidy was rmb35/acre.

28 Impact of Gov t Agri Policy on Soybean Production Gov t subsidy Procurement for Reserve

29 Soybean Production Soared in 2004 & 2008 Resulting from Gov t Policy Agricultural Tax Reduction Procurement for Reserve

30 Impact of Gov t Agri Policy on Soybean Stock Procurement for Reserve Gov t subsidy

31 Impact of Gov t Agri Policy on Soybean Import Soybean Import - Ave past 11 years Soybean /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

32 Government Agricultural Policy Corn 2000: Free Agri tax. Subsidy to seed farmers, hibrideseeds and Agri equipment. 2002: Cancel export subsidy. Adopt import quota system (Corn 7.2 mln mts) 2008: Adopt Revolving Temporary Reserve Program 2015: Linking corn import quota with reserve corn purchases by auction :Only Sinograinbeing authorized to procure corn from farmers for Reserve :Record corn procurement for Revolving Temporary Reserve program MIR 162 was approved by GAQSIQ on Dec 17, SinoGrain monopolised corn procurement for Reserve Model: Sinograin --- regional Reserve Warehouses

33 Corn Production Soared in 2004 & 2008 Resulting from Government Policy

34 Corn Procurement Soared in & 2015 when Support Price above Market Price

35 Impact of Gov t Agri Policy on Corn Stock

36 Impact of Gov t Agri Policy on Corn Stock

37 Corn Stock in Reserve at Peak by end of 2014 / 2015

38 Impact of Gov t Agri Policy on Corn Import

39 Positive Import Margin Leaded to Corn Import

40 Planting Area Remained Gradual Expansion after Agri Tax Reduction in 2004

41 Deteriorating Soybean Return Explained why China Soybean production Kept on Declining over the Years

42 China Agricultural Reform and Its Repercussion to Production, Stock and Import Prospect for I) China Market - Snap shot II) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its Repercussion V) Import Prospect for

43 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.

44 China Agricultural Reform and Its Repercussion to Production, Stock and Import Prospect for I) China Market - Snap shot II) Historical Review of Government Agricultural Policy III) Current Agricultural Reform and its Repercussion V) Import Prospect for

45 2015 Gov t Agricultural Policy Impact 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.

46 Projected Domestic Soybean Import Source: USDA &Own Estimate

47 Projected Meat & Feed Production Source: China Feed Industry Association & China Statistical Year book

48 1 Higher Meat Consumption Due to Increase of Population Size

49 2 Higher Meat Consumption Due to Higher Urbanization Rate

50 Grains & Meats Consumption Per Capita Farms Vs City

51 3 Higher Meat Consumption Due to Higher GDP Per Capita or Improvement of Living Source: USDA

52 4 National Policy - in favor of Grains Production instead of Oilseeds

53 Projected Domestic Soybean Deficit Source: USDA &Own Estimate

54 Projected Domestic Soybean Import Source: USDA &Own Estimate

55 Widening Deficit of Domestic Supply of Edible Oils

56 1 Higher Meat Consumption Due to Increase of Population Size

57 2 Higher Meat Consumption Due to Higher Urbanization Rate

58 3 Higher Edible Oils Consumption Due to Higher GDP Per Capita

59 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 mln mts). Expect corn import to be around 2.88 mln mts by during

60 Expanding Local Corn Supply in Years Ahead by Planting Area 1% & Yield 3% 300,0 China Corn Crop - Ave 4.5% coming 5 Years K Acres China Corn - Planting Growth 1% coming 5 years Area in '000 Acres 250, , , ,0 50,0 0,0 Source: CNGOIC Domestic Crop China Corn Yield - Grow 2 Ave 3% coming 5 Years Bu/Acre Due to "Land Transferable" Program 110,0 105,0 100,0 95,0 90,0 85,0 Yield Bu/acre 80,0 75,0 70,0

61 Corn Import < 3 mln tons in Years Ahead Mln Mts Mln Mts 50 China Corn - Turns to Surplus as from 06/07 due to Gov't Policy Domestic Crop Total Disappearence (10) (20) Mln Mts 10 01/02 02/03 Net Changes to Stock 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 China Remains as Net Importers in Years ahead Because of More Expensive Local Corn 19/ China Corn Net Exports(MMT) -20 Source: CNGOIC

62 Positive Import Margin Induced Corn Import

63 Deteriorating Soybean Return Explained why China Soybean production Kept on Declining over the Years

64 Expected Repercussion on Production, Stock and Import Prospect 1) 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.

65 Reference Information / Import Data

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69 Source: China Statistical Yearbook

70 Soybean in China

71 Rapeseed in China

72 Groundnut in China

73 Cotton in China

74 Corn in China Source: CNGOIC

75 Corn Deficit over Coastal Region Deficit Surplus North East South west 356 Bo Hai Eastern China Source: CNGOIC South 28650

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77 South China - The Major Wheat Import Area

78 000 mts Soybean Import Brazil Superseded USA as Major Supplying Origin Source: China Custom

79 KMT Canola Import - Soaring past 11 years Canola Import /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

80 Explosive Import of oilseeds and Oils resulting from Big Deficit KMT KMT Soybean Canola Seed PO SBO RSO GNO SFO /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 0 Source: CNGOIC

81 Corn Import to China to become Regular Activity in Years Ahead 10 China Turns to Net Importer as from

82 KMT

83 KMT

84 KMT

85 KMT

86 75% of Crushing Capacity is located along Coastal Regions

87 Top 13 Crushers Account for 60% of National Crushing Capacity Source: Own Estimate

88 China Feed Production Remained Stagnant in 2014 & 2015

89 72% of Feed Production Capacity Being Distributed Along Coastal Regions

90 Source: China Statistical Yearbook Meat Production by Type

91 62% of Meat Production Being Distributed Along the Coastal Regions

92 Production Capacity Along Coastal Regions Meat = 62% Feed = 72% Crushing = 75%

93 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, % Wheat 8,672 90% % 9, % Rice 2,660 50% 2,660 50% 5, % Cotton % % % Source: China Development & Reform Council

94 Agri Commodities Allowable for Import to China by GAQSIQ Corn Barley soybean rapeseed wheat Ukraine USA Canada Australia Brazil Argentina Source: GAQSIQ

95 Thank You DonlinksGrain & Oil Co., Ltd Renault Quach