Chinese policymakers have always considered the agricultural sector to be central to the structural transformation of China’s unbalanced economy and to long-term goals of maintaining social harmony and achieving “all-round moderate prosperity”. China today accounts for about 19 percent of the global population, yet has just 8 percent of its arable land. And unlike other countries with growing populations, there’s no land left to till; indeed, given years of chemical abuse in the countryside and industrial pollution that sowed heavy metals through rice paddies, China’s available farmland is actually shrinking.
A large and growing metropolitan population expect greater quality of product, security of supply and to have confidence in the safety of the food they consume. This urban population demand a world-class agricultural sector with strong links to high quality global producers. These two forces are driving unprecedented public-private experimentation and innovation and a reshaping of China’s agricultural sector.
The latest No. 1 Document released by the Chinese Communist Party Central Committee and the State Council in early 2016 signaled a relentless focus on ‘accelerating the modernisation of Chinese agriculture’ by improving the supply side, efficiency and quality of the sector and by pushing forward programmes to improve food safety, reduce agricultural inputs and the loss of arable land. The document announced a range of innovations and experiments such as the introduction of a pilot plan to invest in 53 million ha of ‘high quality’ farmland. Similarly, the recently approved 13th Five Year Plan (2016-20) puts forward the goal of nurturing the creation of professional farmers and reforming rural land and land operation systems. The drive towards the modernization of Chinese food production, processing and distribution means China’s agricultural sector has entered a period of profound transformation.
What these changes mean for businesses, governments and food producers outside of China remains unclear. At one level, rationalising the food and agricultural sector in China is a task of extraordinary magnitude and one where Chinese policymakers fully acknowledge the vast challenge of moving away from small-scale, traditional farming systems. Based on previous experience and the progress to date, however, there is every likelihood that these efforts will create new forms of competition and tighter regulatory requirements for international food exporters.
At another level, the modernisation of Chinese agriculture creates opportunities for foreign companies to play a role in the development of the sector either within China or through joint partnerships at home. Of the later, the new focus on maintaining food security through access to global markets presents a shift-change in policymakers’ attitudes to security of supply issues and increases opportunities for various forms of joint investment and partnership. At the same time the rapid expansion of public and private investment in domestic capacity within China presents a medium to long-term challenge for global food producers.
Structural Change to Livestock Sector
There are signs that China’s demand for feed grains has reached a turning point as a tightening labour supply and rising feed costs force significant structural change in China’s livestock sector. Over the last 5 years, economic growth has absorbed surplus rural labour and rural wages began rising 15 to 20 percent annually. Labour scarcity, animal disease pressures, and rising living standards are prompting rural households to abandon “backyard” livestock production. More recently, livestock production has increasingly become a specialized farm enterprise, with farmers focusing on maximizing growth of animals, and substituting commercial feed for wastes and forages gathered from the countryside.
Rising feed demand has pushed up costs and motivated feed mills and livestock producers to explore new feed ingredients like distillers dried grains and sorghum—both imported from the United States. More importantly, China has switched from being a corn exporter to a consistent importer of 3-to-5 mmt annually since 2009. A few years ago Chinese officials announced a new strategic approach to food security which tacitly acknowledges a need for imported feed grains. The strategy still stresses the importance of self-sufficiency, but it allows for “appropriate imports” and focuses concern on food grains—rice and wheat—while placing a lower priority on corn self-sufficiency.
Demand for meat.
China’s meat consumption is expected to rise at a pace similar to the trend over the past decade. Pork plays a central role in China’s meat economy—China accounts for half of world production and consumption—but poultry is gaining in popularity, largely because it is cheaper than pork. Restaurants, fast food chains, and cafeterias play a key role in diversifying meat consumption since many feature specific kinds of meat or chicken. In particular, beef and mutton are important parts of popular hot pot, kebabs, and other types of ethnic cuisine that are becoming popular among the broader population.
Per capita pork consumption is projected to rise 6.6 kg by 2023/24, more than three times the increase in poultry (2.7 kg) and more than seven times the increase in beef (0.85 kg). However, poultry is projected to account for an increasing share of China’s meat consumption, with per capita consumption rising 2.4 percent annually during the next 10 years, compared to a 1.5-percent annual growth rate projected for per capita pork consumption.
China produces nearly all of its own meat. Its output of pork, poultry, and beef rose from about 20 mmt in 1986 to over 70 mmt in 2012, with the fastest growth during the 1980s into the early ‘90s. Projections suggest an increase in pork, poultry, and beef output to 90 mmt by 2023/24, an increase of about 30 percent. Since about 3 kilograms of feed are needed to produce each kilogram of meat, feeding a large and increasing population of animals will be a growing challenge. Growth in feed consumption has accelerated recently, and as China’s livestock farms transition to a more concentrated mode of operations that uses commercial feeds more intensively. China’s combined use of corn and soy meal for animal feed is expected to rise from 200 mmt to over 300 mmt over the 10-year projection period. Chinese animals also consume a variety of other grains, protein meals, bran, and hulls from grains, and growing use of these commodities is expected to support the expansion of meat output.
China’s soybean imports are expected to reach over 70 percent of global soybean imports by 2023/24, while China’s corn imports are projected to rise to 22 mmt by 2023/24. China will rely on imported soybeans for most of its soybean meal supply, but imports are expected to account for less than 10 percent of corn consumption by 2023/24.
China is expected to account for 40 percent of the rise in global corn trade over the coming decade making China the leading importer of corn by 2023/24.
The growth of meat production will fall slight behind consumption growth, and the imports are expected to consistently rise in the short term. The dairy production will grow by an average annual rate of 3.5%, the fastest amongst all products. The demand of poultry, eggs, vegetables and fruits for processing will grow rapidly, but the trade balance of these products will remain in surplus. China will continue to provide fundamental support to China's economic development, and China will make new contributions to world food security and safety.