What China Wants

April 23, 2016 02:19 AM

Chinese consumers buy more than half of U.S. soybean exports and by 2040, they could consume nearly twice as much meat and dairy products. But the food industry is changing fast. Consumer tastes are evolving. Will what’s worked in the past help U.S. farmers seize opportunities in the future?

Tom Dorr recently discussed with Farm Journal the challenges of maintaining U.S. ag exports’ huge growth in the world’s second-largest economy. The following is a condensed version of Dorr’s comments.

China will demand value-added ag products, not simply commodities.

The market that’s evolving in China is going to be an intensely value-added market that will require track-and-trace and other technologies we’re not anywhere close to at this point. We are not going to sell them, as we think, commodity pork, commodity beef, milk powder products, etc., so we can shoehorn their market needs into our market structure—that isn’t going to happen. They will [form partnerships] with [the likes of food retail giants] CP Foods and Costco. These evolving and major food industry groups will develop highly sophisticated technologies that require precise knowledge of what was applied to a crop at what time during the growing season, how it was handled and trucked, and what went into the processing before it reached the consumer. Now, China can leap frog all the processes we presently have in place that were driven by our commodity approach. If we don’t recognize China and all other emerging countries are going to go that route, we will become residual suppliers of commodity products that might or might not be track-and-trace.

U.S. farmer groups (such as associations) take the wrong approach in building the China market.

Producers who come [to China] and watch smallholder farmers, who largely produce food by hand, make vast assumptions about their lack of understanding or appreciation for technology, biotech or otherwise. As a result, when we get together at a policy level, the U.S. tends to lecture the Chinese about the need for synchronized biotech approvals and a whole host of other issues we present as the appropriate way they can maintain food security (see related story on page 50). We would be better served making a serious effort to first understand the challenges the Chinese need assistance addressing.

U.S. farmers should prepare for a different market.

Producers can aggregate their data into a larger data-management structure, then engage the right people to find uses for [the data] in a way that adds value. You can then impose value on the crop and the product and mark it up. For example, technically, it is already possible to identify exactly what kernel of corn was planted where in the field, how much rainfall it received and the amount of nutrients and pesticides applied. You can define the exact time it was harvested, what load it went to and what bin it was delivered to. Now, when you can begin to track and trace that, you have added significant value. For example, certain traits might increase the crop’s value if it goes to an ethanol plant because of a unique property that enhances the digestibility of the enzymes. 

The U.S. ag industry should seize value-added opportunities. 

The global food market, excluding Japan, is predicted to expand from $3.6 trillion in 2009 to $7.2 trillion in 2020. Let’s stop and think about this: If you move 2 billion or 3 billion people into middle class [like China has] and begin to add $1,000 per capita to food expenditures, that’s an additional $2 trillion or $3 trillion and, of that amount, 15% goes back to the international farm gate. That means there is going to be several trillion dollars deployed into development of new technologies, new production, new track-and-trace [capabilities] and all kinds of value-added components. As of right now, the U.S. ag industry is not setting itself up to participate in these value-added opportunities. 

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