How Will End of China's One-Child Policy Affect Ag?

November 12, 2015 12:00 PM

Given that China is the biggest customer in the world for American soybeans, the announcement that China would lift its three-decade-old one child policy caught the attention of many in ag. After all, the end of this rule should lead to population growth in China and more demand for U.S. ag exports, right?

Maybe, maybe not.

“It is really unclear what the impact of the one-child policy has been in terms of fertility,” said Joseph W. Glauber, now a senior research fellow at the International Food Policy Research Institute in Washington and the former chief economist at USDA. “If you look at fertility rates in Thailand and China, for example, they had very similar fertility rates in the 1970s and today. This might have happened in spite of the one-child policy.”

Market analysts sounded a similarly cautious note. “I think it’s positive in the long term, but obviously it takes a few years to get that going, and there’s some skepticism as to whether some of these single children will want to have two children of their own,” said Alan Brugler of Brugler Marketing and Management in Omaha, Neb., said on U.S. Farm Report. “…It’s a long-term positive for demand, because it implies so much population growth, but in the short run, (it will have) very little impact on the market.”

Listen to Brugler's comments here:

But projecting population growth can be a tricky thing to do. Such models are based on numerous data points, from fertility rates to income growth, according to Glauber, so a change—particularly one that is likely to be a gradual one—will take time to appear. “It’s like turning around an aircraft carrier,” he said.

What does he think is more important that the number of babies born in China? Income growth, which hit an average of 11% in China’s biggest cities between 1998 and 2012. “As you move out of poverty, you change your diets,” explained Glauber, who said such Chinese consumer choices are already trickling down to U.S. ag exports.

“We are seeing increased feed grain imports,” he said. “Their diets are changing, and the way China is producing their meat, dairy, and poultry is changing. They are moving to more compound feed (for their livestock) versus feeding them table scraps.”

Such trends can seen in overall growth of U.S. exports to China of soybeans and corn, but also sorghum, barley and DDGs. 

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