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China to Remain Strong Market for U.S. Commodities

February 3, 2012
By: Ed Clark, Top Producer Business and Issues Editor

 

Much talk in corn export circles in recent years has centered on China becoming an importer of U.S. corn, obviously an exciting development. "The real story, however, is not imports, but China’s lack of exports," says Chip Flory, editor and publisher of Pro Farmer.
 
As late as 2002, China was a significant exporter of corn, a major supplier to nations in Southeast Asia, Flory said at the Top Producer Seminar in Chicago. The combination of China shifting from being a corn exporter to importer adds up to a 750 million to 800 million metric ton shift in global corn supplies.
 
China’s goal is to be 95% self-sufficient in corn, wheat and rice, but let the world market take care of its soybean needs. "It takes one-third of U.S. soybean acres for exports to China," Flory says. Exports of U.S. soybeans to China will continue to increase, he believes, but not at the same scorching rate of the past decade.
 
Overall, Flory is optimistic on sales of U.S. commodities, including dairy, meat, grains and oilseeds, as China’s economy grows. Underscoring his optimism is the fact that China has 20% of the world’s population, but just 7% of the arable land. Moreover, its consumption of meat is increasing dramatically, and he expects growth to continue as China’s middle class continues to increase. From 2000 to 2010, real GDP grew by 171%, with crop consumption up 25%.
   
China’s economy is facing a downturn in 2012, however, with Flory expecting it to grow by 8.5% approximately instead of the double-digit growth earlier this decade. Reasons why include the slowdown in Europe’s economy due to severe economic problems and rising unemployment, and slow growth in the U.S.
 
"The Chinese economy is built on stuff they make," Flory adds. Thus, when the economic engines of its customers slow down, China’s economy feels the affect. That said, it’s possible that the Chinese economy is growing faster than the rest of the world believes underscored by government actions on monetary policy, Flory notes. "It’s a strong country, but will it have its ups and downs, absolutely."
 
One way to get an accurate read on China’s economy, tough to do since Chinese government data is suspect, is to watch meat consumption. "If they have a jump in meat consumption, they have a pretty hot economy," Flory says. From 2000 to 2010, per capita income increased by 156% in China, while meat consumption rose by 21%. Dairy consumption over that period grew by an incredible 212%, driven largely by increases in cheese use. China’s consumption of wheat and rice is basically flat, however. "The Chinese are eating less rice and noodles, more meat."
   
China will be slow to adopt state-of-the-art agricultural practices out of concern that doing so could increase unemployment and create civil unrest, Flory says. "China’s population is 1.34 billion and 900 million people are tied to agriculture in some way. If they mechanize too quickly, more people would be forced into urban areas and the Tiananmen Square (massacre in 1989) would look pretty tame." China will stick with its policy to keep its people happy, he predicts. "Keep them busy, keep them working."

 

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See all of the news, photos, videos and more from the 2012 Top Producer Seminar in Chicago, Ill.

 


 

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