How did the prices of major agricultural products trend in 2016
According to consultations by the Ministry of Agriculture's agricultural whole-industry-chain analysis and early-warning team, in 2015, affected by abundant agricultural harvests, increased imports, weak demand and falling international prices, China's agricultural product market prices generally declined, and farmers in main producing areas suffered relatively large income losses.
Looking ahead to 2016, agricultural structural adjustment, destocking of bulk products, changes in consumer demand and changes in international prices will be important factors dominating the operation of China's agricultural product market.
The just-concluded Central Rural Work Conference and National Agricultural Work Conference proposed that efforts should be made to strengthen supply-side structural reform of agriculture and advance structural adjustment in the planting, livestock and fishery industries. In 2016, pilot projects for fallowing and crop rotation will be gradually carried out, the corn area will be reduced by more than 10 million mu, cotton planting area in the Yellow River basin and Yangtze River basin may continue to decline, rapeseed growers in main producing areas have been discouraged, and the rapeseed area for autumn and winter planting has decreased by more than 20%.
Strengthening agricultural supply-side reform focuses on destocking agricultural products, reducing costs and shoring up weak links. At a time when inventories of bulk agricultural products such as grain, cotton, oil and sugar are generally high, accelerating inventory digestion will increase the effective supply in the agricultural product market, and will in particular create relatively large downward pressure on prices of grain, cotton and oil crops.
From the demand side, total consumption for agricultural product processing is expected to remain basically stable, and the consumption structure will upgrade faster. With the rapid development of e-commerce, consumer demand for high-quality, special-purpose and branded agricultural products will continue to grow. World grain output remains at a historically high level, and institutions such as the United Nations Food and Agriculture Organization (FAO) and the United States Department of Agriculture all predict that international grain prices will continue to fall in 2016. It is expected that the inversion between domestic and international prices of agricultural products will persist, and imports of agricultural products, especially livestock products, will remain at a high level driven by price differentials. However, as corn prices fall, the import scale of corn substitutes such as sorghum and barley, which grew sharply in the past two years, is expected to gradually decline.
Taking into account factors in production, inventory, consumption and imports, it is expected that in 2016 the prices of major agricultural products will continue to run weakly, and the risk of unsold and hard-to-sell products will increase for some agricultural products.
Three major grains: strong downward pressure on market prices
Wheat production and demand are expected to be basically balanced. In 2016, the minimum purchase price for wheat will remain unchanged from the previous year. The winter wheat sown area is stable with a slight increase, seedling conditions are relatively good, and feed demand is at a low point. Prices are expected to fluctuate slightly around the minimum purchase price level, and the price trend for ordinary wheat will continue to be weaker than that for high-quality wheat.
Rice supply and demand are relatively loose. In 2016, the minimum purchase price for rice is expected to remain basically stable. As destocking accelerates in major producing countries such as Thailand, rigid consumption grows and the renminbi depreciates slightly, the pressure of imports driven by domestic and international price differentials is expected to ease. Low-end rice prices are expected to face strong downward pressure, while high-quality rice prices will remain stable.
Corn inventory levels are high, and destocking will lead to periodic loosening of market supply. As market prices gradually decline, processing demand is expected to recover growth, while the price advantage of imported sorghum and barley will weaken, and imports of substitutes are expected to decrease. In addition, as domestic production enters a proactive reduction cycle, it is expected that corn market prices in 2016 will first stabilize and then fall, and gradually stabilize amid the decline.
Livestock and poultry products: prices expected to rise slightly while remaining stable
Affected by a sharp year-on-year decrease in the inventory of breeding sows, the supply and demand of live pigs in the first half of 2016 will continue the balanced-but-tight situation seen since the second half of 2015. Prices are expected to rise slightly, and in the first quarter the price increase may be somewhat larger due to the peak consumption season. As breeding profitability improves, live pig inventories will continue to recover and grow. In addition, imports may increase further, and pork market supply will be sufficient. If no major epidemic occurs, the annual increase in pig prices will not be too large.
Affected by avian influenza in the United States and China's ban on imports of US poultry products, poultry meat products are expected to rise slightly while remaining stable in 2016. Driven by urbanization and consumer demand under the “universal two-child” policy, poultry egg prices are expected to rise while remaining stable.
A recovery in dairy product consumption and a restorative rise in international prices will support a slight increase while remaining stable in domestic raw milk prices.
The tight supply-demand pattern for beef will persist, and prices will run at a high level. Mutton sheep production continues to grow, and affected by import shocks and declining consumption, mutton sheep prices in main producing areas may continue to fall.
Domestic demand for aquatic products is stable while external demand is weak, and prices are expected to remain basically stable.
Cotton, oil crops, sugar: domestic prices fluctuate weakly in sync with international prices
According to the latest forecast in November 2015 by the International Cotton Advisory Committee (ICAC), global cotton output in 2015/16 will be 23.92 million tons and consumption 25.05 million tons. Excluding China, the stock-to-use ratio is 52%, and the supply-demand situation remains loose. Domestic cotton demand has not improved significantly, and under the pressure of high inventories, cotton prices are expected to continue running at a low level. Because in 2015 the cotton area and total output in ** both declined significantly, and the cotton area in the interior continued to shrink, cotton destocking is expected to accelerate, and there is not much room for cotton prices to continue falling sharply.
According to the latest forecast by the International Sugar Organization (ISO), in the 2015/16 crushing season global sugar will end five consecutive years of production exceeding demand and shift to a production shortfall of 3.5 million tons relative to demand, which is conducive to long-term stabilization and recovery of sugar prices. It is expected that in the 2015/2016 crushing season China's sugar output will decline to about 10 million tons, sugar consumption will grow to about 15.5 million tons, and the sugar production-demand gap will widen. However, due to high inventory levels and large domestic and international price differentials, China's sugar market will still be oversupplied in the short term, and market operation will remain fragile.
In 2016, global supply of soybeans and rapeseed will remain very ample, and domestic edible oil inventory levels will remain relatively high. It is expected that oil and oilseed prices will continue to maintain a weak and volatile pattern in line with the international market. As imports continue to increase and domestic oilseed production continues to decline, the self-sufficiency rate of edible oil may fall to about 25% in 2016.
Vegetables and fruits: seasonal price fluctuations
The national vegetable planting area is expected to be relatively stable, and market supply will be sufficient. Affected by rigid increases in planting costs, vegetable prices are expected to rise slightly while remaining stable.
In 2015, China's fruit output continued to increase, especially apples and bananas, which increased relatively more, and later-stage fruit market supply was loose. In addition, fresh fruit imports increased significantly and the trade deficit expanded sharply. It is expected that in 2016 fruit prices will generally run weakly, and vigilance is needed against the risk that some varieties will be unsold and hard to sell.