China’s food and agribusiness sector faces volatile 2019
January 18, 2019
The food and agribusiness sector in China will continue to be volatile in 2019 as it faces a slowing economy beset with uncertainties, including US-China trade negotiations, tightening consumer wallets and manufacturing slowdown, according to a new report from RaboResearch.
“China’s food and agribusiness sector is also confronted with potential disruptions from diseases and ongoing structural changes as a result of industry consolidation, environmental policies and rapidly changing consumer trends,” says Ping Chew, Head of RaboResearch Food & Agribusiness – Asia.
In the soyabean market, Rabobank said factors to watch were the progress of trade talks between the USA and China and weather conditions in South America.
China had started to buy US soyabeans again after the two countries declared a 90-day ceasefire in their trade war to relieve tensions, the report said.
“State-owned firms are reporting purchases of around 5M tonnes of US soyabeans, most of which are to be shipped from the Pacific North West from January to March. It is expected that the beans were purchased to replenish state reserves on behalf of the Chinese government,” Rabobank said.
“As the 25% tariff currently remains in place, the gross margin to import US soyabeans for crushing are negative CNY700 (US$103)/tonne. Chinese commercial crushers will not have the incentive to buy US soyabeans until the punitive tariff is abolished.”
The Rabobank report said effective 1 January, the Chinese government removed the import tariffs on alternatives to soya meal for animal feed including rapeseed meal, cotton meal, sunflower meal and palm meal.
If China and the USA did not reach agreement after their 90-day truce, a full-blown trade war could develop.
“Facing potential supply shortages of soya meal to feed its livestock, China plans to import more alternative meals such as sunflower meal from Ukraine and rapeseed meal from India.”
Onging outbreaks of African swine fever were expected to be problematic for China’s feed and livestock industries, with declining hog inventories set to limit feed, and therefore soya meal, consumption.
Rabobank said Chinese traders were also stocking up on consumer packages of edible oil to prepare for the upcoming spring festival.
With palm oil prices experiencing a rebound due to concerns over El Niño, India’s tariff reduction and lower palm oil production, soya oil prices would get extra support as a substitute oil.