Executive Summary

The year 2016 marks the opening of the 13th FYP period and is also an important year to implement the new concept of development and advance supply-side structural reform in agriculture. The China Agricultural Outlook (2016-2025) released this year reviewed the production, consumption, price and trade of major agricultural products in China, including grain, cotton, oilseeds, sugar, vegetables, fruits, meats, poultry eggs, dairy, aquatic products and feeds, and made predictions into the future 10 years and the 13th FYP period.

1. Review of the operation of agricultural market in China during the 12th FYP period

The 12th FYP period is a remarkable five-year in China's agricultural development. Against the intrinsically complex international situations and the daunting task of domestic market regulation to meet growing consumption, cope with the rising cost and control multiple risks, China has managed to reap bumper harvests for years in a row, increase farmers' income constantly, maintaining supply and demand balance and ushering modern agricultural development into a new era. The main features are as follows:

First, constant growth of output of major agricultural products. The output of grain, meats, vegetables, fruits and aquatic products grew by 2.6%, 1.7%, 3.9%, 5.4% and 4.5% respectively annually, compared with that of 3.2%, 2.7%, 2.9%, 5.8% and 4.0% during the 11th FYP period. In addition, the output of soybean, cotton and oilseeds declined to varying degrees.

Second, significantly slowed down growth of price of most agricultural products. The price of wheat, corn, soybean and oilseeds grew by 3.4%, 0.2%, 2.5% and 7.5% respectively annually, 3.3, 8.3, 8.5 and 3.0 percentage points lower than the 11th FYP period; the annual growth rate of the price of pork, milk and vegetables was 5.7%, 3.6% and 3.0% respectively, 1.6, 7.2 and 9.0 percentage points lower than the 11th FYP period.

Third, constant and rapid growth of the production cost of agricultural products. Driven by the significantly rising cost of laborers, material input and land, the annual growth rate of the production cost per mu of rice, wheat and corn was 11.3%, 11.8% and 13.9% respectively, 2.0, 2.0 and 3.8 percentage points higher than the 11th FYP period.

Fourth, prominent inversion between domestic and international prices of agricultural products. Domestic market price (wholesale price or CIF) of major agricultural products has been generally higher than the CIF price after tax of imported foreign products. To be specific, price inversion for sugar and cotton started from October 2011, that of wheat and soybean started from 2012 and that of rice and corn started from 2013. After the reform of cotton target price in 2014, domestic price declined rapidly, the situation of price inversion was therefore rapidly eased.

Fifth, rapid growth of import of major agricultural products. Driven by domestic and foreign price difference during the 12th FYP period, the import of rice, wheat and corn increased from 569,000 tons, 1.258 million tons and 1.7525 million tons in 2011 to 3.377 million tons, 3.007 million tons and 4.73 million tons in 2015. Sugar import increased from 2.919 million tons in 2011 to 4.846 million tons in 2015. Soybean import increased from 52.634 million tons in 2011 to 81.741 million tons in 2015.

Sixth, growing pressure to maintain sustained and steady agricultural development. Given the tighter double constraints of agricultural resource conditions and ecological environment,the shrinking gap between the cost and market price of agricultural products, and the absence of consumption indication from the supply-demand balance of agricultural products, the major task for steady agricultural development is to give full play to the role of market mechanism, innovate for the approaches of agricultural management, advance supply-side structural reform in agriculture, so as to determine production with sales and guide production with consumption.

2. Market outlook of major agricultural products in China in 2016 and during the 13th FYP period.

The CPC Central Committee and the State Council attaches great importance to the development of agriculture and rural economy. the 5th Plenary Session of the 18th CPC Central Committee has adopted the Recommendations of the CPC Central Committee for the Formulation of the 13th FYP for National Economic and Social Development, which specified the need to advance agricultural modernization, build modern agricultural industrial system, production system and operation system, enhance the quality, efficiency and competitiveness of agriculture and embark on the path of agricultural modernization featuring efficient production, safe products, resource conservation and environment friendliness. Looking into the 13th FYP period and guided by the new concept of innovative, coordinated, green, open and shared development, the Chinese agriculture will accelerate the transformation of engines for development, optimize structure and change the model, so as to constantly improve the quality, efficiency and competitiveness of agriculture. Based on China's latest policy and plan, macroeconomic situation, climate change, the advancement of agricultural technology, international market and other factors, this report made predications on the following main features of China's agricultural market in 2016 and the 13th FYP period.

Basic balance between supply and demand for rice and wheat and absolute security for food grain. Thanks to the implementation of the food crop production strategy based on farmland management and technological application, China's food producing capacity has been further improved and could fully meet the target of basic self-sufficiency of cereals and absolute security of food grain. It is forecast that the rice cultivation area will remain stable with slight expansion, and the production and consumption will reach 208.99 million tons and 208.03 million tons in 2016; and the wheat cultivation area will remain stable with a slight decline, and the production and consumption will reach 130.10 million tons and 120.27 million tons respectively. During the 13th FYP period, the supply-side structural reform focusing on the optimization of product structure, quality improvement, cost saving and efficiency gains, will deliver substantial results; rice production will remain stable and consumption will continue to grow; it is forecast that the total production and consumption of rice in the five years will reach 1.038 billion tons and 1.034 billion tons; the cultivation area will remain stable with slight decline, and the relaxed supply-demand situation will become basically balanced; it is forecast that the total production and consumption of wheat within the five years will reach 659 million tons and 655 million tons respectively.

Substantial downward adjustment of corn cultivation area and effective release of stock pressure. With the adjustment of corn structure in the sickle-shaped major corn producing region, corn cultivation area will be substantially reduced in the future five years, which will effectively address the problem of periodic oversupply and significantly reduce corn stock. In 2016, after the smooth implementation of targets for reducing corn acreage, the area sown to corn in China is predicated to reduce by 3.1%. To be specific, the area reduction in provinces in the sickle-shaped region will exceed 15 million mu, and the cultivation area for the whole year will be 554 million mu (36.95 million hectares), marking the first decline of corn acreage in the recent decade; corn production is forecast to be 215.17 million tons, down by 4.2% over 2015. During the 13th FYP period, corn cultivation area is forecast to decline substantially by 1.8% annually and down to 34.41 million hectares by 2020; and the production will be reduced to 205.67 million tons; during the same period, industrial and feed consumption of corn will grow rapidly, and is forecast to grow at an annual rate of 3.0%; therefore, by the end of the 13th FYP period (2020), the total corn consumption will climb to 221.92 million tons, which will ease stock pressure and return the right of corn pricing to the market.

Recovery and growth of oilseed production and significantly slowed down soybean import. Affected by the policy adjustment of oilseed purchase, the production data of oilseeds in 2016 is adjusted downward compared with the forecast in 2015; both the cultivation area and production of peanut and soybean will grow and the cultivation area and production of oilseeds will shrink significantly. It is forecast that the soybean area will recover and grow to 103.20 million mu (6.88 million hectares) in 2016, and the production will reach 12.03 million tons, registering a year on year growth of 3.6%. During the 13th FYP period, due to technological advancement and the adjustment of cultivation structure, oilseed production will grow steadily, while the annual growth rate of soybean import will decline from 11.6% during the 12th FYP period to the 1.0% during the 13th FYP period. It is forecast that oilseed production will reach 49.70 million tons by the end of the 13th FYP period (2020); oilseed import will reach 91.93 million tons and that of soybean will reach 85.56 million tons.

Remarkably shrunk cotton demand and continuously tight sugar supply and demand situation. Affected by the declining relative efficiency and the rising production cost, the area and production of cotton in China both demonstrate downward trends. In 2016, the projected cotton area and production will reach 51.99 million mu (3.466 million hectares) and 5.157 million tons, down by 8.8% and 8.0% over 2015; the consumption will be 7.158 million tons, a year on year drop of 2.7%; the import will reach 1.001 million tons, a year on year decline of 31.1%. During the 13th FYP period, the pattern of cotton production in China will continue to be adjusted, with further concentration in cotton producing region in Xinjiang and further shrinkage in cotton producing region in the Yangtze River and Yellow River valleys; consumption will remain at a low level. It is predicated that by 2020, cotton consumption will decline to 7.079 million tons, down by 3.8% over 2015; import will be 1.121 million tons, down by 22.8% over 2015. Dampened by the continuous sluggish sugar price, sugar farmers' margin has been declining for years; it is therefore predicated that China's sugar crop cultivation area and sugar production will decline by 8.2% and 14.8% respectively in 2016. During the 13th FYP period, the cultivation of sugarcane will further concentrate in advantageous producing regions in Guangxi and Yunnan and sugar beet production will further concentrate in competitive producing regions in Xinjiang and Inner Mongolia. There is a trend for the further shrinkage of area of sugar crop cultivation, the constant increase of consumption and ever expansion of import. It is forecast that the total production, total demand and gap of sugar will be 48.93 million tons, 80.13 million tons and 31.20 million tons.

Steady growth of vegetables, fruits, eggs and fisheries production and sustained active international trade. Compared with the previous ten years, the growth of the output of vegetables, fruits, eggs and aquatic products will slow down significantly. And the production in 2016 is predicated to be 774 million tons, 275 million tons, 30.2220 million tons and 68.0541 million tons respectively, a year on year increase of 0.63%, 1.4%, 0.8% and 1.7%. During the 13th FYP period, the output will grow at an annual rate of 0.44%, 1.37%, 0.9% and 1.3% respectively and is predicated to reach 788 million tons, 292 million tons, 31.4266 million tons and 71.8009 million tons. In terms of trade, the export position of traditional competitive agricultural products will continue to be maintained. And it is predicated that by the end of the 13th FYP period (2020), the export of vegetables, fruits and aquatic products will reach 11.25 million tons, 5.6 million tons and 3.9525 million tons.

Meat and dairy consumption overtaking production and drastically increased import. Due to the impact of population growth, rising income and accelerated urbanization rate, the meat and dairy consumption of urban residents in China will maintain rapid growth. It is predicated that the total production, total consumption and import of pork, beef, mutton and poultry in 2016 will reach 84.60 million tons, 85.94 million tons and 2.01 million tons, a year and year increase of 0.07%, 0.2% and 6.9%. Given the impact of the exit of small-and medium-sized operators and the slowed down expansion of large-scale animal farm, it is forecast that dairy production will reach 38.79 million tons, a year on year decline of 0.3%, and the consumption and import will reach 51.82 million tons and 12.95 million tons, a year on year growth of 3.4% and 16.6% respectively. During the 13th FYP period, the total production, consumption and import of pork, beef, mutton and poultry will reach 438.56 million tons, 442.56 million tons and 10.28 million tons; and the total production, demand and import of dairy products will reach 202.93 million tons, 273.76 million tons and 71.51 million tons respectively.

3. Development trend of China's agricultural market in the future ten years

In the future ten years, China will continue advancing agricultural modernization in a steady manner; the quality and efficiency of agricultural development will be significantly improved; the interaction and integration with global agriculture will be remarkably strengthened; and the transformation and upgrading of the consumption pattern of agricultural products will be accelerated. The development trend of China's agricultural market in the future ten years will mainly include the following.

First, the producing region of agricultural products will be more concentrated; large-scale operation will enjoy accelerated development; and the feature of local production and nationwide supply will be more prominent. It is predicated that during the 13th FYP period, China's grain producing region will further concentrate towards the north part of China; grain output of major producing provinces will account for nearly 80% of the total national production by 2020. Cotton cultivation will be shifted towards inland cotton producing region in the northwest, particularly towards Xinjiang. Cotton production in Xinjiang may account for around 80% of the country's total by 2020. Pig farming will be shifted to major grain producing regions in an accelerated manner.Pork output in the central and northeast part of China is projected to account for 40% of the country's total and the proportion of the southwest will drop to below 20%. Six competitive vegetable producing regions will be further consolidated, namely winter and spring vegetables in the heat region in the southern and southwest part of China, winter and spring vegetables in the Yangtze River valley, summer and autumn vegetables on the loess plateau, summer and autumn vegetables in the Yunnan and Guizhou plateau, summer and autumn vegetables in the high-latitude region in the north and protected vegetable production in the Yellow River, Huai River and Hai River valley and the Pan Bohai sea. In addition, with government's intensified efforts to support large-scale operation, 50% of major agricultural products will be produced by new types of agricultural operators by 2025. With the concentration of production towards competitive regions and the development of large-scale operation, and given the further development of urbanization, the feature of local and specialized agricultural production and nationwide balanced supply will become more prominent, thus will put forward higher requirements on the distribution of agricultural products and will require more market guidance.

Second, agricultural consumption will maintain rigid growth, the consumption pattern will be upgraded in an accelerated manner and the requirements for diversified and brand products will be more prominent. Taking into comprehensive consideration the implementation of the two-child policy, the accelerated urbanization, poverty alleviation in rural areas and the rising income of residents, we predict that during the 13th FYP period, the total consumption of rice, wheat, edible oil, sugar, meat, dairy products and aquatic products will grow by 43 million tons, 16 million tons, 8.11 million tons, 9.55 million tons, 27.28 million tons, 110 million tons and 44 million tons respectively over the 12th FYP period. Meanwhile, the rising income level will drive the rapid upgrading of the consumption pattern. Urban and rural residents will require more diversified, high quality and brand agricultural products. Brand grain products will be more valued in consumption, therefore the demand for special-purpose varieties and their products will grow; nutrition, health and safety will be more valued for the consumption of animal, poultry and aquatic products, and the demand for processed products will grow significantly; the consumption of fruits and vegetables will increase and the consumption of certified products will increase; in terms of textile consumption, the demand for high quality cotton will grow significantly. Looking into 2020-2025, driven by population and income growth, China's consumption of agricultural products will demonstrate the features of growing quantity, upgraded structure and strong guiding role to agricultural production.

Third, there are growing structural changes in the cost of agricultural production and drivers for cost increase, domestic and international price of agricultural products are moving at a low level. During the 13th FYP period, the cost of agricultural production will rise steadily in China, and the cost structure will be changed tremendously. In addition to the continuous rigid increase of the cost of material inputs, laborers and land, the cost of IPM, the maintenance of modern farming facilities, waste treatment, the processing, packaging, sales and brand building of agricultural products will grow significantly. Meanwhile, in the future 5-10 years, global economy will remain in slow recovery; the international price of agricultural commodities will remain sluggish; the price chained reaction between international and domestic markets will be significantly enhanced, as a result, domestic price will generally move at a low level. To be specific, the price of rice and wheat is expected to remain basically stable; corn price may drop first and then recover given the pressure of re-modeling, restructuring and de-stocking; the linkage between the price of cotton, oil and sugar with the international market will be closer; the price of vegetable oil and cotton will fluctuate following the international price. Domestic and international sugar price is expected to recovery slowly; the price of aquatic products will rise in fluctuation and obvious seasonal fluctuation is possible; beef and mutton price will remain at a high level.

Fourth, integration and interaction between domestic and international agriculture will be strengthened, and agricultural import may witness both increase of varieties and sources. In the future ten years, China will pay more attention to the balanced use of domestic and foreign resources and markets, and the overall scale of agricultural trade will further expand. During the 13th FYP period, in particular, with the acceleration of a range of multilateral and bilateral free trade areas (FTA) between China and ASEAN, Singapore, New Zealand, Chili, ROK and Australia and the development of the Belt and Road Initiative, the resource-intensive import source countries of oilseeds, fruits, meats and dairy products will expand from the traditional Americas, Australia, Southeast Asian countries to Central Asia, Australia and European countries, and the landscape of double increases of varieties and sources will be shaped. It is predicated that by 2025, China's corn import, soybean import, sugar import and dairy product (raw milk equivalent) import will reach 2 million tons, 88.64 million tons, 8.49 million tons and 18.80 million tons respectively; the export of traditionally competitive agricultural products such as vegetables and fruits will continue to grow; and the export of vegetables and fruits will reach 12.42 million tons and 6.50 million tons, 21.9% and 53.7% over 2015. The export of aquatic products will decline first and then recover, yet the extent of fluctuation is limited, with basically stable total quantity. The annual import of aquatic products will be maintained at above 4 million tons and will continue leading the whole world.