The chairman and chief consultant of Shanghai JC Intelligence Co. Ltd. (JCI) said his organization anticipates that China will import some 1.7 million tons of corn this year, 5.8 million tons next year and as much as 15 million tons in 2014-2015.
Speaking through a translator, JCI’s Hanver Li told those at the U.S. Grains Council’s 50th Annual Board of Delegates Meeting that demand for corn in China is simply outstripping the country’s production trend. China’s economy continues to grow, he explained, which is driving an increase in demand for meat, milk and eggs because as incomes rise, food is one of the first items people look to buy.
In fact, JCI estimates that meat consumption per capita will grow from 59 kg in 2005 to 61.7 kg this year to 63.1 kg in 2015. Milk consumption will grow from 22.0 in 2005 to 30.1 and 33.4 in that same time frame, while aquatic products will grow from 39.2 to 44.1 and 48.9. Li said rural areas will drive meat demand, while urban centers will drive milk and aquatic products demand.
In looking at the economy, Li said China’s gross domestic product (GDP) growth rate now stands at 11 percent, although some individual provinces are seeing growth rates of 15-16 percent, as estimated by JCI. The country’s consumer price index is within a normal range, the amount of currency held by the public is strong and incomes in both urban and rural areas are rising. “There is a great future for the growth of agricultural products in China,” he said.
To answer the question about why China imported U.S. corn this year, Li explained there is simply a short supply in China right now due to production shortfalls driven by poor weather but demand has remained strong. He said prices have moved up and the amount of corn in storage has fallen – and JCI believes there is less corn on hand than the government’s official estimates.
This also explains why China’s imports of U.S. distiller’s dried grains with solubles (DDGS) have grown so quickly, he said. China is on pace to become the largest buyer of U.S. DDGS this year, buying some 1.5 million tons. JCI estimates imports of 1.5 million to 1.8 million tons.
Li said imports of U.S. corn and higher local prices for corn and wheat indicates that “we have gotten to the turning point” – the point where China will become a regular importer of corn.
In addition to economic growth, the population continues to expand, Li said, and even with normal weather, China’s ability to produce corn can’t keep up with that growth. “That’s why we’ve come to the conclusion that a new era of China importing corn is here,” he said.
Li did note that China will work to better control corn production. “Policy changes can only improve the production of corn,” he said, “and if the government invests a lot to improve the land” it could override shortfalls created by poor weather. He added, however, that this will take some time and that by then “my hair will all turn gray.”
Market Development, Other Programs Key to Growing Exports
The United States has been in an enviable position with its ability to post an agricultural trade surplus year after year, said Jim Miller, the U.S. Department of Agriculture’s Under Secretary for Farm and Foreign Agricultural Services.
Miller, at the U.S. Grains Council’s 50th Annual Board of Delegates Meeting, said that trend will continue in fiscal year 2010, when the agricultural trade surplus is estimated to be some $28 billion, the second largest in history.
“As we moved through the economic downturn, there were some impacts,” he said, “but the agriculture trade recovery is certainly well underway.”
In fact, he said, agricultural exports are expected to reach $104 billion this year, the second largest in history and below only the record $115 billion in 2008.
In an effort to increase exports across all industries, the Administration has launched the National Export Initiative with a goal to double exports over the next five years. “That is a very significant challenge,” he said. “It’s going to be a significant challenge for any sector in the economy, even in agriculture, despite its good performance lately.”
He said exports are key to growing the economy and aiding the economic recovery, because rising exports create jobs.
For agriculture, Miller said there are four areas where a renewed effort will pay dividends. Among those four areas are market development programs like those implemented by the U.S. Grains Council.
“We have a long history – you have a long history – of market development, and we’ve been relatively effective,” Miller said, adding that a budget request for increased market development funds was submitted to Congress.
He said USDA will be “extremely aggressive to make sure those funds are used in a way that allows us to maximize our efforts.”
Another item that will benefit agriculture is bilateral and multilateral trade talks. Miller said increasing trade opportunities will require a more aggressive effort within USDA, as well as working with colleagues in the Office of the United States Trade Representative. There can be accomplishments, he said, including in the Doha Round, finalizing the three existing free trade agreements that have yet to be implemented; the Trans-Pacific Partnership and bilateral issues that impede U.S. exports.
Ensuring the enforcement and compliance with existing trade agreements is also necessary, Miller said. “We will be redoubling that effort,” he said, “one issue and one country at a time.” He cited pork trade with Russia and access to markets for U.S. beef as examples. Yet he noted that agricultural trade is also dependent on the ability to market products that come from new technology and that technology itself.
“Efforts like biotechnology are at the forefront of this agenda,” Miller said.
Finally, Miller cited the global hunger and food security initiative as a way to boost agriculture exports. This effort stretches across governmental agencies and involves finding new ways to deliver foreign assistance programs. The goal, he said, is to think long term – to help educate people, build infrastructure and promote free and open markets. Over time, more people will have a better standard of living and will be more receptive to U.S. agricultural products.
“Poor people don’t make very good commercial customers,” he said. “We must create real growth and income in people oversees.”
From U.S.Grain Newsletter