China agriculture investment bimonthly report

China Agriculture Investment

Bimonthly Report

Copyright © CCM International Limited

China Agriculture Investment Bimonthly Report

CCM International Limited www.cnchemicals.com

Agriculture is very important for China, as China has less than 10% global tilled land and has to feed over 20% global population. Threatened by reducing tilled land and water

resources as well as increasing demand, the food security has become more and more important. Thus, pesticide, fertilizers and feeds which can greatly improve production efficiency of agriculture have great market potential in China now and in the future.

Currently, the pesticide, fertilizer, feed and food industries are not so developed in China, production accidents and food safety accidents happen frequently. In order to improve these situations and ensure the food security, the Chinese government has carried out a series of policies. These policies will obviously activate development of the related industries in the near future and will also accelerate the industry concentration ratio in China.

Figure 1 Focus of China Agriculture Investmnet Bimonthly Report

Enterprises M&A in China

Pesticide Fertilizers

Intermediate

Seed

Agriculture

Government

Risks

Opportunities

Feed

Food

Economic environment



China's pesticide industry witnesses fast development and made some positive actions to protect domestic planting agriculture, public healthy, etc. in recent years. According to National Bureau of Statistics of China, pesticide total output hit over 2.67million tonnes in 2010, up 20.34% year on year. As the most important pesticide exporter in the world, China exported about 0.51 million tonnes of pesticides in 2010, valuing approximately USD420 million.

However, without proper management by government, many problems like overcapacity and high pollution have been increasingly serious in this industry, blocking its further development. In order to stop current chaotic market, build large scale companies, enhance international competitiveness of the whole industry, etc., the Chinese government has released a series of policies like China's Pesticide Industry Policy to accelerate the industry upgrading, thus fastening domestic industrial M&A. Actually, with continuous integration, some

companies like Sinochem Group and China National Agrochemical have been becoming more and more important in international pesticide market. Meanwhile, the weak pesticide players with weak competitiveness, high energy consumption, mass pollutant emission, etc. will be weeded out in the future in China.

Pesticide: Under supervision and keeping upgrading

Obviously, many commercial opportunities will emerge along with the changes in China, such as new investment in potential company/products, production expansion by asset integration, etc.



Fertilizers: Under strict supervision and merging

The fertilizer industry mainly consists of nitrogenous fertilizers, phosphatic fertilizers and potash fertilizers as well as NPKs and foliar fertilizers.

Thanks to the modernization of agriculture in China, the demand of fertilizers increases year by year. Because of decentralized demand of fertilizers in China, there were many small fertilizers plants dispersed in China in the past, with the industry upgrading and the market developing, the M&A in this industry happens more and more frequently. Now in China, urea production in recent years has been more and more concentrated in the coal enterprises. The M&A trend in fertilizer industry will continue in the near future.

Considering the close relationship with nature resources and harvest of crops, the Chinese government has strict supervision on fertilizer production, distribution, import and export to ensure the domestic supply.

Traditional Modern



Feed: Strict supervision and fast developing

Feed is important for meat supply because now feed is widely used in animal breeding and aquaculture to improve the production efficiency in China. Feed industry has extensive room to increase in the next few years in China. Now, China is the second largest base of feed in the world, and in 2010, its total output of feed reached over 150 million tonnes, accounting for about 20% of global total output. But the per capita feed amount in China is just one fifth of the US’s. Thus, it’s predicted that Chinese feed industry will witness great development in future, and the market demand for feed may amount to over 200 million tonnes in 2015.

However, current development model of Chinese feed industry can not catch up with its development. At present, there are hundreds of feed manufacturers at home, and most of them are small ones, which can’t promise the safety of feed products. Besides, the scattered development model restrains the upgrade of feed products and R & D progress, thus Chinese feed industry needs to improve industry concentration ratio, which will be the major develop tendency in future.

It’s believed that Chinese government will strengthen the supervisor on feed industry, and more and more small manufacturers will be washed out. In the meantime, leading manufacturers will keep expanding their capacity and output, and to merge and acquire small players is also their priority option to grab more market share.



Food: Lack of supervision and facing crisis of confidence

The food industry, including agricultural food processing, food manufacturing and beverage manufacturing sub-industries, is a main constituent part of China’s economy. The food industry has realized sales value of USD667.44 billion in 2009, up 18.82% over 2008, and the sales captures 12.92% of China’s GDP in 2009. And China’s food sales were USD677.45 billion in the first nine months of 2010, up 26% over the same period of 2009. China’s food industry is promising and the next five years are expected to be the golden age of food consumption.

Along with the rapid development of China’s food industry, many food scandals and incidents broke out, which badly hit domestic consumers’ confidences and impel the government to launch stricter policies, thus quickening the upgrading of food industry.

China’s dairy industry is a typical example, affected by the 2008 melamine scandal and the subsequent incidents, the government launched many policies, such as the policy about production licenses reapplication recently. Affected by this policy, there are only 643 dairies being approved by March 2011(accounting for 55% of China’s 1,176 dairies sent their application to the government, while in fact there are believed to be at least 2,000 dairy processors in China before). And the consolidation is expected to be continued in the future, including the acquisition in China, such Mengniu acquired Junlebao Dairy – top 4 yogurt processor in China in November 2010, and the acquisition overseas, such as Ausnutria Dairy acquired 51% stake of struggling Dutch dairy business Hyproca in March 2011.



What’s the scope?

Industries related to agricultures such as:Pesticides, including insecticide, herbicide, fungicide, plant growth regulator, etc.Intermediates of pesticides, adjuvantSeedsFertilizers, including inorganic fertilizers, organic fertilizer, foliar fertilizer, etcEdible oil and foodstuffs

CCM Methodology

Desk researchThe sources of desk research are various, including published magazines, journals, government statistics, industry statistics, association, seminars as well as information from the Internet.

Telephone interview CCM will interview events related party to gain first-hand information.

QuestionnaireCCM will set questionnaire on events to collect experts’ views and opinions.

Face-to-face interview CCM carries out face-to-face interviews with industry insiders to make in-depth analysis & comment on relative issues. Experts consultancy CCM has established long-term business relationships with experts in each industry via payment or information offering, and they would contribute stories or comments to CCM in return.

Why to subscribe?

Trace the latest M&A event for you business decision.Master the current industry environment in China.Get the changes in related industry policy in time to avoid the potential business risks.Discover M&A event’s influence on the whole industry. Know the insiders’ opinions about the latest policies and events.

Who need it?

Companies and researchers interested in China agriculture relative industries.Companies with the intention of developing in China to cooperate with domestic companies.

What you will have?

PDF newsletter bimonthly, 6 issues per annum.Access to online archives of all previous issues with downloadable files



Main contentEnterprises dynamic (about 5 topics) • Report the latest dynamic of key enterprises in this industry

Macro economy update (about 3 topics) • Macro economy environment analysis • Industrial macro analysis • Investment and financing environment analysis

M&A dynamic and analysis (about 6 topics) • Report the latest M&A event in China with CCM’s analysis. • Trace the latest M&A dynamic in China. • Comments from companies, associations, experts, consumers, etc. • M&A feasibility analysis

Central and local policy analysis (1~2 topics) • Introduction to new policies affecting domestic agriculture industry • Analysis on impact of policies on the industry • Comments from companies, associations, experts, consumers, etc.

Legislation & rules update (1~2 topics) • Introduction to new policies and legislations affecting domestic agriculture industry. • Analysis on impact of the legislations on the industry • Comments from companies, associations, experts, consumers, etc.

The Interview (1~2 topics, this column may not appear in each issue.) • Key company’s interview on the M&A event, policy and legislation & rules • Companies strategies to respond to the legislation

Price update (about 5 topics) • Key pesticides • Key edible oil and foodstuff • Key fertilizers • Key seeds

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China agriculture investment bimonthly report