Asia’s future farms
Food shortages are a distant memory for many people in Asia. But as the region struggles to feed and nourish a booming population, they could become a painful fact of life again.
Asia is already the world’s largest food market, and by 2050 its population is expected to grow to five billion – an increase of 900 million people. Owing to its expanding middle class, the region will likely account for half of the global increase in annual beef and poultry consumption and over three quarters of the rise in fish consumption between now and 2030. And by then, more than 60% of total cereal demand in the developing world will come from South and East Asia. To keep up with this growing demand, food production will have to increase by 60-70% compared to a decade ago.
Ideally, Asia’s farms could simply expand their production. But they are woefully ill-equipped to do so. To produce a sufficient amount of food, Asia’s farms will need to undergo a twenty-first-century transformation.
Helping Asia’s farmers cope with climate change should be a central part of this effort. Although a warming planet could boost agricultural output in a few areas, it will severely limit production, and possibly trigger prolonged food crises, throughout the rest of the region. As water becomes increasingly scarce in traditionally fertile zones such as the Indo-Gangetic Plain, rising seas will ruin vast swathes of farmland. If sea levels were to rise by one meter, the resulting saltwater intrusion would threaten 70% of Vietnam’s coastal farmlands. And as waters warm and tidal flows change, yields from the Mekong Delta’s vast fishing grounds could plummet.
According to Asian Development Bank research, by 2050, irrigated rice and wheat yields could fall by as much as 20% and 44%, respectively. This would drive up the price for cereals, soybeans, and wheat by 70%, causing the number of malnourished children in the region to rise by 11 million.
But this doesn’t have to be Asia’s future, if its farmers can adapt. Most farmers today oversee family-run subsistence plots, and lack the money and know-how to improve productivity and crop quality. In Myanmar, for example, only 16% of farm households even use tillers or tractors to prepare the land for planting.
Moreover, environmental degradation has left huge swaths of land barren. According to the United Nations Convention to Combat Desertification, various forms of desertification affect nearly 40% of Asia’s total land area. While governments cannot create new arable land, they can – and must – pursue policies to support, consolidate, and intensify farming operations on the land that is still available.
For starters, the region’s governments can promote farm cooperatives. Not to be confused with old-style collectivized farming, today’s cooperatives are thoroughly commercial, prioritizing efficiency and profits. They comprise agricultural enterprises as well as farmers, all of whom pool their resources to create economies of scale, reduce costs, and lift incomes. When bought in bulk by a cooperative, inputs such as fertilizer and equipment are less expensive, as is the harvesting process. By coming together to coordinate planting, cooperatives in India and Nepal have made it possible for every member’s crops to be sown and harvested together by a machine, rather than individually by hand.
Cooperatives can also add value after the harvest, by streamlining crop cleaning, grading, packaging, storage, and transportation. This increases the supply of food and boosts farmers’ incomes, especially in places such as Bangladesh, where more than one-third of perishables spoil before ever reaching the consumer.
China is already modernizing farms through cooperatives, and by using digital e-commerce platforms to tap into high-value markets. In Vietnam, a cooperative program has improved the quality of produce for urban consumers, and boosted tea, fruit, and vegetable revenues by nearly one third.
Although cooperatives are gradually catching on in Asia, they will need more support. Most of the region’s cooperatives are fragile, informal arrangements. But with the right legal framework in place, they could become far more efficient and durable.
China’s 2007 Farmers’ Cooperative Law serves as a good model. By offering incentives such as value-added-tax exemptions, the law has encouraged cooperatives and other agricultural organizations to collaborate and create economies of scale. Within three years of the law’s enactment, the number of cooperatives in China had increased ninefold, to nearly 400,000.
Cooperatives also help farmers manage the effects of climate change, by creating networks through which members can share knowledge about tricky adaptive strategies like switching from crops to fish or shrimp in saline-affected areas. And with the extra income that cooperatives provide, farmers can buy greenhouses to prolong their production season, and shield against erratic weather. Cooperatives also allow farmers to benefit from previously unavailable techniques such as fertigation – using irrigation to deliver liquid fertilizers.
Finally, cooperatives make climate-smart technologies more affordable. With new digital technologies, farmers can better manage their land, water, and energy use, and prepare for bad weather. For example, the Philippines has experimented with apps that give farmers news about plant and animal diseases, the best places to buy and sell farm supplies, and upcoming weather events.
By using less labor, and more capital and technology, Asia’s future farms can grow enough food to feed everyone in the region. Cooperatives are one way to make this vision a reality. Only then will food shortages truly be a thing of the past.
Source: Euronews.
From bacon to blockchain – China’s changing pork sector
China, the world’s largest pork market, is seeking to reform the country’s pork industry in a drive to stabilise prices, improve product quality and adjust to changing consumption trends.
At the same time, private companies are also looking to meet higher standards and expectations of more sophisticated consumers.
Pork index
Perhaps the most important event in recent months has been the introduction of a pork price index at the Dalian Commodity Exchange, the first in China.
The China’s agriculture ministry and the Dalian Commodity Exchange signed the “Joint Action Plan for Bulk Agricultural Commodity Market Information” to jointly issue a “lean type pork price index”.
The pork price index, introduced on March 14, is the country’s first pork price index that is published on a government public service website and oriented toward a commercial application.
Stabilising factor
The index is compiled by using data from 89 large sized slaughtering companies in 16 main production and sales provinces in China.
The Dalian exchange said that “these slaughtering enterprises are representative of the country’s industry as their production accounts for 32% of the total slaughter volume of the designated slaughtering enterprises above a certain size across the country”.
This development is viewed as a stabilising factor in a country with often volatile pork prices.
That’s because the Chinese market has so far been dominated by small-scale farms which are highly sensitive to price swings. This has historically made it difficult to create a price index.
In the past, when pork supply was high, farmers reacted to a drop in prices by slaughtering pigs for meat rather than breeding more piglets.
A few months down the line this would result in a shortage of pork, sending prices high again.
Futures contract looms?
The introduction of the pork price index also lays the groundwork for futures and options contracts, which the Dalian has already hinted at.
Introducing a futures contract could result in more price stability because buyers and sellers can hedge against risk by agreeing on a price in advance, which could give pork producers peace of mind.
A futures contract is an agreement to buy a commodity or another asset at a specific price but have it delivered and paid for at a later date.
Crackdown on urban pig rearing
Another major development has been a crackdown on urban pig rearing and a drive towards more centralized, large-scale farming.
China’s latest five-year plan for agriculture set a goal of moving swine production away from waterways and densely populated areas, and into the countryside.
This resulted in widespread bans on pig production in urban areas, being implemented by local authorities from 2017.
The main impact from this will be lower pig production in the short term, which could result in higher domestic prices and more imports to compensate for the shortfall.
And as China consolidates and modernises its swine industry, the total volume and market share of pork production from large companies, especially fully-integrated operations, will further increase.
Chinese takeover
Pork has a huge influence on the Chinese economy, which is most pronounced in the consumer price index and is also reflected in inflation data.
According to some estimates, the country is home to half the world’s pig population and it also imports vast quantities of the meat.
This dynamic is seen as a primary reason behind the purchase in 2013 by China’s WH Group of US-based pork producer Smithfield Foods.
The rationale behind purchasing Smithfield Foods was to take advantage of lower hog prices in the US and higher pork prices in China.
Given China’s huge appetite for pork, perhaps it is not surprising that operating profits at Smithfield’s fresh pork business increased by 141% to $545m in 2016.
‘Growing faster than anywhere else’
In a Bloomberg interview in March, Kenneth Sullivan, executive director of WH Group and chief executive of Smithfield Foods, said that the company doesn’t see pork consumption moderating in China – not in the long term at least.
However, “in the short term the macroeconomic environment in China will cause a bit of a slowdown there.
“It’s already put a little bit of a dent there in protein consumption in the country.
“But if you look at it over the very long term, protein consumption in China is growing faster than any place in the world.
“The urbanisation, the increasing incomes all these have a very positive correlation to pork consumption and to protein consumption in general,” Mr Sullivan said.
Sow shrinkage hangover
Rabobank has underpinned this cautious forecast, with the bank downbeat on Chinese pork output prospects for the first half of 2017, given that “the sow inventory before August 2016 was, on average, 5% lower than 2015.
“Production will likely start to recover in the second half of 2017, as lower feed grain prices encourage farmers to build up herds and newly established capacity comes online.”
Mr Sullivan added that “we could see a significant increase in exports from the US to China – the big idea is that China is the biggest pork market in the world – half the world’s pork is consumed in China, so it’s a huge market”.
Western allure
Mr Sullivan also pointed out in the interview that consumption trends are changing in China.
Consumers are becoming more sophisticated and demand for Western style meats is growing.
He added: “The more income you have you change the way you consume pork.
“As their incomes rise, the more Western style produce they will consume, so American style bacon, ham, sausage, these sorts of things.
“For us, the WH Group, it’s a huge opportunity”.
Blockchain earns its bacon
Other US firms are also aware of this opportunity and are looking to ride this wave of change.
One of them is Walmart’s Chinese arm, which has teamed up with IBM to roll out a blockchain system to track pork movements from farm to store shelves.
The rationale behind this is to show customers that Walmart pork products are of high quality and are traceable, which is hoped will give Walmart customers peace of mind.
Source: AgriMoney Date: 2017-07-05
Malaysia declared free of bird flu virus
Malaysia has been declared free from the Highly Pathogenic Avian Influenza (HPAI) H5N1, or better known as the bird flu virus, as of July 1.
Veterinary Services Department director-general Datuk Dr Quaza Nizamuddin Hassan Nizam said the announcement was made following no new occurrences of the disease after 90 days from the last disinfection procedure on April 1.
“The 90-day period is a condition laid down by the World Animal Health Organisation (OIE) in addressing these animal diseases,” he said in a statement here today.
Dr Quaza Nizamuddin said the department had sent a full report to OIE on the situation and measures taken to address the issue.
Following the announcement, he said, importing countries such as Japan, Indonesia, Sri Lanka, and China were expected to lift restrictions for import of items such as poultry, ducks, and bird’s nest from Malaysia.
The disease was detected in 16 of 26 village-bred chickens on Feb 28 in Kampung Pulau Tebu, Mukim Tunjung, Kota Bharu.
On March 15, the Kelantan government declared the H5N1 epidemic as a state disaster after it spread from Kota Bharu and Pasir Mas to Bachok and Pasir Puteh.
Source: The Sun Daily. Date: 2017-07-05
Hunan Group Dakang International Food & Agriculture to expand in Brazil
China’s Hunan Dakang International Food & Agriculture Co Ltd announced on Wednesday in São Paulo that it intends to raise US$300 million to expand its agricultural and livestock activity in Brazil, according to Globo Rural magazine.
The group bought a 57% stake in the Fiagril trading company in 2016 and this year it acquired a stake of 53.99% in the share capital of Belagrícola, a company specialising in the sale of equipment for the agricultural sector.
The two companies jointly trade around six million tonnes of grain per year, most of which is exported, and the group intends to use the resulting turnover as a guarantee to secure credit from the Brazilian banking sector.
“The group intends to expand locally but, at the moment, the focus is on the profitability of existing businesses,” said Fábio Jacob, Dakang’s financial director in Brazil.
During the session to present the group’s plans to representatives of Brazilian banks, the group’s president, Ge Jungie, recalled that the economies of Brazil and China are complementary, which brings “great opportunities” for business in the country. (macauhub)
Source: Macauhub. Date: 2017-07-06
Skretting opens 60,000t shrimp feed plant in Vietnam
Aquatic feed maker Skretting has opened a new shrimp feed plant in Vietnam which will serve the country’s fast-growing shrimp sector, according to a press release.
The plant was opened by executives from Skretting and Dutch firm Nutreco — Skretting’s parent company — during an opening ceremony on June 23.
Based in the Mekong Delta, Vietnam’s biggest shrimp production region, the plant is 23,000 square meters and has an initial annual production capacity of 60,000 metric tons. The facility is located in the Thuan Dao Industrial Zone, Long An, near to transport links to other important farming provinces in the Mekong Delta.
The company said the facility will produce Skretting’s functional health feed for shrimp, Lorica, which is formulated for different life cycles of shrimp, and help serve Vietnam’s “fast-growing shrimp sector reach its full potential”.
Samson Li, managing manager of Nutreco Asia, said: “Building this new state-of-the-art plant in Vietnam underlines the strong commitment that we have long shown to our customers in this very important country. This investment will be a vital contributor to the progress of Vietnam’s aquaculture industry and meeting the dietary needs of its fast growing population.”
Marc Le Poul, general manager of Skretting South Asia, added: “Building on several years of experience operating in Vietnam, we feel that 2017 is the year for our ambition to reach new heights.”
Alex Obach, managing director at “Skretting Aquaculture Research Centre”, the global research organization for Skretting, said Lorica is designed to shield shrimp during challenging phases in their lifecycle, including transfer and handling. He added its formulation delivers support to the defense mechanisms of these animals, enabling them to better cope with stress factors.
Skretting entered Vietnam in 2010 through the acquisition of Tomboy Aquafeed, a Vietnamese fish and shrimp feed company. Skretting Vietnam now conducts research, raw material procurement, as well as provides products and services for aquaculture in the country.
Source: Undercurrent News. Date: 2017-07-06
Vietnam aims to meet USDA requirements with pangasius sector overhaul
Vietnam’s ministry of agricultural and rural development (Mard) is aiming to meet any and all US requirements with the implementation of a new decree, exporter Vinh Hoan Corporation has noted.
In May 2017 Mard set out its decree “number 55” to regulate the pangasius sector. “Exporters anticipate that the newly-effective decree will shift this billion dollar industry onto a more sustainable path,” said Vinh Hoan on July 1, as the decree entered into force.
Mard, and exporters, have been aiming to meet US Department of Agriculture “equivalency” in time for the expected Sept. 2 deadline; however, the USDA has just announced it will begin inspection of 100% of pangasius imports from Aug. 2.
Mard’s decree is unique in that it can be executed immediately, as the ministry had previously promulgated “national technical standards for frozen pangasius fillets”, said Vinh Hoan. “The standards would pave the way for farmers, processors, and exporters to comply with the highest regulative requirements, and eliminate those enterprises whose dishonest operations had impacted negatively on the reputation and quality of the Vietnam pangasius.”
According to Vietnam’s directorate of fisheries, in the first half of 2017 the value of pangasius exports rose 2.7% year-on-year. In the Mekong Delta, farming area and harvest volume reached 3,100 hectares and 519,260 metric tons, up 1.3% and 2.2% respectively year-on-year.
Most farmers and processing companies made profits thanks to increasing raw material price, in which farmers gained VND 4,000-6,000 ($0.17-$0.26) per kilogram, said Vinh Hoan.
However, it is forecast that in August, September, and the fourth quarter of 2017, the processing plants will be short of materials as a consequence of declining farming area in the first quarter.
“Demand from fast-growing markets such as China and Hong Kong is surging, hence the supply-demand gap is expected to widen,” the company said.
Source: Undercurrent News. Date: 2017-07-06
Rabobank analyst predicts Chinese dairy demand to lift after two-year hiatus
Chinese demand for dairy products is continuing to grow but not at the breakneck pace of a decade and more ago, Rabobank analyst Sandy Chen says.
Rosy projections for the growth of the Chinese infant formula market have proven to be wide of the mark. Two years ago Euromonitor forecast that with the loosening of the one-child policy, sales of infant formula would jump from US$19b to more than US$50b by 2020.
Shanghai-based Chen, in New Zealand this week to provide a first-hand insight into China’s appetite for dairy imports, said people were reluctant to have more than one child because of the perceived high cost of bringing up children.
Beingmate chairman Wang Zhentai, Fonterra chief executive Theo Spierings, former Prime Minister John Key and chairman of China Dairy Industry Association Song Kungang. Fonterra has made a hefty investment in dairy marketing company Beingmate.
“Euromonitor was pretty optimistic but they have revised down their projection sizably, it’s still a growing market but not at the same rate – about 8-9 per cent a year, more in line with what we were looking at.”
Two years ago Fonterra decided to attempt to cash in on the infant formula market by investing $700 million for an 18.8 per cent stake in Chinese company Beingmate. So far no product has been sold as a result of the deal.
In addition, after criticism over the focus on infant formula, the Chinese government has promoted breast feeding as healthier, and parents have agreed.
Chen said after a two-year hiatus, demand for imported dairy products was lifting, partly because Chinese production had fallen, although it was difficult to see transparency in the statistics.
In the early 2000s growth of imported products had been as high as 20 per cent, but today that was down to 4-5 per cent, following the melamine scandal of 2008.
Last year domestic milk production fell by 4 per cent, or 1.5 billion fewer litres than the year before. The three leading dairy provinces – Inner Mongolia, Hebei and Henan, accounting for 43 per cent of national production – recorded a drop of 3 per cent.
“Since 2008 production has been stagnant, there has been a shift in farming structure with more large scale dairy farms, and a strong exit of small farmers. There is also a problem of summer heat stress in cows which impacts production.”
As a result, demand would grow faster than domestic production, offering opportunities to exporters. Chen predicted that, with a low level of inventory, China would import more dairy products in the second half of this year.
He said consumer confidence in New Zealand products remained positive, and the country was profiting from word-of-mouth marketing from increasing numbers of Chinese tourists.
New forms of marketing such as e-commerce were becoming popular, and allied to the growth in courier services, products could be sold into second and third tier cities.
New Zealand had gradually shifted to more value add products such as cheese and butter for the food service business, where it was “pretty dominant” in those categories.
Chen cautioned New Zealand about becoming too dependent on China and pointed to countries in Southeast Asia such as Vietnam and Indonesia which were showing more rapid growth and which it should focus on.
Chen is Rabobank’s senior dairy and beverages analyst for Asia, and has been responsible for interpreting the latest trends since 2013. He has a background as an equity analyst.
Source: NZFarmer. Date: 2017-07-06
Farmers in China Wrestle With Drought
The corn has grown to only half its normal height on Yan Shuqin’s ranch in the hills of Inner Mongolia this year, as a swath of northern China suffers its worst drought in 60 years.
The ruddy-faced woman said that even before the rains stopped, the groundwater in her region had been sinking, from 20 meters (about 70 feet) below the surface just a few years ago to as much as 80 meters (260 feet) this past summer. While she can still eat and sell the corn, lettuce and other vegetables on her farm, the yield has shrunk.
“If the grass doesn’t grow and the vegetables die off, who’s going to be able to live here?” Yan asked outside her family’s spotless two-room house. “My mother and her mother lived here. My family has always lived here. What are my children going to do?”
After a season of record-breaking drought across China, groundwater levels have hit historic lows this year in northeast and central parts of China where hundreds of millions of people live. Reservoirs grew so dry in agricultural Henan province that the city of Pingdingshan closed car washes and bathhouses and extracted water from puddles.
But this is no one-time emergency. Farmers like Yan and water-hungry industries have been wrestling with a long-term water crisis that has dried up more than half the country’s 50,000 significant rivers and left hundreds of cities facing what the government classifies as a “serious scarcity” of water.
Half a billion Chinese live in a handful of provinces, largely in the northeast, where coal-fired power plants, steel foundries and other water-gulping industries already burden reservoirs and aquifers. Widespread chemical runoff and other pollution have contaminated 60 percent of the country’s groundwater.
The country’s climate is also warming, particular in its populous northeast where rain levels have fallen, according to a 2011 study by Chinese, French and British researchers. Meanwhile, the country’s south has seen its rainfall concentrated in shorter bursts, which has made it harder to predict water supplies.
As a result, per capita water availability in the megacities of Beijing and Shanghai as well as their surrounding provinces equals that of dry Middle Eastern countries such as Israel and Jordan, said Feng Hu, a water analyst with the Hong Kong-based research group China Water Risk. By comparison, the average U.S. household has access to nearly five times more available water than Chinese households do.
“If we continue with our business-as-usual model, the demand will exceed supply by 2030,” Feng said in a lecture in Beijing last month. “The water crisis is a real risk.”
Already, Chinese farmers have lost an estimated $1.2 billion this year due to drought, while China has slowed plans to tap its vast deposits of shale gas, which sit in areas with the greatest scarcity. The water crisis is also hitting China’s main energy source, coal, which requires large amounts of water to extract and convert into power.
Heavy rains over the past week helped lift some of the immediate crisis in central China, flooding cities that just days earlier had been struggling to keep taps flowing. But fields remain bone-dry and parched in Inner Mongolia and other northern regions.
In response to the country’s water woes, Chinese authorities have called for solutions that include relying more on imports for foods that require lots of water to produce, such as grains and vegetable oils.
They also are betting on more than 2,400 kilometers (1,500 miles) of canal that when completed will move trillions of gallons of water from the rivers of China’s south to its dry north. One branch of the canal leading straight to Beijing is expected to be done this fall.
Many water experts remain skeptical about the project, however, with some warning it could wreak havoc on southern aquifers and watersheds.
But Fuqiang Yang, a senior adviser with the U.S.-based National Resources Defense Council, said the canal could relieve water shortages in some northern cities such as Beijing, if launched with conservation and water reuse measures. Without the canals, metropolitan Beijing only has enough water for 15 million people, not the 20 million who now live there, he said.
“This has always been a regional problem,” Yang said. “Groundwater is going down very quickly … These areas will not be able to solve the problems themselves. So this canal will provide some important help there.”
But Feng said Chinese authorities also need to encourage conservation by ending its subsidization of water consumption by all users, from households to farmers to industries. The average price of residential water in Beijing, for example, is a fifth of that in New York. And although China’s per capita consumption rate still falls below the global average, it is rising steadily as the country’s economy expands.
Industry and agriculture make up 85 percent of China’s water consumption.
“For something so scarce, water in China is not priced at the level it should be,” Feng said.
The canals still won’t help farmers in remote regions such as far western Xinjiang and Inner Mongolia where the drought has hit the hardest. Despite the arid conditions there, China’s government actually hopes to stimulate more water-dependent industries such as coal-fired energy production that will compete with farmers for meager resources.
In Hexingten county in Inner Mongolia, people say they’ve already seen radical climate shifts. Last winter went by without any significant snows to replenish streams and groundwater, followed by a drought-plagued spring and summer.
A 40-year-old farmer in Hexingten who would only identify himself by his family name of Bao said everyone there is wondering how long they can survive in these grasslands.
“The environment was good before,” Bao said. “The grasses grew so tall. Now, it doesn’t even rain anymore.”
Source: Associated Press Date: 2017-06-28
China’s youth create a stir in pork industry
China’s frozen dumpling makers are finding a quick route to winning new sales – increase the vegetable content and cut down on the meat.
This departure from traditional pork-rich dumplings is a hit with busy, young urbanites trying to reduce fat in their diets often heavy in fast food.
“They [consumers] like trying new healthy products once a week or fortnight. It’s a big trend for Chinese mainland consumers, especially those aged 20 to 35,” said Ellis Wang, Shanghai-based marketing manager at US food giant General Mills, which owns top dumpling brand, Wanchai Ferry.
For pig farmers in China and abroad, this is a difficult trend to stomach. The producers and other market experts originally expected pig meat market growth to continue until at least 2026.
In the wake of this prediction, Chinese hog farmers have been on a building spree, constructing huge modern farms to capture a bigger share of the world’s largest pork market, while leading overseas producers have been changing the way they raise their pigs in order to meet Chinese imports standards. Some have, for example, stopped using growth hormones, which are banned in China.
Despite recent changes, China still consumes significantly more meat than any other country. People here will eat about 74 million tons of pork, beef and poultry this year, around twice as much as the US, according to US agriculture department estimates. More than half of this number constitutes pork consumption. For foreign producers, this has caused a big growth in the market, especially for Western-style packaged meats.
But pork demand has recently hit a wall, well ahead of most official forecasts. Sales of pork have now fallen for the past three years, according to data from London-based research firm Euromonitor International.
Last year, they hit three-year lows of 40.85 million tons from 42.49 million tons in 2014. Euromonitor predicts they will fall slightly in 2017.
In China, hog prices have come down approximately 25 percent since January, even though official numbers suggest supply is lower compared with last year.
Less meat is better?
Since China began opening up to the world in the late 1970s, pork demand expanded by an average of 5.7 percent every year until 2014. This was due to the booming economy allowing hundreds of millions of people to afford to eat meat more often.
Now, growing concerns about obesity and heart health have shaped a variety of shopping habits, fueling sales of everything from avocados to fruit juices and sportswear.
“Market demand remains very weak. I think one factor behind this is people believe less meat is healthier. This is a new trend,” said Pan Chenjun, executive director of food and agriculture research at Rabobank in Hong Kong.
Sales of vegetable-only dumplings grew 30 percent last year, compared with around 7 percent for all frozen dumplings, data from global marketing research firm Nielsen also shows.
“Demand for vegetable products keeps rising, giving us large room for growth,” said Zhou Wei, product manager at No.2 dumpling producer Synear Food.
Guangzhou-based Harmony Catering says that for the approximate 1 million employees eating at its 300 canteens every day, concern over health has become the core reason for reduced servings of meat.
Harmony’s chief clientele – that is, staff members from technology companies, banks and oil majors – are consuming about 10 percent less meat today than they did five years ago, whereas they are consuming around 10 percent more green vegetables, according to Harmony’s vice president Li Huang.
“This is mainly because of media messages, the concept of health has entered popular consciousness [through mainstream communication channels],” he said.
For now, it’s mostly urban and white-collar workers paying closer attention to their diets. There’s been, for example, a sharp rise in vegetarian food stations at university campuses.
Besides, the government wants a nationwide shift in eating habits.
Childhood obesity in China is rocketing, and the country also faces an epidemic of heart disease, Harvard researchers warned last year. They blamed the growing consumption of red meat and high salt intake for these problems.
In April, the health ministry kicked off its second 10-year healthy lifestyle campaign, urging citizens to consume less fat, salt and sugar and instead, aim for a ‘healthy diet, healthy weight and healthy bones’.
By 2030, China wants to see a noticeable increase in nutritional awareness, a 20 percent cut in the per capita consumption of salt and slower growth in the rate of obesity, according to a recently published “Healthy China 2030” pamphlet.
Meeting healthy demands
Some companies have been urgently changing the mix of products they sell by going for higher-margin meats rather than volumes. Sales of traditionally less popular lamb and beef have also been increasing.
Li of Harmony Catering says, although servings of pork are down, the firm is including more beef and lamb in meals for diet diversity purposes.
“People usually eat lean beef or lamb, like beef brisket, while pork has both fatty and lean parts, like in ‘hong shao rou’,” said Beijing-based nutritionist Chen Zhikun, referring to the widely consumed braised pork dish.
China’s top pork producer, WH Group, has been going up market by selling more expensive, Western-style products in China, such as sausages and ham. Such products are commonly imported from Smithfield, the largest US pork producer, which was acquired by WH in 2013.
Some producers say that the recent drop in pork consumption can also be partly explained by sharply lower output. A prolonged period of losses during 2013 to 2015 forced farmers to cull millions of hogs, hitting supply and sending pork prices to record levels in 2016.
But for a growing portion of Chinese consumers, price tags on food items are becoming less and less important. A spate of safety scandals in recent years, many of which were related to meat, has made urban Chinese highly sensitive to food quality.
More than 80 percent of people in China surveyed by Nielsen last year said they were willing to pay more for foods without undesirable ingredients, much higher than the global average, which is 68 percent.
“China is in a new stage where consumption of pork and other foods is no longer a simple matter of ‘more is better’,” said Fred Gale, senior economist at the US agriculture department.
Source: Global Times Date: 2017-06-29
Norne: Sooner or later Chinese importers will look to Norway salmon M&A
With the Chinese market now open once again to Norwegian salmon sales, investment bank Norne Securities believes it is only a matter of time before importers start looking at mergers and acquisitions to secure supply.
One hundred Norwegian seafood exporters recently met with 300 importers in China, to mark the opening of seafood imports from Norway again. The Norway’s Seafood Council is targeting 156,000 metric tons of salmon exports to China by 2025; one of every seven salmon farmed in Norway now, Norne notes.
“Sooner or later some of China’s seafood importers are likely to differentiate from competitors at home to go beyond contracts to secure supplies,” said analysts Karl Johan Molnes and Rytis Mikelionis.
Chinese firms may do this either with a full acquisition, or via a 50/50 joint venture; there is precedent for both, set by Japan when it too wished to secure supply.
In 2014 Mitsubishi Corporation took over Cermaq, for approximately NOK 8.880 billion ($1.4bn). More recently, Norne noted, Japan’s Yokohama Reito and Norway’s Hofseth International paired up to buy a trout farmer, Fjordlaks Aqua.
“China has money, but it does not have Japan’s experience that has been active along the Norwegian coast sourcing seafood, teaching Norwegians how to treat and package shrimps, mackerel and salmon since the early 1980s,” Norne suggested.
Bakkafrost’s CEO, according to Norne, believes that only Norway can build a market in China.
From an investment point of view, Norne suggested holding onto shares in those companies the shareholder believes could be acquired; the rest, it said, should be sold.
“Strip away the biomass adjustment and focus on the estimated adjusted earnings per share from abnormal high prices and high costs,” the bank wrote.
“The valuation of the sector has been around PER [price-earnings ratio] 10 on adjusted consensus numbers since after the companies starting making significant profits in 2014. Value investors recognize that there is now more downside than upside in the earnings level, and have thus already sold their shares.”
The table below shows how certain listed companies are expected to perform regarding enterprise value/ earning before interest and tax, and dividend yield.
“Because of the high correlation between salmon prices and salmon stocks the sector is a ‘trading sell’ until salmon prices are lifted above NOK 60 [per kilogram] per week around the start of 4Q17.”
China market has bounced share prices back.
The market has, so far in Q1 2017, been worried about the salmon sector, shown by falling share prices in the listed Norwegian salmon farmers.
This has mainly been caused by an early downward readjustment of forward prices.
However, falling share prices was halted by the announcement in early April that China would open to Norwegian seafood imports. “Both salmon prices and salmon stocks have rebounded sharply on the news in April and May,” Norne added.
The bank descried the recent meeting between Norwegian exporters and Chinese importers as impressive, but suggested “short term progress indicated might be slower than needed to lend much support to salmon prices this year”.
“The bullish view: if the salmon prices rapidly rebound from the low 50’s and stay above NOK 60/kg before the end of 3Q17, we are likely to upgrade our recommendations yet again to ‘trading buy’ into 2018.”
“The bearish view: the longer time it takes for salmon prices to get back up to NOK 60/kg in 2H17 the more earnings per share estimates will have to come down, and stocks will fall even more than our target prices.”
Source: undercurrentnews.com Date: 2017-06-29
