China as a market for Latin American dairy and beef : a supply and demand outlook with a food security perspective FAO September 2728, 2011 Daniel Conforte Massey University 1
Contents Drivers of China s demand The Chinese diet How China fed itself Dairy and Animal proteins in China Oil cakes and imports of soybeans Beef and dairy in S.A. Production, trade, growth restrictions and potential Competing for land versus crop farming Sources of food insecurity Future supply of dairy and animal proteins in China Alternative sources Securing foreign procurement of soybean and dairy? Government and industry perspectives Implications for S.A. Conclusions and recommendations Daniel Conforte Massey University 2
Drivers of China demand Population growth Income Diet Daniel Conforte Massey University 3
Changes in diet in China Daniel Conforte Comparative Food and Agriculture Systems 4
How has China been feeding its growing livestock production? 69,5 kg of Grains from Food to feed + 23 kg of animal proteins 23 kg growth of meat equivalent x 1.3B people = 30 million additional tons. of meat equivalent 69,5x 1.3B people = 91 million tons. of grain from food to feed plus 50 million tons. of additional oilseed cakes supply = 120 million tons. of additional feedstuffs; A FEED/MEAT CONVERTION RATIO OF 4/1 Daniel Conforte Massey University 5
ANIMAL PROTEINS KG/CAP. 45 40 35 30 25 20 15 USA Italy China 10 5 0 ANIMAL FATS KG/CAP. 70 60 50 40 30 20 USA Italy China 10 0 Daniel Conforte Massey University 6
Daniel Conforte Massey University 7 0 20 40 60 80 100 120 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Italy USA China VEGETABLES KG/CAP. 0 20 40 60 80 100 120 140 160 180 200 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 China Italy USA CEREALS KG/CAP. 0 20 40 60 80 100 120 140 160 180 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Italy USA China FRUITS KG/CAP.
Total supply of these food items: animals proteins and fats, vegetables, fruits and cereals (kg/cap/year) 600 500 400 300 200 100 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Italy USA China Daniel Conforte Massey University 8
Milk consumption per capita 120 100 80 60 40 20 0 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 2007 China milk consumption per capita South America milk consup per cap Daniel Conforte Massey University 9
How China fed itself Dairy and Animal proteins in China Oil cakes and imports of soybeans Daniel Conforte Massey University 10
China dairy Daniel Conforte Massey University 11
China: value of agriculture production (million constant USD of 20042006) 600,000 500,000 400,000 300,000 200,000 32% 100,000 26% 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 2009 total ag production livestock products Daniel Conforte Massey University 12
China: area planted (hectares) 100,000,000 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 4 2005 6 7 8 2009 CEREALS OILCAKES FRUITS, VEGGIES, ROOTS Daniel Conforte Massey University 13
S.A and China milk production (tonnes) 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 2009 S.A. milk production China milk production Daniel Conforte Massey University 14
China: milk production and imports (tones) 45,000,000 20.0 40,000,000 18.0 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 16.0 14.0 12.0 10.0 8.0 6.0 4.0 5,000,000 2.0 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 2009 China milk production China imports dairy equivalent imports as % of production Daniel Conforte Massey University 15
China: milk production, herd, and yield 40000000 3500 35000000 3000 30000000 25000000 20000000 15000000 10000000 2500 2000 1500 1000 Milk Animals (Head) Production (tonnes) Yield (Hg/An) 5000000 500 0 0 Daniel Conforte Massey University 16
4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 China dairy imports vs. S.A. Dairy exports (tones) 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 2008 China imports dairy equivalent SA exports dairy equivalent (000 METRIC TONES) CHINA WMP CONSUMPTION CHINA WMP IMPORTS 320,000 tons of WMP aprox. = to 3,200,000 tons of dairy equivalent Daniel Conforte Massey University
World dairy trade vs. China imports 100,000,000 and S.A. exports (tonnes dairy equivalent) 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 World exports China imports SA exports Daniel Conforte Massey University 18
China meats Daniel Conforte Massey University 19
1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 2009 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 2009 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 2009 120,000 100,000 80,000 60,000 80 70 60 50 40 China: livestock number and yields 40,000 20,000 500,000 CATTLE (000 heads) yield (kg meat per head) 30 20 10 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 120 3.00 2.50 2.00 1.50 1.00 0.50 450,000 400,000 350,000 300,000 100 80 CHICKEN (000) yield (kg meat per SU) 250,000 60 200,000 150,000 40 100,000 50,000 20 PIGS (000 heads) Daniel Conforte Massey University 20 yield (kg meat per head)
China: meat production and trade 80,000,000 600,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 400,000 200,000 200,000 400,000 600,000 800,000 1,000,000 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 2008 all meats production (tonnes) meat trade balance (tonnes) 1,200,000 Daniel Conforte Massey University 21
China: meat exports and imports (tonnes) 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 2008 ALL MEAT EXPORTS ALL MEAT IMPORTS Daniel Conforte Massey University 22
China: meat imports (tons) 1,200,000 1,000,000 800,000 600,000 400,000 200,000 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 2008 Chicken meat Bovine meat Turkey meat Pig and pork Daniel Conforte Massey University 23
How China fed itself Dairy and Animal proteins in China Oil cakes and imports of soybeans Daniel Conforte Massey University 24
China feed stuffs Daniel Conforte Massey University 25
China: area of agriculture (hectares) 100,000,000 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 4 2005 6 7 8 2009 CEREALS OILCAKES FRUITS, VEGGIES, ROOTS Daniel Conforte Massey University 26
900,000,000 China: production of cereals and oilcakes 800,000,000 18 tons/hect. 700,000,000 600,000,000 500,000,000 400,000,000 4.7 tons/hect. 300,000,000 200,000,000 100,000,000 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 3 2005 6 7 8 2009 FRUITS, VEGGIES, PULSES, ROOTS, NUTS CEREALS OIL CAKES PRODUCTION 5.5 tons/hect. Daniel Conforte Massey University 27
China: average cereals yield 6.000 5.000 4.000 3.000 2.000 1.000 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 4 2005 6 7 8 2009 cereals yield (kg/hectare) Daniel Conforte Massey University 28
China: imports of feed stuffs (tons.) 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 1990 1995 2000 2004 2008 All feed stuffs 510,744 991,743 1,830,611 1,392,268 1,822,333 Cake of Rapeseed 56,920 120,616 136,946 201,181 392,730 Cake of Soybeans 1,244 43,930 565,016 133,339 325,868 Alfalfa Meal and Pellets 50,792 137,921 116,150 65,106 15,113 Bran of Maize 50,811 65,788 69,138 55,957 6,898 Food Wastes 71,419 83,721 149,187 118,737 256,317 Meal Meat 19,430 13,849 75,599 Daniel Conforte Massey University 21,080 63,932 29
China: imports of soybean and maize 45,000,000 (tonnes) 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 SOYBEAN MAIZE 15,000,000 10,000,000 5,000,000 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 2,008 Daniel Conforte Massey University 30
80,000,000 China: oilseeds cake domestic production (tonnes) 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 3 2005 6 7 8 2009 Soybean Cottonseed rapeseed sunflower TOTAL OILSEED CAKE Daniel Conforte Massey University 31
China: share of cakes from imported soybean vs. all oilseed cakes (000 tons) 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 3 2005 6 7 8 2009 Cake from all oilseeds Cake from soybean Cake from imported soybean Daniel Conforte Massey University 32
China: soybean imports (tons.) share of total oilseeds supply (%) 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 3 2005 6 7 8 60.0 50.0 40.0 30.0 20.0 10.0 0.0 TOTAL PROCESSED OILSEEDS IMPORTS OF SOYBEAN IMPORTS SHARE OF PROCESSED Daniel Conforte Massey University 33
China: soybean imports share of livestock production value 180,000 16.00 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 14.00 12.00 10.00 8.00 6.00 4.00 2.00 1990 91 92 93 94 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 Livestock production value (million USD 2005) Soybean imports (million current USD) soy imports share of livestock value Daniel Conforte Massey University 34
Actual soy cake supply vs. modeled demand of cake derived from livestock ouput growth 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 2000 1 2 3 4 5 6 7 2008 ACTUAL INCREMENTAL SOY CAKE SUPPLY ESTIMATED INCREMENTAL CAKE DEMAND ASSUMPTIONS: PIGS: 4 kg feed per kilo gain, 30% cake; MILK 20 litres per day, 17 kg feed, 8kg concentrate, 50% cake on concentrate= 200 grams per litre; POULTRY: 2 kg feed per kg meat, 40% cake = 800 grs per kg; EGGS: 3kg feed per kg eggs,40% cake, 1,2 kg per kg eggs Daniel Conforte Massey University 35
China imports of soybean Daniel Conforte Massey University 36
Importers of soybean and soycake Major soybean importers (2007) Major soy meal importers (2007) 35,000 5,000 30,000 4,500 4,000 25,000 3,500 20,000 3,000 2,500 15,000 10,000 (000 tonnes) 2,000 1,500 1,000 000 tonnes 5,000 500 Daniel Conforte
Share of soybean imports 60 50 40 30 20 China EU Other 10 1990 1999 2004 2008 Daniel Conforte Massey University 38
South America beef and dairy Production and trade Growth restrictions and potential Competing for land versus crop farming Daniel Conforte Massey University 39
South America dairy Daniel Conforte Massey University 40
70,000,000 S.A. dairy production (tons) 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1990 1 2 3 4 5 6 7 8 9 2000 1 2 3 4 5 6 7 8 2009 South America Brazil Argentina Uruguay MILK PRODUCTION 000 tons Daniel Conforte Massey University 41
Milk yields (kg. per cow) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 1990 1 2 3 4 1995 6 7 8 9 2000 1 2 3 4 2005 6 7 8 Argentina yield Uruguay yield Brazil yield Daniel Conforte Massey University 42
S.A. dairy exports (tonnes) 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 South America Argentina Uruguay Brazil Daniel Conforte Massey University 43
South America meat Daniel Conforte Massey University 44
South America meat exports (tons) 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 1990 2000 2008 Bovine meat Chicken meat Pig meat Daniel Conforte Massey University 45
Brazil meat production (tons) 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Bovine meat Chicken meat Pig meat Daniel Conforte Massey University 46
Brazil meat exports (tons) 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 Bovine meat Chicken meat Pig meat Daniel Conforte Massey University 47
Beef and dairy in S.A. Production and trade Growth restrictions and potential Competing for land versus crop farming Daniel Conforte Massey University 48
Feed, pastures and grains Feeding fish, pork, poultry Feeding dairy cows Feeding beef cattle Major restrictions Grains and soy cakes Forages calves Daniel Conforte Massey University 49
Where is the beef in Brazil? 163 million 204 million 182 million 208 M Leila Harfuch, (2009)Modeling Land Use and Land Use Change 10/14/2011 in Brazil Brazilian Institute for International Trade Negotiations, Daniel Conforte 30 M new hectares in Amazon Biome but decreasing growth 50
Where is the beeef in Argentina? 25% 57%
10/14/2011 Daniel Conforte 52
Potential growth in beef and dairy Cultivated pastures Pasture genetics: subtropical Animal genetics: dairy in Brazil Rotational farming: risk management, prices and pests Intensive grassing systems Daniel Conforte Massey University 53
The future of beef and dairy 10/14/2011 Daniel Conforte 54
Growth restrictions in beef and dairy Beef Moving to marginal areas Less quality of soils and pastures Cows and calves are major bottleneck Dairy Moving to marginal areas Upfront investments Learning curve and qualified labor Higher barriers to entry compared to crop farming Daniel Conforte Massey University 55
The total number of animals finished in feedlots in Brazil in 2008 was around 2.7 million which corresponds to 6.7% of slaughter. Another 2.5 million were finished in semiconfinement which is on grass but with supply of cut forage, silage and grain. This number, although seemingly small in percentage terms, is larger than all the animals finished in feed lots in Australia in 2008 which was around 2.1 million. 10/14/2011 Daniel Conforte 56
Beef and dairy in S.A. Production and trade Growth restrictions and potential Competing for land versus crop farming Daniel Conforte Massey University 57
140,000,000 South America soybean production (tonnes) 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 South America Brazil Argentina Daniel Conforte Massey University 58
WARNING! Highly debatable content The honourable audience may not like some or all of the following pureplay propositions Daniel Conforte Massey University 59
Sources of food insecurity Domestic Short term shocks Climate, pests; Food safety Long term imbalance Area and productivity Foreign Short term shocks Price volatility, domestic politics, market interventions, geopolitics, conflicts, climate, pests Long term imbalance Area and productivity Daniel Conforte Massey University 60
Sources of meat and dairy supply Future supply of dairy and animal proteins in China Soybeans and dairy Alternative sources Domestic growth Imports FDI in production Securing foreign procurement of soybean and dairy? Government and industry perspectives Sources of insecurity Meats vs. dairy industry interests Implications for S.A. Daniel Conforte Massey University 61
Meeting dairy demand with domestic supply Every 1 lt. of extra milk per capita per year in China = 1.3 B liters marginal demand Assuming a herd of 13 million milking cows Yield per cow must increase 100 liters per year Assuming same supply of forages Extra feed needs to be imported Aprox 650,000 tons of feed stuffs per year Daniel Conforte Massey University 62
Meeting dairy demand with foreign supply Option 1: Brazil increases 60 liters per cows per year Option 2: S.A would need to add 250,000 hectares of dairy farming plus 4 cows per hectare if in Brazil and 2 cows per hectare if in Argentina. Daniel Conforte Massey University 63
Farming incentives: a S.A. farmer perspective Current rate of soybean imports driven by animal protein demand is 3 million tons per year which is equivalent to 1,5 extra million hectares per year (marginal land areas) It is easier to plant 1 extra million hectares with soybeans than to milk 500,000 extra dairy cows Daniel Conforte Massey University 64
Technology driven economies 10/14/2011 Daniel Conforte 65
Brazil: major soybean routs Santarem Port Route BR 163 Port of Santos Port of Paranagua 10/14/2011 Daniel Conforte 66
Route BR 163 http://www.brazilmax.com/news.cfm/tborigem/pl_amazon/id/28 10/14/2011 Daniel Conforte 67
Deforestation along BR163 10/14/2011 Daniel Conforte 68
Supply assurance: the make or buy dilemma of feed stuffs Buy: let markets work Private companies State owned enterprises Hybrids (private but highly government dependent) Do: FDI by state owned or dependent enterprises Land ownership Production ownership Origination control Global sourcing and trading control Daniel Conforte Massey University 69
Who will invest? S.A. farmers Investment funds Chinese grain companies Markets Origination Global traders Chinese dairy interests Production in China Production in S.A. Daniel Conforte Massey University 70
Conclusion Future dairy growth in China at 100 liters per cow is possible: vast forages a major restriction Slowly increasing dairy imports from China are likely; many sources available but divers growth potential Slow growth of beef imports are likely but not too relevant If demand growth for meats continues, crop farming will continue pressure on grass lands and marginal areas in S.A. Daniel Conforte Massey University 71
Conclusions Calves production is a major restriction for beef growth Crop farming has low barriers to entry low assets specificity, there are standard procedures and subcontracting facilities Dairy farming has high barriers to entry upfront investment, knowledge, human resources Daniel Conforte Massey University 72
Recommendation China: institute policies for a moderate growth of meat and dairy consumption China: open up to imports of dairy China & SA: invest in developing dairy production capacity in SA China, be mindful of what exchange rate (strong) could do to global agriculture incentives, resources and environment Daniel Conforte Massey University 73
Corollary May the Chinese continue a moderate and prudent growth in animal protein consumption and a mostly vegetarian base diet Daniel Conforte Massey University 74
Thank you for your attention! Daniel Conforte Massey University 75