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2022

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07

Rabobank: China Food & Agribusiness Q3 2022 Outlook

Source:

Rabobank

While Shanghai’s Covid situation is becoming less dire, there have been more partial lock downs in numerous regions in China.

While Shanghai’s Covid situation is becoming less dire, there have been more partial lockdowns in numerous regions in China. Economic uncertainties further weakened consumer sentiment, resulting in cautious spending and trading down. While food consumption is relatively resilient, rising input costs continue to pressure margins. We expect most food and beverage companies in downstream sectors will see margins decline in 2022, but the degree of impact will vary, with some sectors more resilient compared to non-discretionary segments. Foodservice is bearing the brunt of ongoing lockdowns.

 

The report’s main highlights include:

- Animal Protein: Pork prices have increased tremendously, driven by tight supplies and improved demand. Strong prices will continue in 2H 2022, supporting a rebound in imports. Poultry prices have rebounded since April, but slaughtering continues making losses. Slowing production and the decline in breeder imports will lead to tight supplies in 2H 2022.

 

- Consumer Foods: In June, the foodservice sector declined by 4%, revealing a slow recovery trend compared with May. However, the sector faces uncertainty due to constant Covid controls across the country. In June 2022, food-only retail sales rose by 9% YOY. Beverage retail sales showed a sluggish growth trend, up by only 1.9% YOY.