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Black Sea Grains Conference
April 9-10, 2014
Kiev, Ukraine By
Guo Jia Hua
Dongling Grain & Oil Co., Ltd [email protected]
www.dongling.cn
China
Expanding Appetite For Feed Raw Materials Vs
Opportunities for Ukraine Agriculture Industry I) China Market - Snap shot II) Likely Supply Deficit in Years Ahead
III) Implication to Ukraine Agri. Industry
V) Summary & Market Outlook
Black Sea Grain Conference 2014 I) China Market - Snap shot
- Major Oilseeds
- Vegetable Oils
- Protein Meals
Current China Market Situation
China Oilseeds Growing Distribution
Soybean - Huge Deficit due to Flattening Local Production but Robust Expansion of Crushing Needs
Source: CNGOIC
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
03/0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/14
Total rushing domestic total supply total demandKMT
0
5
10
15
20
25
30
0
5 000
10 000
15 000
20 000
25 000
Soybean Acres Bu/acres'000 Acreas Bu/Acres
Canola Seed – Widening Deficit due to Expanding Demand over Stagnant Local Supply
Source:CNGOIC
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
03/04 04/05 05/06 06/07 07/08 08/09 09/1010/11 11/12 12/13 13/14
total crushing Production total demandKMT
0
5
10
15
20
25
30
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
Rapeseed Acres Bu/Acres'000 Acreas Bu/Acres
Canadian Logistic Bottle Neck enabled Australia Canola Seed Import to China in 2013
‘000 Mts
Source: China Custom
Groundnut - Steady but Minor Growth
Source: CNGOIC
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
5 0005 5006 0006 5007 0007 5008 0008 5009 0009 500
10 00010 50011 00011 50012 00012 50013 00013 50014 00014 50015 00015 50016 00016 50017 00017 50018 000
08/09 09/10 10/11 11/12 12/13 13/14
total crushing(R)
domestic total supply(L)
total demand(L)KMT
KMT
0
10
20
30
40
50
60
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
08/09 09/10 10/11 11/12 12/13 13/14
Groundnut Acres Bu/acres'000 Acreas Bu/Acres
Cotton Seed – Stagnant Production
8 000
9 000
10 000
11 000
12 000
13 000
14 000
08/09 09/10 10/11 11/12 12/13 13/14
Crushing (Domestic) domestic total supplytotal demand
KMT
Source: CNGOIC
0
10
20
30
40
50
60
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
08/09 09/10 10/11 11/12 12/13 13/14
Cotton Seed Acres Bu/acres'000 Acreas Bu/Acres
SBO – Widening Deficit to be Filled by More Import of Soy + SBO
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
03/0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/14
K Mts SBO - Soaring Deficit
Supply from Domestic Soy Total Disappearence
0
500
1 000
1 500
2 000
2 500
3 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Delining SBO Import B'cause of Soaring Soy Import
SBO Import
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Soybean Import - Ave Growth @29.6% Past 10 years
Soy Import
K Mts
K Mts
Source: CNGOIC
RSO – Widening Deficit Being Fulfilled by Higher Import of Canola Seed & RSO
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
RSO Import
2 000
2 500
3 000
3 500
4 000
4 500
5 000
5 500
6 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts RSO - Widening Deficit
Supply from Domestic Rapeseed Total Disappearence
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts Canola seed - Soaring Grwoth @93% Past 10 Years
Palm Olein – Entirely Import with Steady Ave. Growth @7.8% past 10 Years
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
PO Import
3 000
5 000
7 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts
Domestic Supply Domestic Demand
K Mts
Source: CNGOIC
Sunflower Seed – Trending towards Deficit B’cause of Explosive SFO Consumption
Source: USDA
1 000
1 200
1 400
1 600
1 800
2 000
2 200
2 400
2 600
2 800
08/09 09/10 10/11 11/12 12/13 13/14
Sunflower Oilseed Production
Total DisappearanceKMT
0
100
200
300
400
500
600
700
800
900
1000
08/09 09/10 10/11 11/12 12/13 13/14
Sunflower Oil Production Total DispearanceKMT
SFO Import – Impressive Growth
Source: China Custom
K Mt 2013 - 92% of SFO from Ukraine
Shanghai – Major Import Port of SFO
‘000 mts
Source: China Custom
Widening Deficit of Edible Oils being Fulfilled by Soaring Import of Oilseeds & Vegoils
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
K Mts Edible Oil Deficit Resulting From Strong Consumption
Oil Supply from Dom. Oilseeds
Domestic Total Oil Demand
Source: CNGOIC
China Edible Oils Turns to Surplus After Soaring Import of Oilseeds and Vegoils
17 000
19 000
21 000
23 000
25 000
27 000
29 000
31 000
33 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
total supply total demandKMT
Source: CNGOIC
Widening SBM & RSM Deficit
Source: CNGOIC
0
10 000
20 000
30 000
40 000
50 000
60 000
03/0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/14
K Mts SBM Consumption - Exponential Growth @ ave 15.4% past 10 Years
Supply from Domestic Soy Total Demand
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
12 000
03/0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/14
K Mts RSM – Disappearance Ave Growth @5.9% past 10 Years
Supply from Domestic Rapeseed Total disapprearence
CSM & GNM – Well Balanced but Gradually Expanding
Source: CNGOIC
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
5 500
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts CSM - Well Balanced
Supply from Domestic Soy Total disapprearence
1 500
2 000
2 500
3 000
3 500
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts GNM - Well Balanced
Supply from Domestic Soy Total disapprearence
Soaring Meals Deficit – Robust Growth Consumption of Meats & Feed Production
Source: China Statistics Years Book, China Feed Association & CNGOIC
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
K Mts SBM+RSM+GNM+CSM - Soaring Deficit
Suppy From Domestic Source Total Disappearence
Soaring Meals Deficit – Only Solution => Import
Source: China Custom
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts Canola seed Import - Soaring Growth @93% Past 10 Years
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts
Soybean Import - Ave Growth @29.6% Past 10 Years
0
20
40
60
80
100
120
140
160
08/09 09/10 10/11 11/12 12/13 13/14
Groundnut ImportKMT
Average growth rate=226%
0
50
100
150
200
250
300
350
400
450
08/09 09/10 10/11 11/12 12/13 13/14
Cotton Seed ImportKMT
Groundnut + Cotton Seed Import - Supplementary
Source: China Custom
Feed production in China 2013
Source: China Feed Industry Association
Expanding Local Corn Supply - by Planting Area or Yield in Future??
Source: CNGOIC
100
120
140
160
180
200
220
240
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
K Mts
Corn - Trending Balanced ??
Domestic Production Total Disappearence
0
20
40
60
80
100
120
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
03/0404/0505/0606/0707/0808/0909/1010/1111/1212/1313/14
Corn Acres Bu/Acre
Bu/Acre K Acres
Corn Import – A Trend or Temporary?
Source: CNGOIC
100
120
140
160
180
200
220
240
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Mln Mts
Corn - Trending Balanced?
Domestic Production Total Disappearence
-25
-20
-15
-10
-5
0
5
10
15
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Net Changes to Stock
Surplus (Deficit)
0
1
2
3
4
5
6
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Corn Import – Will it be continued?
Import
Mln Mts
Mln Mts
Source:CNGOIC
Corn Import to China be Continued?
-10
-5
0
5
10
15
20
China Corn Net Export
Mln Mts
0
50
100
150
200
250
Industry Usage Feed Usage
Total demand Total Supply
Mln Mts
Black Sea Grain Conference 2014 I) China Market - Snap shot
Current China Market Situation
- Hog Sector
- Poultry Sector
- Crushing Industry
First Time of # of Sow to Decline as from July 2010
Source: Department of Agriculture
Deteriorating Hog Return – Will it Induce Slaughtering of Sow?
Source: Soozhu
0
1
2
3
4
5
6
7
8
-350
-250
-150
-50
50
150
250
350
36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 1 2 3 4 5 6 7 8 9 10 11
pig profit（RMB/pig）(L) Pork/Grain Ratio(R)RMB/PIG
Hog Margin was the Worst since Jan 2010 & seems no Improvement in April / May, 2014
-400
-200
0
200
400
600
800
1000
10-1 10-5 10-9 11-1 11-5 11-9 12-1 12-5 12-9 13-1 13-5 13-9 14-1
Hog Margin
783
725
420
540
202
-180
-177
351 373
316
292 220
103 119
-300
-243 -258
Rmb/Head
Source: Soozhu
RMB/Head
Broiler Margin – Recovering as from January 2014 B’cause of Higher Meat Price
Source: CNGOIC
RMB/Head
Layer Margin – Recovering as from March 2014 B’cause of Demand from Placements
Source: CNGOIC
RMB/Mt
Soy Crush Margin – Worsening being Squeezed by Firmer CBOT but Lower Local Meal Price
Source: CNGOIC
RMB/Mt
Local Rapeseed Crush Margin
Source: Hua Tai
RMB/Mt
Imported Canola Seed Crush Margin – Impressive
Source: CNGOIC
Black Sea Grain Conference 2014 I) China Market - Snap shot
II) Likely Supply Deficit in Years Ahead
III) Implication to Ukraine Agri. Industry
IV) Summary of Market Outlook
Source: China Statistical Yearbook
1、Higher Meat Consumption Due to
Increase of Population Size
2、Higher Meat Consumption Due to
Higher Urbanization Rate
Grains & Meats Consumption Per Capita – Farms Vs City
Source: China Statistical Yearbook
3、Higher Meat Consumption Due to Higher GDP Per Capita or Improvement of Living
Source: USDA
4、National Policy - in favor of Grains Production instead of Oilseeds
Projected Meat & Feed Production
Source: China Feed Industry Association & China Statistical Year book
Projected Domestic Soybean Deficit
Source: USDA &Own Estimate
Projected Domestic Soybean Import
Source: USDA &Own Estimate
Widening Deficit of Domestic Supply
of Edible Oils
Corn Planting Area Growth @5% – Can it be Maintained, given Scarcity of Arable Land in China?
Source: CNGOIC
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
'000 Ha Corn Planting Area - Steady Growth @Ave 5%. Can it be Maintained?
50
60
70
80
90
100
110
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Corn Yield - Steady Improvement @2.6%
Yield (Bu/Acre)
0
50
100
150
200
250
03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
Total Corn Disappearance being Grown @Ave 5.9% past 10 Years
Feed Usage Industry Usage Food Seedling
Will Huge Positive Margin of Imported Vs Local Corn Repeat in 2nd Half of 2014?
Will Huge Positive Margin of Imported Vs Local Corn Repeat in 2nd Half of 2014 ?
Corn Deficit over Coastal Region
Deficit
Surplus
Bo Hai 13977
Eastern China 11031
South 28650
South west 356
Source: CNGOIC
North East
45298
Black Sea Grain Conference 2014 I) China Market - Snap shot
II) Likely Supply Deficit in Years Ahead
III) Implication to Ukraine Agri. Industry
IV) Summary of Market Outlook
China – 2014 Import Quota
Commodity Stated-Owned Non State-Owned Total
K tons % K tons % K tons %
Corn 4,320 60% 2,880 40% 7,200 100%
Wheat 8,672 90% 964 10% 9,636 100%
Rice 2,660 50% 2,660 50% 5,320 100%
Cotton 295 33% 599 67% 894 100%
Source: China Development & Reform Council
Agri Commodities Allowable for Import to China by GAQSIQ
Corn Barley soybean rapeseed wheat
Ukraine √ √ √ × ×
USA √ × √ × √
Canada × √ √ √ √
Australia × √ × √ √
Brazil √ × √ × ×
Argentina √ √ √ × ×
Source: GAQSIQ
Ukraine Agri Commodities to China
Corn - Bright prospect because of competitive price and non-GMO nature. Potential risk: China adopts zero tolerance over GMO findings!
Soybean - Ukraine needs to develop higher protein content hybrid seed in order to capture China market because the protein content of current Ukraine soybean is too low to be bought for crushing purpose. However, current non-GMO soybean can be bought for food sector.
SFO - Big potential because of increasing consumption in China and low supply from domestic source. Majority of local sunflower seeds is ended up as snack in daily life.
Barley – Recently started to use by feed mills in China. Not widely acceptable like sorghum by local feed mills. Need promotion.
SFM – Need Ukraine relevant department to work with China quarantine department in order to allow Ukraine SFM to be imported to China.
Black Sea Grain Conference 2014 I) China Market - Snap shot
II) Likely Supply Deficit in Years Ahead
III) Implication to Ukraine Agri. Industry
IV) Summary of Market Outlook
Summary of Market Outlook
• Smaller import volume (Vs USDA) of soybean for 2013/2014 due to Gov’t propaganda of saving and Bird Flu impact on meal consumption during Feb-May, 2014 in South China ;
• Recent negative margin in Hog and Poultry sectors will limit growth of meals & corn demand for FH 2014 but current high live hog # in farms and getting improved poultry margin will push up demand for protein meals & feed grains in 2nd half of 2014; However, need to watch out # of Sow in Farms which starts to be declined slightly as from 2014;
• Higher Import of oilseeds, mainly soybean and canola seed, to be continued in years ahead because of strong protein demand and local supply deficit;
• Corn import to China will not be increased by degree as people originally expected because of Gov’t’s incentive and supporting programe as well as potential technological application over local corn production.
• However, corn import (mainly to South China) will remain a phenomenal, given positive price spread between imported vs local corn and Gov’t’s minimum procurement price policy.
• Ukraine will replace USA as major supplier of corn to China in 2014 and probably years ahead because of competitive price and GMO reason;
• Expect continual growth of SFO import to China because of middle-class expansion looking for healthier food and food ingredients;
* Expected import volume to China for 2012/2013: Soybean - 65 mln tons; Canola See - 3.5 mln tons; Soybean Oil - 1.3 mln tons; Rapeseed Oil - 0.6 mln tons; Palm Olein - 6.0 mln tons;
Swing Factors • Possible economic slow down due to bursting of regional Gov’t
debt and / or Real Estate Industry; • How persistence of the current Gov’t’s propaganda of saving will be
continued? • Degree of reduction of Sow # in farms in responsive to current
negative hog margin; • How fast of poultry sectors to recover from current Bird Flu Impact; • Government Policy: * Subsidizing policy over disposal of old crop burdensome corn stock
& degree of minimum procurement price for new crop corn; * Continued restriction over use of Corn by local Ethanol Plants? * Release of RSO from Stock Reserve in 2014; * Monetary Policy in 2014 – impact on economic growth & RMB
valuation;
Reference Information / Import Data
Source: China Statistical Yearbook
Soybean in China
Rapeseed in China
Groundnut in China
Cotton in China
Corn Deficit over Coastal Region
Deficit
Surplus
Bo Hai 13977
Eastern China 11031
South 28650
South west 356
Source: CNGOIC
North East
45298
South China - The Major Wheat Import Area
Soybean Import – Brazil Superseded USA as Major Supplying Origin
‘000 mts
Source: China Custom
Explosive Import of oilseeds and Oils
resulting from Big Deficit
Corn Import to China to become Regular Activity in Years Ahead
-100
100
300
500
700
900
1100
1300
1500
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
12 000
20
09
.02
.11
20
09
.03
.13
20
09
.04
.15
20
09
.05
.14
20
09
.06
.16
20
09
.07
.15
20
09
.08
.12
20
09
.09
.11
20
09
.10
.21
20
09
.11
.18
20
09
.12
.18
20
10
.01
.21
20
10
.03
.02
20
10
.03
.30
20
10
.04
.29
20
10
.06
.03
20
10
.07
.05
20
10
.08
.03
20
10
.08
.31
20
10
.10
.14
20
10
.11
.11
20
10
.12
.10
20
11
.01
.10
20
11
.02
.11
20
11
.03
.10
20
11
.04
.08
20
11
.07
.26
20
11
.08
.23
20
11
.09
.21
20
11
.10
.24
20
11
.11
.21
20
11
.12
.19
20
12
.01
.18
20
12
.02
.20
20
12
.03
.19
20
12
.04
.17
20
12
.05
.16
20
12
.06
.13
20
12
.07
.16
20
12
.08
.14
20
12
.09
.11
20
12
.10
.15
20
12
.11
.12
20
12
.12
.10
20
13
.01
.08
20
13
.02
.06
20
13
.03
.12
20
13
.04
.10
20
13
.05
.09
20
13
.06
.06
20
13
.07
.05
20
13
.08
.02
20
13
.08
.30
20
13
.09
.29
20
13
.11
.01
20
13
.11
.29
20
13
.12
.27
20
14
.01
.26
20
14
.02
.27
Argentina Imported CDSBO and Local EX-warehouse CDSBO
spread 价差 Argentina Imported CDSBO
阿根廷豆油进口成本
Local Ex-warehouse CDSBO
当地豆油价格
-100
100
300
500
700
900
1100
1300
1500
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
12 000
20
09
.02
.11
20
09
.03
.13
20
09
.04
.15
20
09
.05
.14
20
09
.06
.16
20
09
.07
.15
20
09
.08
.12
20
09
.09
.11
20
09
.10
.21
20
09
.11
.18
20
09
.12
.18
20
10
.01
.21
20
10
.03
.02
20
10
.03
.30
20
10
.04
.29
20
10
.06
.03
20
10
.07
.05
20
10
.08
.03
20
10
.08
.31
20
10
.10
.14
20
10
.11
.11
20
10
.12
.10
20
11
.01
.10
20
11
.02
.11
20
11
.03
.10
20
11
.04
.08
20
11
.07
.26
20
11
.08
.23
20
11
.09
.21
20
11
.10
.24
20
11
.11
.21
20
11
.12
.19
20
12
.01
.18
20
12
.02
.20
20
12
.03
.19
20
12
.04
.17
20
12
.05
.16
20
12
.06
.13
20
12
.07
.16
20
12
.08
.14
20
12
.09
.11
20
12
.10
.15
20
12
.11
.12
20
12
.12
.10
20
13
.01
.08
20
13
.02
.06
20
13
.03
.12
20
13
.04
.10
20
13
.05
.09
20
13
.06
.06
20
13
.07
.05
20
13
.08
.02
20
13
.08
.30
20
13
.09
.29
20
13
.11
.01
20
13
.11
.29
20
13
.12
.27
20
14
.01
.26
20
14
.02
.27
Malay Imported Palm Oil and Local EX-warehouse Palm Oil
spread Malay Imported Palm Oil
马来西亚进口棕榈油成本
Local Ex-warehouse Palm Oil
本地棕榈油报价
-100
400
900
1400
1900
2400
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
20
09
.02
.11
20
09
.03
.13
20
09
.04
.15
20
09
.05
.14
20
09
.06
.16
20
09
.07
.15
20
09
.08
.12
20
09
.09
.11
20
09
.10
.21
20
09
.11
.18
20
09
.12
.18
20
10
.01
.21
20
10
.03
.02
20
10
.03
.30
20
10
.04
.29
20
10
.06
.03
20
10
.07
.05
20
10
.08
.03
20
10
.08
.31
20
10
.10
.14
20
10
.11
.11
20
10
.12
.10
20
11
.01
.10
20
11
.02
.11
20
11
.03
.10
20
11
.04
.08
20
11
.07
.26
20
11
.08
.23
20
11
.09
.21
20
11
.10
.24
20
11
.11
.21
20
11
.12
.19
20
12
.01
.18
20
12
.02
.20
20
12
.03
.19
20
12
.04
.17
20
12
.05
.16
20
12
.06
.13
20
12
.07
.16
20
12
.08
.14
20
12
.09
.11
20
12
.10
.15
20
12
.11
.12
20
12
.12
.10
20
13
.01
.08
20
13
.02
.06
20
13
.03
.12
20
13
.04
.10
20
13
.05
.09
20
13
.06
.06
20
13
.07
.05
20
13
.08
.02
20
13
.08
.30
20
13
.09
.29
20
13
.11
.01
20
13
.11
.29
20
13
.12
.27
20
14
.01
.26
20
14
.02
.27
Local Ex-warehouse CDSBO and Local Ex-warehouse Palm Oil Price
spread2 Local Ex-warehouse CDSBO
当地豆油价格
Local Ex-warehouse Palm Oil
本地棕榈油报价
75% of Crushing Capacity is located along
Coastal Regions
Top 13 Crushers Account for 60% of National
Crushing Capacity
Source: Own Estimate
China Feed Production slightly Decline
in 2013
72% of Feed Production Capacity Being
Distributed Along Coastal Regions
Meat Production by Type
Source: China Statistical Yearbook
62% of Meat Production Being Distributed
Along the Coastal Regions
Production Capacity Along Coastal Regions Meat = 62% Feed = 72% Crushing = 75%
