NZ-linked Chinese dairy firms rank highly

By Jamie Gray

Fonterra was ranked the fourth biggest dairy company in the world in terms of turnover. Photo / Brett Phibbs

Chinese dairy companies Yili and Mengniu - both of which will soon have factories in New Zealand - now rate among the top 15 of the world's biggest dairy companies in terms of turnover, rural lending specialist Rabobank said.

Rabobank said Yili is now ranked at 12th, up from 15th last year, while Mengniu went to 15th from 16th.

Yili has plans to manufacture in South Canterbury while Yashili - which is in the throes of being taken over by Mengniu - is building a factory at Pokeno, on the southern outskirts of Auckland.

The top five rankings - with Fonterra at number four - remained unchanged from last year.

Nestlé extended its lead at the top of the table, with organic growth and the purchase of Pfizer's infant nutrition business contributing to 23 per cent to revenue growth in dairy sales.

Danone and Lactalis, both of France, were second and third, respectively, followed by Fonterra and then the Netherlands' Friesland Compina at fifth.

Almost all of the top-20 felt the stiff headwinds of a slow global economy, recession in Europe and maturing western dairy markets in 2012, Rabobank said, and at least six companies saw their dairy revenues decline in local currency terms.

China's big dairy companies did not enter the top 20 until 2008, Rabobank analyst Tim Hunt said in a commentary.

"Slowing organic growth potential is placing more pressure on companies to consolidate local industries and to seek growth via acquisition, contributing to the flurry of recent activity in the top-20," Hunt said.

Companies were also actively positioning themselves to access stronger growth markets abroad.

"The Chinese government's desire for domestic consolidation and vertical integration, together with local market growth, will almost certainly underpin further growth of the Chinese giants Yili and Mengniu," Hunt said.

In contrast, a combination of confinement to the domestic market and a lack of sizeable acquisitions has seen the rankings of US companies decline in recent years, he said.

America's Kraft slipped seven places following the split of its US grocery business from Mondelez, while Dairy Farmers of America saw sales decline in 2012.

Hunt said it was possible that the US giants would be pushed further down the list in coming years.

"Size should not be a goal in itself, and US companies can participate in growth offshore by developing their export businesses,'' he said.

"However, with much of the growth opportunities in dairy likely to come outside of the US in coming years, US companies will need to think about whether being an unaligned exporter with no offshore footing will be enough to secure a fair share of the growth and value available in coming years," he said.

Yashili is based in Chaozhou, Guangdong province. In June, China Mengniu Dairy Co Ltd signed a takeover deal to buy Yashili.

Meanwhile Yili, whose full name is Inner Mongolia Yili Industrial Group - has started construction of a $214 million infant formula plant at Glenavy, in South Canterbury.

Source: http://www.nzherald.co.nz

China eyes five percent broken rice from Pakistan, Vietnam

January 22, 2013

RECORDER REPORT

Chinese demand looks likely to act as a partial safety valve for an amply supplied rice market for a second year running, as the world''s top consumer of the grain takes advantage of global prices around 25-30 percent below record domestic levels.

Still, Chinese demand looks unlikely to bail out Thailand - where a government rice buying scheme has built up stocks equal to half of global annual trade - as cheaper Vietnamese and Pakistani grain snatch the lion''s share of business. China''s rice imports jumped five-fold in 2012 to 2.6 million tonnes, making it the world''s second largest buyer after Nigeria. While it might import a bit less this year, the country will still tap bumper global supplies to ease record-high domestic prices and top up stockpiles. Global rice prices, which have fallen on Thai stocks and India''s booming exports, could find a floor on the back of this demand.

"Domestic prices are high so there is motivation for trading companies to increase imports," said an analyst with official think-tank China National Grain and Oils Information Centre (CNGOIC). "Bumper rice harvests in most Asian countries will keep global rice prices far below domestic prices."

The price of 5 percent broken rice in Vietnam has fallen 14 percent from its 2012 peak, with the market on track for a third consecutive month of decline. The 100 percent B grade Thai white rice is trading about 10 percent below last year''s high. At the same time, long-grain milled rice in China''s largest growing province of Hunan was quoted at a record 3,820 yuan per tonne in December, up 6 percent from the beginning of the year. China''s rice prices rose in 2012 for a third year in a row. The CNGOIC forecasts China''s rice imports in 2012/13 at 2 million tonnes, down from 2.85 million tonnes shipped a year earlier but enough keep the nation among top importers in the world.

Last year the market was dominated by Vietnam and Pakistan, and the two look likely to emerge on top again this year. China bought around 2 million tonnes of Vietnamese rice in 2012, a surge of more than six-fold from around 310,000 tonnes in 2011, according to Vietnam Customs data. The balance came from Pakistan. Vietnamese and Pakistani 5 percent broken rice in the Chinese market is quoted around $420-$425 a tonne, including cost and freight, compared with domestic price of similar variety being offered around $600 a tonne.  

Courtesy Business Recoder

A. M. Awan (Author)

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A M Awan Currently working as Marketing Executive at Oasis Agro Industries Pakistan, and hobbies to read about agriculture, share latest information with others

Aid to agriculture increases by 130% in China and by 40% in the US

Global support to agriculture per capita in the period 2005-2010 has increased by 130% in China, by 60% in Brazil and by 40% in the United States, while in the European Union it has stayed in the same level since 2005, according to the indicator "Global Support to Agricultural Production (SGPA)" published by the Movement for a World Agricultural Organization, MOMAGRI.

According to the indicator that measures support to agriculture in the planet's four largest agricultural producers (Brazil, China, United States and European Union) in 2010, the first place in absolute value is for the US with 163,000 million dollars; in second place is China with 154,000 million dollars; in third place is the EU with 101,000 million dollars and Brazil is fourth with 38,000 million dollars.

In terms of the percentage of the production's value, the US takes the first place with aid representing 48% of the total value, followed by the EU and Brazil with 24% and finally China with 20%.

According to the report, it appears that Brazil and the US show similar support policies to promote competitiveness and stimulate domestic demand. This way, growers from those countries benefit from regulation tools such as:

1. For Brazil: direct intervention in the market, storage planning and funding for the development of biofuels (42% of the Brazilian AGPA).

2. For the US: countercyclical aid mechanisms carried out by insurers and a large plan for domestic food aid.

Regarding China, the report states that the government enforces policies of intervention and insurance of the agricultural production, especially in the shape of a minimum guaranteed price (258 US$/t for wheat, 291 US$/t for rice in 2010), direct income support, social support programs and tax cuts.

Contrastingly, "the EU is the only one basing its agricultural policy on aid decoupled from production, accompanied by greening criteria," according to MOMAGRI in their statement.

According to MOMAGRI:

- "Despite claims about the maintenance of the CAP budget, results show that, since 2005, Europe has taken a different direction to that of other large world producers, which are making large investments to ensure food security for their populations."

- "The worrying decrease in aid entails that the EU may fall behind; situation which would only get worse if the project for the reform of the CAP goes ahead."

- "If the EU persists in its plan to reform the CAP, falling behind would lead to very severe consequences for European agriculture and the agri-food industry." MOMAGRI does not call for an increase in the CAP's budget, but for the adoption of price regulation mechanisms and, consequently, of the income.

It is the first time that the institution compares the support to agriculture in the world's largest agricultural producers. To date, MOMAGRI had only published comparisons between the EU and the US.

Source: Fepex