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China Food and Meat Industry
April 2014
Table of Contents
2
Overview of China Food and Meat Industry
Outlook of China Food and Meat Industry
About COFCO
1
2
3
2
China’s Fast Economic Growth and Urbanization since 1978
11,7
7,8
13,5
3,8
10,9
8,4 8,39,1
1010,1
11,3
12,7
14,2
9,69,2
10,4
9,2
0
2
4
6
8
10
12
14
16
1978
1980
1985
1990
1995
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
GDP growth rate（%）
17,9
19,4
23,7
26,4
29,0 36,2
37,7
39,1
40,5
41,8
43,0
44,3
45,9
47,0
48,3
50,0
51,3
0
10
20
30
40
50
60
proportion of urban population（%）
Source: National Bureau of Statistics of China3
The Change of Consumption Structure
4
-3% -6%25%
100%
125%
150%
rice flour meat plant�oil sugar dairy�product
Source: Total consumption data from USDA, population data from NBSC; starch sugar consumption data from China Fermentation Industry
Association-starch sugar branch
Note: Dairy product is already converted to raw milk; sugar includes table sugar made from sugarcane & sugarbeet, and starch sugar made from
corn
The change of average food consumption during 2001-2011
Staple foods
Rice and flour
Animal protein, plant oil
and sugar
3
The Growth of Soybean and Corn Consumption
5
2�670�
6�595�
12�024�
18�000�
�-
�5�000
�10�000
�15�000
�20�000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
soybean corn
Source: USDA
CAGR=4.1%
CAGR=9.5%
The change of soybean and corn consumption during 2001-2011 (10k t)
A Relatively High Self-sufficiency Rate of Grain Rations
101,5%
0%
20%
40%
60%
80%
100%
120%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Rice self-sufficiency rate
104,2%
0%
20%
40%
60%
80%
100%
120%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Wheat self-sufficiency rate
98,5%
0%
20%
40%
60%
80%
100%
120%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Corn self-sufficiency rate
Source: USDA 6
4
Import of Oils & Oilseeds, and Net Import of Corn
1�503�
2�221�
3�325�
3�857�
4�330�
5�082�5�095�
5�623�
6�952�
6�174�6�304�
�-
�1�000
�2�000
�3�000
�4�000
�5�000
�6�000
�7�000
�8�000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
palm oil import(k t)
13�574�11�315�
20�741�20�230�
26�590�28�270�
30�821�
37�436�
42�552�
54�797�52�640�
�-
�10�000
�20�000
�30�000
�40�000
�50�000
�60�000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
soybean import(k t)
-16�389�
-2�316�
-8�607�
-3�005�
-4�879�
-203�-46�
1�445�1�617�
�-18�000
�-16�000
�-14�000
�-12�000
�-10�000
�-8�000
�-6�000
�-4�000
�-2�000
�-
�2�000
�4�000
2003
2004
2005
2006
2007
2008
2009
2010
2011
corn net import(k t)
Source: China Customs 7
The Trend of Meat Production and Consumption
8
0
1000
2000
3000
4000
5000
6000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
pork production and consumption(10k t)
production
consumption
The CAGR of China pork production maintains at 2%, and consumption at 3%, a little higher than production.
0
500
1000
1500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
poultry production and consumption(10k t)
production
consumption
Over the past 10 years, poultry production and consumption both grow at 3%
520
540
560
580
600
620
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
beef production and consumption(10k t)
production
consumption
Domestic beef production began falling since 2008.In 2013, beef production fell by 8% to 5,640,000 tons, while consumption went up by 7%.
200
250
300
350
400
450
500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
mutton production (10k t)
Domestic mutton production began falling since 2007.In 2012, mutton production fell by 14% to 4.01 million tons, compared to 2006.
Source: USDA, National Bureau of Statistics of China
5
9
dollar/kg(weight of carcass)
6,20
2,99
1,27
America
Brazil
Germany
China
Australia
3,00
1,84
0,99
5,00 4,80
2,45
1,23 1,22
Russia
3,40
1,77
1,03
Global Meat Production Cost
3,30
Poultry production cost
Pork production cost
Beef production cost
The Countries and Categories of Meat of China Import
Meat Countries allowed to import from Categories allowed to import
Pork America, Denmark, Germany, Canada, etc America, Denmark: All categories of porkGermany: Pork, not including stomachs or intestines.Canada: Pork, including viscera
Poultry America, Brazil, Argentina, Chile, etc America: All categories of poultryBrazil, Argentina, Chile: Poultry, not including digestive organs such as stomachs and intestines.
Beef Australia, Uruguay, New Zealand, Canada, etc
Australia, New Zealand: Beef including viscera, but not including heads, hooves, lungs, stomachs or intestinesUruguay: Beef, not including digestive organs such as stomachs and intestines.Canada: Beef produced after Feb 1st and younger than 30-month old, without bones.
Mutton New Zealand, Australia, Uruguay New Zealand, Australia: Mutton, including viscera, but not includingheads, hooves, lungs, stomachs or intestinesUruguay: Mutton, not including digestive organs such as stomachs and intestines. 10
6
The Trend of China Pork Import
11
0
50
100
150
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(10k t)
Since 2004, the CAGR of China Pork import has been as high as 19%.In 2013, domestic supply of pork went up, resulting in the fall of pork price and a smaller rise of pork import, which is basically the same as 2012.
Ireland 2,1% Britain
2,5%Chile2,7%
Poland5,3%France
6,0%
Spain9,0%
Canada11,8%Germany
16,2%
Denmark16,7%
America26,1%
Pork import by country
Source: China Customs
frozen bone-in or boneless shoulder and leg10,1%
other frozen pork
44,3931,7%
frozen pork offal
57,4%
Pork import by item
The Trend of China Mutton Import
12
0
5
10
15
20
25
30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(10k t)
Australia43,19%
Uruguay3,60%
New Zealand53,21%
Mutton import by country
Since 2011, China mutton import has been going up rapidly. In 2013, China imported 260 thousand tons of mutton, 108.7% higher than 2012.
Source: China Customs
frozen bone-in sheep87,7%
frozen boneless
sheep5,5%
frozen sheep
carcass and half carcass
3,0%
frozen lamb
carcass and half carcass
2,1%
goat meat1,7%
Mutton import by item
7
The Trend of China Poultry Import
13
0
20
40
60
80
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(10k t)
Before 2009,China poultry import was going up significantly year by year. Since 2010, main-port import declined sharply due to the anti-dumping policy against America. Still, a huge number of American chicken toes was smuggled into China. With the heavy blow on smuggling in recent years, some American products have been turning to legal channel, pushing uppoultry import by 12% in 2013.
America59,47%
Brazil32,93%
Argentina4,05%
Chile2,17%
Poultry import by country
Source: China Customs
frozen chicken's
feet50,7%
frozen chicken wings
without tips20,8%
other frozen
chicken chops11,5%
frozen chicken nuggets
with bones8,7%
frozen turkey
nuggets and chops
7,4%
Poultry import by item
The Trend of China Beef Import
14
0
10
20
30
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(10k t)
In recent years, China beef import is growing fast, with CAGR as high as 31%.In 2013, there was a severe shortage of cattle, resulting in a 345% rise in import.
Australia52,11%
Uruguay25,36%
New Zealand11,82%
Canada7,72%
Argentina2,96%
Beef import by country
Source: China Customs
frozen boneless beef
71,5%
frozen bone-in beef
18,4%
frozen beef offal6,4%
fresh or chilled boneless beef
2,7%
Beef import by item
8
The Global Meat Flow：a global export at 26.35 million tons in 2012
15
Table of Contents
16
Overview of China’s Food and Meat Industry
Outlook of China’s Food and Meat Industry
About COFCO
1
2
3
9
China’s Consumption Growth Rate
-20,0%
-10,0%
0,0%
10,0%
20,0%
30,0%
40,0%
2002 2004 2006 2008 2010
pork,�beef�and�poultry liquid�milk edible�oil sugar
Source: USDA17
Consumption Trend of Taiwan, Japan and Korea
Taiwan, Japan and Korea, with similar consumption habits, have the following
characteristics:
– GDP per capita of PPP $15,000 is a milestone.
– When GDP per capita reaches PPP $15,000 to $20,000, consumption tends towards stable or slow
growth. With the change of population structure, consumption per person may drop due to aging
and low birthrate.
18
10
The Consumption Growth Path of Taiwan
After year 2000， when Taiwan GDP per capita reached PPP $15,000, the rice and flour
consumption remained at around 90kg, meat at 80kg, aquatic products at 30kg, eggs at 20kg, oil
at 25kg; and sugar at 25kg (since middle and late 1970s).
0
20
40
60
80
100
120
140
160
0 10000 20000 30000 400000
10
20
30
40
50
60
70
80
90
0 10000 20000 30000 400000
5
10
15
20
25
30
35
0 10000 20000 30000 40000
Note: The horizontal axis shows GDP per capita, PPP, and the vertical axis shows annual per capita consumption in kg
Source: Taiwan COA, OECD, research department of COFCO
total
rice
flour
meat
aquatic products
sugar and honey
oil
eggs
19
The Consumption Path of Japan
0
10
20
30
40
50
60
70
80
90
100
0 10000 20000 30000 40000 50000
In the early 1990s, (Nominal GDP between $25000～$35000, GDP per capita, PPP between $
15000～$20000) Japan consumption became stability, with rice and flour consumption at around
100kg, meat at 40kg, milk at 90kg and oil at 20kg.
0
20
40
60
80
100
120
140
160
180
200
0 10000 20000 30000 40000 500000
10
20
30
40
50
60
70
80
0 10000 20000 30000 40000 50000
Note: The horizontal axis shows GDP per capita, PPP, and the vertical axis shows annual per capita consumption in kg
Source: MAFF, World Bank, OECD, research department of COFCO
total
rice
flour
meat
aquatic products
milk
oil
eggs
20
11
The Consumption Path of Korea
Korea consumption became stability since 2000 (GDP per capita at PPP $20000) with rice and
flour consumption at around 140kg, meat at 50kg, oil at 15kg.
0
20
40
60
80
100
120
140
160
180
200
0 10000 20000 300000
10
20
30
40
50
60
0 10000 20000 300000
10
20
30
40
50
60
70
80
0 10000 20000 30000
Note: The horizontal axis shows GDP per capita, PPP, and the vertical axis shows annual per capita consumption in kg
Source: USDA, World Bank, OECD, research department of COFCO
total
rice
flour
pork
poultry
beef
total
milk
oil
21
China GDP per Capita Will Approach PPP $15,000 in 2020
5 000
10 000
15 000
-
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
2007 2015E 2020E
Source: OECD and the research department of COFCO 22
12
China Food Consumption with Relative High Growth in Next 10 Years
If the experience of Taiwan, Japan and Korea applies to China, the next 10 years will be the last
gold decade for China consumption growth.
Compared with last 10 years, the next decade ending in 2020 will show a weaker consumption
growth.
After 2020, China food consumption will tend towards stability or enter a stage of slow growth.
23
China’s Consumption of Animal protein, Oil and Sugar in Next 10 Years
Item
China food consumption expectation
Average consumption in 2020（kg/person•year）
Total consumption in 2020 （10k t） Compared with 2010
rice 90 18,150(rice) -5%
flour 49 9,200(wheat) -5%
meat 76 10,700 35%
edible oil 23.4 3,300 35%
sugar(including starch sugar)
22.9 3230 52%
milk 60 8,500 116%
24
13
Meat Demand Forecast
25
28
30
32
34
36
2014 2015 2016 2017 2018 2019 2020 2021 2022
Pork demand forecast(kg/person)
11,0
12,0
13,0
14,0
2014 2015 2016 2017 2018 2019 2020 2021 2022
Chicken demand forecast (kg/person)
3,2
3,4
3,6
3,8
4,0
2014 2015 2016 2017 2018 2019 2020 2021 2022
Beef demand forecast(kg/person)
0
1
2
3
2014 2015 2016 2017 2018 2019 2020 2021 2022
Mutton demand forecast(kg/person)
Source: FAO-OECD
In the next 9 years, CAGR of China pork demand is expected to stay the same.
In the next 9 years, CAGR of China beef demand is estimated to be 1.4%
In the next 9 years, CAGR of China chicken demand is estimated to be 1.7%
In the next 9 years, CAGR of China pork demand is estimated to be 1.3%
Continuous Decrease of Agricultural acreage in China
26
middle or low-yield lands take up 2/3，severely restraining area yield improvement.
19,45� 19,38�19,24�
19,14�
18,89�
18,51�18,37� 18,31� 18,27� 18,26� 18,26� 18,18�
18,05�
17,0
17,5
18,0
18,5
19,0
19,5
20,0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2010E 2020E
100�million�mu
Source: Ministry of Land and Resources
14
Lack of Water Resources Problems.
27
Per capita water resource
Seasonally unevenly distributed
Regionally unevenly distributed
Misuse
China per capita water resource is 2200m³， 1/4 of world average per capita water resource.China per capita water resource is 2200m³， 1/4 of world average per capita water resource.
Annual precipitation mainly happens between June and September, therefore, the shortage of water is severe during spring ploughing and autumn/winter planting.
Annual precipitation mainly happens between June and September, therefore, the shortage of water is severe during spring ploughing and autumn/winter planting.
The farmlands north of the Huaihe River take up 2/3of the country，with water resources less than 1/5 of the country.The farmlands north of the Huaihe River take up 2/3of the country，with water resources less than 1/5 of the country.
Waste; over-extraction of underground water ; pollution…Waste; over-extraction of underground water ; pollution…
Relatively Stable Yield of Corn and Soybean in the Past 10 Years
28
Area yield of corn(ton/ hectare ) Area yield of soybean(ton/
hectare )
1,63�
1,89�
1,65�
1,81�1,70�
1,62�1,53�
1,70�1,63�
1,77�
0
1
2
2001
年20
02年
2003
年20
04年
2005
年20
06年
2007
年20
08年
2009
年20
10年
Source: Ministry of Agriculture
5,27�
4,70�4,92� 4,81�
5,12� 5,29� 5,33�5,17�5,56�
5,26�5,45�
0
1
2
3
4
5
6
1998
年20
01年
2002
年20
03年
2004
年20
05年
2006
年20
07年
2008
年20
09年
2010
年
15
In 2025, Supply and Demand Gap will Reach 20% of Total Consumption
29
Basically, rice and wheat can achieve balance of supply and demand; for others, demand gap remains a
problem.
Overall, the demand gap of grain, oil plant, sugar and raw milk will reach 170 million tons, about 20% of their
total consumption.
4 400
8 500
600 600
3 200
corn soybean rapeseed sugar raw milk
Source: Strategy Department, COFCO
Demand gap forecast of China main agricultural products in 2025 (10k t)
Table of Contents
30
Overview of China’s Food and Meat Industry
Outlook of China’s Food and Meat Industry
About COFCO
1
2
3
16
About COFCO: Basic Facts
31
COFCO Corporation was founded in 1949. With decades of efforts, it
has successfully transformed from simply an exporter, importer,
international trading enterprise into China's the largest
comprehensive conglomerate of agri-commodity trading, logistics,
processing, production and distribution of food and edible oil in China
With strong operating performance, COFCO continues to be a
Fortune Global 500 company and the top player in China Food
Industry
It is one of the 53 pillar enterprises under direct administration of
the State Council
Over 60 years history
Founded in 1949
For 20 years
the only Chinese food & edible oil company inFortune Global 500;
AA-level by SASACfrom 2007 to 2012
A-/A3Rating from three international rating agencies
Strategic Vision: Fully Integrated Value Chain
32
A market-oriented fully-integrated player, covering from farm to dining table
From agricultural raw materials to end products, including planting, purchasing and storage, logistics, trading,
processing, slaughtering, food manufacturing and marketing etc
To achieve overall competitiveness through systematic management of fully-integrated value chain, effective
control over the key segments and maximize synergies among value chains
To establish overall competitive advantages through offering safe, nutritious and health food products and
developing a comprehensive and sustainable business model
Farm Table
Breeding/Slaughtering
Feed Processing
Primary Processing
Pla
nti
ng
Sto
rag
e &
L
og
isti
c
Fo
od
Man
ufa
ctu
rin
g
Fo
od
Mar
keti
ng
Agricultural Service &Grain Circulation
Agricultural Products Processing & Breeding/Slaughtering
Branded Consumables
Rural Financial Service
Tra
de
Further Processing
17
About COFCO: Business Structure
33
Over 120,000 employees
China Grain&
Logistics
China Agri-Industries Holdings606.HK
COFCO Real Estate
Financial Services
COFCOTunhe
600737.SH
Board of Directors
Admin; Strategy; Finance; HR; Audit & Discipline; Legal Service; Corporate Culture;
Quality & Safety; Nutrition & Health R&D
Agri-Trading, Processing & Logistics
China Foods506.HK COFCO
Meat
Mengniu Dairy2319.HK Womai.
com
CPMC Holdings906.HK
Engineering &
Technology
China Tuhsu
COFCO Agri-
Trading& Logistics （Tomato & Sugar
Trade） （Food Packaging）
(Tea & Timber Trade) (E-commerce)
（Agri- product）
(Dairy Products)(Food & Beverage)
8/13
8 listed companies/13 businesses
400operating points
Covering 31 provinces
COFCO
Branded Food
After 60 Years of Development, COFCO is Now Acting as the Main Channel for International Trade in China
34
Total export-import
Over $200 billion
Total cereal, oil and
sugar import
Over 470million tons
Total cereal export
Over 230 million tons
Cereal, oil and sugar
import in 2012
18million tons
Since its foundation, COFCO has set up trade channels all over the globe to
manage import and export business of agricultural products and foodstuff, such as
cereal, oil and sugar.
Effectively acting as the main channel for international trade of cereal, oil and
sugar, ensuring domestic supply of cereal and oil, and defending national foodstuff
safety.
A leading role in trading of staple food like rice, wheat and corn; Top trader of
sugar, soybean and palm oil.
18
The Leader in China’s Cereals, Oils and Foodstuffs Market
35
Total warehouse capacity over 17 million tons, domestic
grain trade at 25 million tons per year
13 docks owned, with a capacity of 31 million tons
over 2.3 million sales outlets selling19.8 million tons of
cereals, oils and foodstuff，with “Fortune” branded packaged
oil and rice taking up a market share of 15% .
Cereal distribution
capacity
Cereal transfer capacity
Process capacity of agricultural
products
Channel and brand
Process capacity of over 60 million tons
oils & oilseeds of 20.84 million tons, corn 6.25million tons, rice 3.98million tons, wheat 3.75million tons, feed 3.71million tons, barley 1.03million tons, sugar crop 7.80 million tons.
Thank you!
36
