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China Agribusiness Report Q2 2010
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
China |
Published |
26 January 2010 |
Number of Pages |
73 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
The second half of 2009 saw fears over the safety of Chinese dairy products make a reappearance. The government has been trying to draw a line under the melamine adulteration scandal with harsh punishments for those found to have been involved - in November two men were executed for supplying milk powder containing melamine. In December three employees of a dairy company in Shaanxi Province were arrested after inspectors discovered contaminated product.
More worrying was news released in January that a Shanghai dairy allegedly sold dairy products that had been returned in a recall following the breaking of the melamine story in 2008. What was most concerning about this story were claims made in a New York Times report that the problem had been known about since early 2009. Indeed, the dairy was closed and arrests made in April, according to the report. If the report proves to be accurate, the failure of the food inspection agencies to make an announcement at the time about the dangers of products from the dairy calls into question how serious the authorities are in rebuilding confidence in the safety of China's food products. Any further suggestion that government agencies are not being upfront about discoveries of contamination could dent confidence in Chinese-produced dairy goods and other food products both at home and abroad.
Away from the dairy sector, fears of the safety of pork consumption in the wake of the H1N1 swine flu scare seem to have dissipated. At the start of December 2009, China lifted the ban on imports of pork from Mexico and parts of the US and Canada. News in the previous month that pigs in Heilongjiang had tested positive for the virus does not seem to have affected Chinese consumers' appetite for pork. The situation for China's hog farmers improved considerably through the second half of 2009 as increased demand and government action saw pork prices climb rapidly. We expect the rise to continue in the first quarter of 2010 in the run up to Chinese New Year in mid-February. The high prices should spur strong growth in pork production in 2010.
The expansion of China's dairy and livestock sectors is driving a rapid increase in demand for feed, primarily soybeans and corn. China is reliant on massive imports of soybeans but at present is still a netexporter of corn. The government is keen to keep it this way and has launched a series of measures to try and boost corn production. Traditionally, the government's focus has been more on the food staples of rice and wheat but in November 2009, the National Development and Reform Commission said it would shift its focus to boosting corn production over the next decade. The commission will encourage the expansion of the area planted to corn and increase the floor price paid to farmers. Potentially more significant for corn production was a decision by the Chinese Ministry of Agriculture at the beginning of December to allow the use of a number of genetically modified (GM) strains of corn and rice. Though it will likely take a few years of trials before large scale GM corn production is introduced, in the longer term we see the adoption of GM crops to be a huge opportunity for boosting yields.
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