China’s Quest for Protein Rabobank — Matthijs Mondria Rabobank Food & Agribusiness Research and Advisory Dirk Jan Kennes and Karen Heuvelmans 19 April 2016
The F&A sector must prepare for the ‘new normal’ of prices 700 600 500 400 USD/tonne 300 200 100 0 1997 2010 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 CBOT Wheat CBOT Soybeans CBOT Corn 2
Yet, vegetable protein supply and demand will keep on growing 450 Global production of protein crops = 400 twice the growth of energy crops 350 300 million tonnes (protein) 10m tonnes (energy) 250 200 150 100 50 0 Protein crops (soybean, sunflower, rapeseed) Energy crops (corn, wheat, barley, oats, sorghum, rye, mixed grains)
Three key drivers of shift to a larger protein share in feed Energy Modernisation Type of meat we Genetics of farming eat Proteins
Chinese soybean imports are forecast at a record 81.5m tonnes in 2015/16 … and remain a key price driver 120 30% 100 25% 80 20% million tonnes 60 15% 40 10% 20 5% 0 0% Imports Domestic Consumption Stocks-to-use (RHS) 5
Major destination: China’s pork appetite
Going Dutch Professionalising Chinese How can China grow agriculture on a small land base its agriculture? By taking a similar approach China has over 250m farmers as the Netherlands did in on a shrinking arable land base, the late 1940s capping farm size Average farm size: That means: 182 ha US • Smallholders who cooperate in family 73 ha farms, invest in livestock Brazil • Grow high-value Potatoes Onions Carrots Netherlands 28 ha crops like: • Import lower- • Feed grain China 0.7 ha Soy • Grain by-products value products 7
Two scenarios to satisfy China’s hunger for pork Breakthrough technologies Improved practices in in crop farming livestock farming 8
The livestock farming scenario is likely to be most successful With Dutch standards, China could produce the same amount of pork with 54m tonnes less feed 236m 57m 182m tonnes tonnes of pork of feed meat Feed-to-meat ratio … meeting global pork demand until 2025 9
The livestock farming scenario is likely to be most successful With Dutch standards, China could produce the same amount of pork with 54m tonnes less feed 236m 70m tonnes 182m or produce an additional 13m of pork tonnes tonnes of pork meat of feed Feed-to-meat ratio … meeting global pork demand until 2025 10
Improvements in Chinese pork farming unlock a USD 30bn market USD 30bn market value to be created Housing Feed Rendering Genetics & Veterinary AI services & laboratory 11
Rabobank’s Banking for Food strategy Relevance Economically attractive Socially relevant Building blocks Increase food Improve access Stimulate Enhance availability to food balanced nutrition stability Rabobank’s contribution Financing Knowledge Networks 12
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