China's Growth Tests Global Agriculture

Where China goes, so does global agriculture. China’s burgeoning middle class has led to soaring demand for protein that was met by Brazil. In the process, Brazil became a first-rank agricultural power. Global markets rise and fall on the changing tastes of Chinese consumers.

For November, we will use data in Gro, including the recently integrated Chinese Agricultural Supply and Demand Estimates (CASDE), to analyze recent agricultural trends in China. From pork consumption to land reform, China’s growth can be a boon or a curse for global markets, and sometimes both.

Two notable trends are increased consumption of wine and chocolate, among other luxuries. By 2020, China is on track to become the second-largest wine market, by value, behind the US. Analysts expect the country’s increase in chocolate consumption to outpace global growth in 2017.

While the Chinese diet changed significantly over the last decade, pork remained firmly entrenched as the protein of choice. China consumed 54.9 million tonnes of pork in 2017, by far the most of any country. For comparison, the entire EU consumed 20.6 million in 2017. Pork remains king, but consumption has been declining since reaching a peak of 57.2 million tonnes in 2014.

If China has reached peak pork, global producers could capitalize on a hungry market by anticipating the next popular source of protein. Even after opening up new trade routes to multiple countries, beef consumption in China remains relatively low. Seafood could also be an alternative for consumers with more disposable income.

China does not have enough arable land to meet its own protein consumption needs. China’s land issues are compounded by increased pollution that has damaged local water sources and further reduced the amount of viable farmland. China has pursued foreign land investments to help meet demand, and more recently, China has allowed farmers to lease their land to agricultural companies to improve farmland efficiency.

Agricultural modernization is a fundamental policy China will pursue until 2020. Basic food security, more efficient agricultural practices, and land reform were among the agricultural policies introduced in the 13th Five-year Plan for Economic and Social Development of the People’s Republic of China released in 2015. The Agricultural Development Bank of China agreed to provide at least $450 billion in loans by 2020 to meet the plan’s objectives.

Food security remains a top priority for China as its population increases alongside a rapidly booming global population. As China looks to secure supply to meet demand, we recommend using Gro to identify the ripples before they become shockwaves.