Dermot Hayes



The rapid growth rate in per capita disposable income in China, coupled with a continued migration of hundreds of millions of new consumers to urban areas, has created challenges for the Chinese crop and livestock sectors. Faced with an increase in demand for animal protein, a scarcity of land, and a reduction in the agricultural labor force, China has responded by importing almost all of the soybeans needed to feed its domestic livestock industries. More recently, China has also become a reliable importer of corn and distillers dry grains. The situation is unsustainable for the Chinese government, the country’s agricultural sector, and especially Chinese consumers who are demanding more and competitively priced animal protein in their diet. Indeed, as China’s animal protein requirements continue to rise, the country will have to rely more heavily on global markets to assure supplies, not just import feed. A logical solution to the livestock issue is to import more meat products. Yet the Chinese government has, to date, opposed this move because it does not wish to become reliant on other countries. The government equates “food security” with “self-sufficiency” and fears that the enormous imports that might ensue would be responsible for increasing world prices for key animal products. Savvy investors are in a position to capitalize on the Chinese government’s inevitable recognition of the need for policy change. This report identifies and describes three business opportunities that could emerge as this situation unfolds: long-term production contracts, animal parts arbitrage, and labor intensive exports from China.