China F&A Monthly September 2020

US-China relations remain the center of attention. Both sides are maintaining positive attitudes toward the implementation of the phase-one trade deal. Despite the recent geopolitical tensions, China has increasingly purchased US goods, particularly agricultural products. But, the risk of further deterioration of the relationship should not be ruled out. As for China’s domestic consumption, sales of dairy and consumer foods have shown resilience, and the e-commerce channel will continue to be the growth engine. However, amid economic slowdown, low-income consumer groups are trading down toward lower-value products. A slow and steady recovery is also expected in foodservice, which drives the consumption of animal protein and edible oils.

The main highlights for September include:

- Strong overseas demand drives urea and DAP prices higher, although domestic markets remain weak due to low demand. Glyphosate prices are expected to rise but, most agrochemical prices will stay low.

- Feed consumption stays strong in China, mostly driven by the acceleration of hog herd rebuilding.

- As the hog herd and sow herd have improved greatly, hog supply is expected to increase in six months. However, risks of disease outbreaks are rising.

- Poultry prices improved slightly but remained weak, but will likely improve further in 2H with the further recovery in foodservice. Despite the weak market, poultry imports have hit a record high in July.

- Dairy shows a strong Q2 recovery in volume, squeezed profitability, consumers trading down, and domestically dried milk worked through.

- In July 2020, foodservice sales declined. Food-only retail sales continue to show resilience, and penetration of online physical goods’ sales accelerated.

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  • Ping Chew

    Head of RaboResearch Food & Agribusiness - Asia
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  • Sandy Chen

    Senior Analyst - Dairy
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  • Chenjun Pan

    Senior Analyst - Animal Protein
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  • Lief Chiang

    Analyst - Grains & Oilseeds
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  • Jingyan Sun

    Analyst - Farm Inputs
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  • Stacie Wan

    Analyst – Supply Chains and Beverages
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  • Michelle Huang

    Analyst – Consumer Foods
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