china – market briefing

U.S. WHEAT

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CHINA –

MARKET BRIEFING

U.S. Wheat AssociatesCHINA

FEBRUARY 2008

China – Population: 1.3 billion

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,0008,5009,0009,500

GDP

China Economy: Fastest Growing Major Economy

(2007 growth 11.5% - 11.9%)

(Billion US$)

< 2005 – 2006 actual growth 10% - 10.9% >

Source: China National Statistics BureauExchange rate @7.6 (2007), growth rate 2008-2010 @8.5%, 2011-2020 @7%

High Per Capita GDP Growth

(Unit: US$)

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,000

Per Capita GDP

Source: China National Statistics BureauExchange rate @7.6 (2007), growth rate 2008-2010 @8.5%, 2011-2020 @7%

China – Wheat area: PRC 23.5 MHa / USA 23.4 MHa

•Dalian

•Xiamen

•Shenzhen

•Zhanjiang

•Lianyungang

•Huangpu

•Fangcheng

•Qinhaungdao

•Xingang

•Nantong•Zhangjiagang •Shangh

ai•Ningbo

China - 15 MAJOR PORTS

•Yantiai

•Qingdao

China Wheat Situation

106

0

39

101

0

20

40

60

80

100

120

140

79/80 83/84 87/88 91/92 95/96 99/00 03/04 07/08

MM

T

Production Imports Ending Stocks Utilization

11491 83

114 112

71

45

4581

92

39

39

0

20

40

60

80

100

120

140

160

180

200

220

87/88 89/90 91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08

MM

T X

X

rest of world China

China accounted for 49% of world stocks in 1999/2000, down to 29%

Chinese vs. Rest of the World Ending Stocks

China’s Soybean Supply / Demand

15

34

48

30

10

20

30

40

50

60

77/78 82/83 87/88 92/93 97/98 02/03 07/08

MM

T

Production Imports Ending Stocks Utilization

China’s Rice Supply / Demand

127

1128

33

0

20

40

60

80

100

120

140

160

77/78 82/83 87/88 92/93 97/98 02/03 07/08

MM

T

Production Imports Ending Stocks Utilization

China’s Corn Supply / Demand

143

148

26

20

20

40

60

80

100

120

140

160

77/78 82/83 87/88 92/93 97/98 02/03 07/08

MM

T

Production Ending Stocks Exports Utilization

China –Wheat Area and Production

0

20

40

60

80

100

120

140

80/8

181

/8282

/8383

/8484

/8585

/8686

/8787

/8888

/8989

/9090

/9191

/9292

/9393

/9494

/9595

/9696

/9797

/9898

/9999

/0000

/0101

/0202

/0303

/0404

/0505

/0606

/0707

/08

MM

T &

Mill

ion

He

cta

res

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

MT

/Ha

Area Harvested (Millions HA) Production (MMT) Yield/Ha

23.0

107

4.6

China Wheat Production - Major Producer Provinces

(Unit: MMT)

Source: China National Grain & Oil Information Center (CNGOIC)* Estimate

0

5

10

15

20

25

30

35

01/02 02/03 03/04 04/05 05/06 *06/07 *07/08

Henan

Shandong

Hebei

Anhui

Jiangsu

China Wheat Yield - By Major Province

(Unit: MT/Ha)

Source: China National Grain & Oil Information Center (CNGOIC)* Estimate

0

1

2

3

4

5

6

7

01/02 02/03 03/04 04/05 05/06 *06/07 *07/08

Henan

Shandong

Hebei

Anhui

Jiangsu

Average

China Daily Grain Market Price :

0

50

100

150

200

250

300

Ex-Warehouse Hebei Ex-Warehouse Shandong Ex-Warehouse Henan Ex-Rail Guangdong

Source: China National Grain & Oils Information Center Exchange rate @8.0 since Sep 2004, @7.86 since Nov 2006, @7.55 since Jul 2007@7.5 since Aug 2007, @7.15 since Jan 2008

U.S. FOB PNW Prices

160

260

360

460

560

660

760

Feb-08Dec-07Oct-07Aug-07Jun-07Apr-07Mar-07

$/M

etri

c T

on

HRS 14% HRW 11.5% SW

100

150

200

250

300

350

400

450

500

550

600

Feb-08Oct-07Jun-07Mar-07Nov-06Jul-06Mar-06Dec-05Aug-05

$/M

etr

ic T

on

SW SRW

SRW and Soft White Prices

Ocean Freight Rates for Grains

20

40

60

80

100

120

140

160

Feb-08Dec-07Oct-07Aug-07Jun-07Apr-07Mar-07Jan-07

$/M

etri

c To

n

XX

PNW to Japan US Gulf to Middle East (Egypt)

St. Lawrence to Europe/Rotterdam Great Lakes to Italy

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China Wheat Imports - Calendar Year – by Country

(Unit: MMT)

Source: China Customs Statistics

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2003 2004 2005 2006 2007

Canada

U.S.A

Australia

French

Others

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China Flour Imports - Calendar Year – by Country

(Unit: TMT)

Source: China Customs Statistics

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2003 2004 2005 2006 2007

JapanNepalKorea (S)CanadaU.S.AAustraliaOthers

China’s US ImportsPurchases and actual imports: Containerized and bulk vessel shipments

498

915

2003/04 2005/06 2007/08

1,000's of metric tons

SW/WW

NS/DNS

SRW

HRW

*(July – June)

HRW – 0.5SW/WW-5.8NS/DNS-3.3SRW – 57.3

SW/WW-178NS/DNS-188SRW – 66

376152

HRW – 0.3SW/WW-10.5NS/DNS-0.7SRW – 0

516 725

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China Wheat Exports - Calendar Year – by Country

(Unit: MMT)

Source: China Customs Statistics

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2003 2004 2005 2006 2007

Indonesia

Malaysia

Philippines

Korea (S)

Vietnam

Others

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China Wheat Exports - *Crop Year – by Country

(Unit: MMT)

Source: China Customs Statistics*Crop Year from June to next May

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

03/04 04/05 05/06 06/07 07/08(0706-0712)

Indonesia

Malaysia

Philippines

Korea (S)

Vietnam

Others

U.S. WHEAT

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China Flour Exports - Calendar Year – by Country

(Unit: 10 TMT)

Source: China Customs Statistics

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2003 2004 2005 2006 2007

Korea (N)Hong KongIndonesiaPhilippinesKorea (S)ThailandOthers

U.S. WHEAT

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China Flour Exports - *Marketing Year – by Country

(Unit: 10 TMT)

Source: China Customs Statistics*Marketing Year from July to next June

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

03/04 04/05 05/06 06/07 07/08(0707-0712)

Korea (N)Hong KongIndonesiaPhilippinesKorea (S)ThailandVietnamOthers

Noodle/Dumpling49%

Biscuit6%

Steam Bread40%

Western Bread/cake

5%

Noodle/Dumpling Steam Bread

Western Bread/cake Biscuit

China’s flour consumption estimates –

70 MMT

Market Quality Segments

High

Medium

Low

Medium

Low

Market

Pressure

CurrentCurrent FutureFuture

High

QSR Expansion (Quick Service Retail)

Western-Style Fast Food

Source: China Food Industry Association and internet

Quick Service Retail Chains

(QSR)

# of outlets

May 2004

# of outlets

January 2005# of outlets June 2007

Growth %

07 vs 05

KFC 1,000 1,400 1,800+ 28.5%

McDonald’s 560 663 815 14.6%

Pizza Hut 130 150 200+ 33.3%

Dico’s 300 400 54 - 640.7%

HRW & HWW Use – China( HWW - 12.5 or higher protein )

•Western Pan Bread (only pan loaf tested in OVA)

•Sweet Breads

•European Hearth Breads

•Dumpling (Jiao Zi) Wrappers

•Premium Grade Chilled and Fresh Noodles

Policies Affecting Wheat•Domestic & int’l price differential

•TRQ•Value added tax - VAT

•Milling wheat and flour exports•VAT, TRQ

•Flour exports to other Asian markets

•Animal & plant quarantine rules•Dockage and non-wheat seeds•TCK and KB fungus •Insects

•MRL’s for pesticides

•Food labeling requirements

US Wheat Activities•Trade servicing and information

•Weekly price report•Crop and harvest progress reports•Supply & demand reports•Industry & Government relations

•Publications•Chinese or dual language

•Sino – America Baking School•Instructor training (USA, Europe, Asia)

•Baking technical servicing•Milling technical servicing•Wheat procurement training•Overseas Varietal Analysis•Asian products collaborative

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