China is set to become a net exporter of cotton by 2020, while coffee demand soars, says Barclays.
China’s palm oil imports are seen to decline, as continued high levels of soybean crushing flood the domestic market with soy oil, the bank says in a report on the Chinese commodity sector.
China is expected to become a net cotton exporter thanks to the slump in the domestic cotton industry.
“Cotton is the only commodity detailed in our report on Chinese demand which suffered negative demand growth from 2008 to 2014,” Barclay’s noted.
“We expect this decline to continue in between 2014 and 2020, due to a loss of cost competitiveness in the textile industry,” the bank said.
“With demand contracting, even with a decline in cotton acreage of 3.2% pa, we believe China will no longer need to import cotton from 2018 onwards and possibly even start to export it from 2019”
Chinese cotton imports are seen falling from 8.2m tonnes in 2014 to a net export of 2.4m tonnes in 2020.
Net wheat importer
China is also expected to move from a net importer of 0.9m tonnes of wheat in 2014 to a net exporter of 12.8m tonnes of wheat in 2020, thanks to the slow growth of domestic demand, and increased yields.
Increased yields also mean rice production will be continue to be sufficient to meet domestic demand.
And despite growing demand and falling production, corn imports are likely to be limited by the size of Chinese state corn inventories, which Barclays sees at 95.4m tonnes.
But Chinese coffee imports are seen rising from 1.9m tonnes in 2014 to 7.2m tonnes in 2020.
Coffee demand is being lifted by changing tastes and rising consumer incomes, and Barclays says China will struggle to meet the domestic demand through increased production.
“China has very limited headroom to ramp up coffee production over the next five years,” said the bank.
Only a small area of Chinese land, mostly in Yunnan, is suitable for coffee production, and acreages there face coffee from the tea industry.
“Given the minimal levels of domestic coffee production, we have translated coffee demand growth directly into import growth,” Barclays said.
Earlier this year ABN Amro saw Chinese coffee demand set to weather the Chinese slowdown, as voluntary spending increases.
Soybean demand grows
Chinese soybean demand is expected to continue to grow, but the pace will be slower than in recent years, as Barclay’s says the “big changes” in Chinese diet, specifically meat consumption, have come to an end.
China dominates world soybean demand, thanks to its huge soybean crushing industry, which provide high protein meal for use in the country’s meat industry.
China imports over 65% of the world’s soybeans, accounting for over 85% of domestic production.
The banks sees Chinese domestic soybean demand to grow by 4.3% a year until 2020, but the continued decline in production will push import demand up by over 5%.
Falling soybean acreagaes, and a Chinese ban on genetically modified organisms in domestic soy production, have lead soy harvests to fall, with 2014 production just 72% of 2004 levels.
This has in part been the result of China’s hefty price support for corn, which has encourage farmers to switch away from soybean production.
Coffee demand is set to soar in the next five years, though maturing diets mean slower growth of meat, corn and soybean demand
Palm oil loses out
Barclay’s forecast Chinese domestic vegetable oil demand to grow by 2.9% a year from 2014 to 2020, but demand for soymeal is expected to grow by 4.6% a year over the same period.
As soyoil and soymeal are produced simultaneously during soybean processing, soybean oil production will increase as a by-product of crushing to meet soymeal demand.
“As a result, soybean oil could gain market share at the expense of other oils, including rapeseed, palm and sunflower oil,” Barclays said.
Due to health concerns, palm oil is expected to be the main loser from the surplus of soyoil.
“We expect palm oil demand to gradually decline to from 5.8mn tonnes in 2015 to 5.2mn in 2020 and its market share in vegetable oil consumption to decline from 18% to 14.3%,” Barclay’s said.
(Source – http://www.agrimoney.com/news/china-to-become-net-cotton-exporter-barclays-says-while-coffee-demand-booms–8728.html)