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The Chinese Agricultural Market Presents Great Opportunities



China Agricultural Market

China is now the world's fourth largest importer of agricultural goods and its imports are
expected to continue growing. China Customs records for 2004 indicate the country
imported over $35 billion in agricultural, fishery, and forestry commodities. Presently,
U.S. agricultural, fishery, and forestry exports to China are at their all-time greatest
levels; China Customs records indicate the value was $8.1 billion in 2004.

Poultry and Poultry Products

China's 2005 poultry production is forecast at 9.9 MMT –the same as post's September
2004 forecast. China banned imports of all U.S. poultry products, worth about $300
million annually, in February 2004 when a case of low pathogenic avian influenza (AI)
occurred in Delaware. After months of negotiations, the Chinese Government re-opened
the market to U.S. poultry products in December 2004; the first containers reportedly
cleared Chinese customs in late January. As a result of China's tougher inspection
requirements and a crackdown on smuggling in Hong Kong during 2004, more shipments
are likely to go direct to Mainland ports rather than through Hong Kong.

Livestock and Livestock Products

In November 2004, China and the US signed an import protocol for US bovine semen
and embryos. Before actual trade begins, China has requested an inspection by Chinese
officials of each embryo and semen collection facility. China's import suspension on
other bovine products, including live cattle, beef products and non-protein tallow,
remains in place. During 2005, technical meetings between Chinese and US experts are
the next step on US beef access. China's cattle imports shot up 232 percent from a year
ago to 110,000 head driven by strong demand by the dairy sector. US pork exports last
year increased over 100 percent to 40,000 MT, and the forecast is for continued growth in
exports.

Mainland China Food Retail Sector

China's food retail sector continues to grow and develop as hypermarket and convenience
store chains expand across the country. Foreign-invested hypermarkets are likely to
continue growing as restrictions on their activity and ownership are scheduled to be
loosened in 2005.

South China's Wine and Beer Market

South Chinese incomes have doubled within the last few years, resulting in increased
beer and wine expenditure. However, imported products only hold a small share in
overall sales. Education and promotion will be necessary to introduce more imported
wines since many consumers do not understand variety and quality differences. In
addition, sales of foreign standard lager have primarily been successful with joint venture
production in China.


Cotton and Cotton Products

Xinjiang cotton experts forecast imports will be about 1.8 MMT for MY04/05, which is
higher than the 1.4 MMT as estimated by many other trade sources. His forecast is based
on his analysis of domestic consumption growth and the availability of domestic cotton.
Imports for the first three months of MY04/05 (Aug-Oct) reached 195,424 MT, up 130
percent compared to 84,958 MT in the same period in MY03/04.

Soybean

Trade sources forecast soybean imports for MY04/05 will reach 19 MMT, chiefly due to
continuing strong demand for soy products, especially SBM, in addition to a relatively
low ending stock for MY03/04. Some sources estimates range as high as 20 MMT. Post's
import estimate for MY04/05 is 20 MMT or even higher. One source reported that
China's total contracts for U.S. soybeans reached 6.6 MMT as of Nov 18 of MY04/05.
This was 44 percent higher than the same period in previous year. Arrivals in the coming
two months are expected exceed 2 MMT monthly. It is worth noting a bumper harvest of
cotton (estimated at 6.3 MMT) will result in higher cottonseed meal and oil in market. It
is estimated that cottonseed will grow by above 2 MMT relative to the year before.

China's Fish Meal Sector

Like many other major fish meal producing countries, China's fish meal production
continues to decline -- from about 400,000 MT in 2003 to an estimated 386,000 MT in
2004. The primary cause of the decline is the shrinking marine fish stocks and related
catches. Meanwhile, consumption remains high at 1 to 1.3 MMT. Imports fluctuate
between 0.8 to 1 MMT. The shrinking catches are pushing international prices up to
levels where customers look for substitutes.

Dairy and Dairy Products

China's raw milk production is forecast to increase 25% during 2005 due to continued
strong demand from consumers for dairy products. Despite the strong demand for
imported live dairy cows and bovine genetics, China has not lifted its ban on imported
US and Canadian bovine products due to the BSE cases in those countries. Though on
September 28, 2004, China lifted the ban on imported semen, embryos and protein-free
tallow from BSE-affected countries, final import approval is contingent on negotiating
and signing bilateral protocols. China's direct imports of US dairy products during
CY2004, led by whey products, are forecast to increase 38 percent to approximately $55
million.

Fresh Deciduous Fruit

China, the world's largest producer and consumer of apples, pears, and grapes, accounts
for 50% of world apple production, 65% of world pear production, and 40% of world
table grape production. Year 2004 apple production should be lower, at 20.2 MMT,
following last year's peak in the production cycle, while pear and grape volumes should
increase to 10.2 MMT and 5.6 MMT on expanded planting and better yields. CAJ
production is also higher, at 560 KMT, on expanded capacity and high world demand.

Traded volume in relation to production is relatively small yet growing fast. Fruit
imports by dollar value increased over the past year while overall volumes decreased.
Exports continue fast growth as prices, although rising, remain low compared to other
suppliers, new markets open, and quality improves. CAJ exports continue booming and
account for 90% of production use. Recently issued fruit entry requirements could
impact trade of all deciduous fruit, especially re-exports from Hong Kong to China.

Citrus Fruit

China's MY 2004/05 citrus production is forecast between 13-14 MMT. Total acreage
remains stable, with orange area growing slightly and tangerine area declining. In the
next few years, citrus production will likely stabilize at current levels while quality
improves. Government support focuses on technical extension and market information
but there is no significant investment. Demand for high quality fruit will outpace
production over the short to medium run leading to fresh orange and other citrus import
growth.

Planting Seed

China's planting seed imports rose 17 percent by value to $84.3 million in MY03/04,
while exports climbed 7 percent to $49.5 million. China's imports from the U.S. equaled
$30 million while exports totaled $9 million. The U.S.'s competitive strength rests with
grass seeds for turf, forage, and reclamation use, along with strong support from herb,
vegetable, and sunflower seeds. China continues exporting large volumes of rice and
vegetable seeds.

Tree Nuts

China's tree nut production decreased in 2003 due to a down year in production cycle,
even if the acreage continued to increase. The 2004 production is expected to reach new
high with walnut production reaching around 350,000 MT. Demand for tree nuts remains
strong, yet high market prices restrict imports and consumption. Efforts are needed to
change people's perception of tree nuts as a snack food to a health food.

Food Processing Ingredients

The food processing industry is developing rapidly in China. Strong economic growth
combined with higher disposable incomes means increased demand for high quality
processed food by Chinese consumers.



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