Analysis on Consumption Structure of China’s Sweet Potato Products and Trading of Domestic and Foreign Markets Part 1

Publish time: 25th August, 2016      Source: CCM
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  1 Changes on Consumption Structure of Domestic Sweet Potato Products


  1.1 Obvious Increase on the Postharvest Processing 


  Currently, 70%-80% of China's sweet potatoes have been processed into starch products, including starch, starch vermicelli, whole starch flour, and dried sweet potatoes. The new mode for developing the industrialization of sweet potato industry is "rural cooperative + base + enterprises'. The specialized households are able to process 500,000 to 1 million kilograms sweet potatoes within about 30 days, among which the net profits could amount to RMB50,000 to 100,000.


  In recent years, China has strengthened the research and promotion on the processing machinery and techniques of potato starch, which, as a result, propelled the development of starch processing industry and the economy of potato area. At present, the annual consumption of nationwide starch processing is about 35 million tonnes.


  1.2 Urban Residents rather than those in Rural Areas turned to Major Consumers 


  In the era when the sweet potato was the staple food, 80% sweet potatoes were consumed by farmers, while currently, the fresh sweet potatoes, with the consumption increased year by year, turned to be a healthy accessary food that popularized among urban residents.


  The consumption of fresh sweet potatoes in South China is higher than that in North China, and a phenomenon of South-to-North sweet potato transfer occurred during the anti-season. For the sweet potatoes cultivated by farmer, 60.04% directly entered into the market, 33.83%, for home processing; 3.5%, reserved as seeds; while the self-consumption, fodder, and rotten ones only accounted for about 1% respectively.


  From the nationwide, consumption of fresh sweet potato accounted for about 12%, with the consideration that the rural residents consuming the fresh sweet potatoes have hugely increased, the actual consumption proportion of fresh sweet potato may has already amounted to 30%, with the total consumption of 20 million tonnes.


  In 2013, the per capita consumption of potato products in China was 2.3 kilograms. China has not only a large demand on the quantity of sweet potatoes, but also on its varieties. With the emerging of aged society, more and more people that focused on the healthy-eating-habit would turn into the target customers of fresh potatoes.


  1.3 Proportion of Fodder has Reduced


  In the past, 30%-50% of sweet potatoes were used as fodder for pig breeding. In recent years, the figure has obviously reduced. The primary cause lied in structural adjustment of breeding industry in rural areas, among which the individual breeding was replaced by large-scale breeding. Although the potato residues of sweet potato starch processing have still been used as fodder, the corn was applied as main feed. Currently, the fodder consumption of fresh sweet potato was about 7 million tonnes.


  2 Trading Channels for Domestic Sweet Potato Market


  2.1 Farmers --- Consumers


  Farmers cultivate the sweet potatoes and then directly sell those products to consumers. This is a usual deal that happened in local farmer's market, accounting for about 30%.


  2.2 Farmers --- Processing of Family Workshop --- (Small Retailer) --- Consumers


  Farmers process the sweet potatoes that cultivate by themselves through the family workshop and then sell them to small retailers or the farmer's market. This is very common among the main producing areas, especially the concentration areas of processing, of sweet potatoes, accounting for about 20%.


  2.3 Farmers --- Processing Enterprises --- Retailers --- Consumers


  The retailers refer to terminal supermarkets, country markets, and individual retailers. The farmers sell the sweet potatoes to processing enterprises that process the products and then sell them to customers through retailers. This order-oriented sale is the main form for sweet potato's circulation at the moment, accounting for about 35%.


  2.4 Farmers --- Wholesalers --- Processing Enterprises --- Retailers --- Consumers


  In this form, some enterprises help to organize the raw materials for large leading enterprises, as the demand from the large enterprises is too huge to be satisfied by its own base, which accounts for about 15%. For a mature market, driving the industry by leading enterprises would be the tendency for further development.




  3 Transaction Price of Domestic Fresh Sweet Potato and Its Components


  According to the investigation and study materials of national sweet potato industry technology structure, the annual average price of sweet potato is RMB1.93/kg, higher than that of 2012 (RMB1.8/kg). The peak of the price was RMB2.54/kg on February, and the bottom occurred on October, which was RMB1.49/kg. Analyzing from the structure of sales volume, the sales peak of sweet potatoes, on nationwide, occurs on November and December, among which the price in November is the highest, taking up 30.4% of a year.


  According to United Nations Food and Agricultural Organization (UNFAO), in 2009, China's sweet potato price was USD263.5/t, which was 7.7 times compared with that of 1991 (USD34.2/t). The price slightly decreased after 2010, for example, in 2012, it was USD 311.6/t.


  3.1 Domestic Price of Sweet Potato Starch and Its Influence Factors


  Generally, with the supply exceeding demand, the domestic demand is weakening in recent years. Many of the low-end and small-size starch processing enterprises were shut down due to the market constraint and the intensified environmental inspections. The productions of wet sweet potato starch were mainly in October and December, with the production cycle of about 40 days.


  The low-priced cassava has an obvious substitution effect on sweet potato starch, and it is usually applied by some low-end starch vermicelli processing enterprises to replace the relatively high-priced sweet potato starch.


  3.2 Influencing Factors of Domestic Sweet Potato Starch Market in 2014


  3.2.1 Cost Factor


  The starch output ratio of fresh sweet potato, which mainly related to the starch ratio of the potato variety, is 1:5.5 to 1:6. The market price of freshly produced sweet potato has adjusted around September and October each year, and the purchase price of raw materials, with the rise and fall around RMB0.2/kg, and as a result the processing price would fluctuate in a range of RMB1100-1200/t. The cost of raw material of sweet potato starch is about RMB500/t, while the market price of dried processing starch is about RMB6000/t, from which we can easily get to know that the net profit is about RMB1000/t. The price of the refined processing starch is about RMB6,500-7,000/t, with the net profit of RMB1,500-2,000/t.


  3.2.2 Supply and Demand Factor


  The supply season of starch market is around mid-September to early December, while the demand from the downstream enterprises lie on December to February of the next year. Generally, the market is very active in the purchasing season, during which the producers tend to push the price upward; while during later period since the starch processing enterprises start operation, the price would gradually decline with the increasing inventory pressure and fierce competition among the producers.


  3.2.3 Capital Factor


  The enterprise has a strong tendency in increasing the quotation. But, there are various factors that may cause a falling price in starch market, including the loan repaying, payment of wages, and the expenditures on water and electricity in December, inventory pressure during May to June, and capital pressure on the raw material purchasing during the production season of August and September.


  3.2.4 Substitution Factor


  Sweet potato starch is mainly used as the raw material for processing starch vermicelli. The products of mid-and-low-end applied cassava and corn starch to replace the sweet potato starch, while the high-end products are influenced by the price of potato starch.


  3.2.5 Environmental Protection Factor


  In recent years, the environmental protection administration has compulsively shut those enterprises that caused environmental pollution during the manufacturing process down, which, with no doubt, would impose restrictions on the low-end sweet potato starch processing industry.


  3.3 Major Competing factors


  Corn starch, with low price and 23.5 million tonnes annual output in 2013, took the dominant position in the starch industry in China. In the low-end vermicelli processing, there's an obvious tendency that the corn starch would replace the low-end sweet potato starch, and therefore the price fluctuation of corn starch would generate a great impact on the market demand on sweet potato starch.


  There's a long-term and obvious substitution relationship between cassava starch and sweet potato starch. Sweet potato starch embraced its peak production season during the mid of October to the end of November. When a large amount of freshly produced sweet potato starch was pouring into the market, the price of cassava starch was reducing; as a result, the manufacturers may suffer a large-scale overstock. The weak and subdued atmosphere of the sweet potato starch market was further strengthened by the downstream starch vermicelli manufacturers due to the substitution of cassava starch.


  The domestic potato starch, which has had a great influence in the high-end market of sweet potato starch industry, was mainly applied in the high-end starch vermicelli industry. Among the areas of Shandong, Jiangsu, Hebei, Henan, Anhui, and Sichuan, sweet potato starch and potato starch were in a substitution relationship in vermicelli processing, and the manufacturers preferred the low-priced one. The average manufacturer's price of potato starch was about RMB6,500/t during January to November of 2014.


  *The article is edited and translated by CCM. The original one comes from Agricultural Outlook.





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