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China Part 2: Growth of Chinese Imports

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China Part 1: Addendum

  • The Chinese have reported that they produced more than 85 million tons of meat in 2013, well on their way towards recent USDA’s projections. In addition, the Chinese say they produced more than 61 million tons of fish, mostly from their growing aquaculture industry. These huge numbers are needed to feed China’s population estimated at nearly 1.4 billion people - 19% of the world’s population.
  • Obtaining accurate data on China has always been a challenge for USDA analysts. China’s livestock sector has increasingly been under pressure from rising costs, disease, environmental regulations, health concerns and resource constraints. Recent emphasis on safety and quality is now called the “new normal”. A different Chinese agency than the one that had been reporting hog numbers said that the total Chinese hog population in November is down 7.4% from a year ago, but this decline cannot be confirmed by their soybean meal usage, according to Fred Gale, the senior USDA economist who specializes on China. If we are to believe the dodgy numbers from the Chinese, China’s sow herd has been contracting for more than a year. Bottom line: If China’s pork industry has contracted, it could be a factor in slowing Chinese grain imports.
 
China Part 2: Growth of Chinese Imports
 
China’s pork industry has led to the explosion of China’s imports of soybeans. As China’s largest agricultural import item, Chinese soybean imports are expected to reach over 70% of global soybean imports by 2023-2024 as China relies on imported soybeans for most of its soybean meal supply.

China’s imports of soybeans have grown from only $75 million in 1995 to $38 billion in 2013. Imported soybeans provide soybean meal used for animal feed that improved animal diets and increased productivity. Importing soybeans allowed Chinese farmers to specialize in producing corn, which produces higher yields and net returns than soybeans. As a result, corn became China’s largest single crop in 2013. The U.S. accounts for over 40% of China’s soybean imports in most yea rs.
 
 
As China moves into its next stage of economic development that features continued urbanization and more attention to improving living standards for the entire population, livestock production has increasingly become a specialized farm enterprise that substitutes commercial feed for wastes and forages gathered from the countryside. Until 2007, China was a net exporter of grains. Now, China has been a consistent importer of 3 to 5 million tons of corn annually since 2009.

In 2014, Chinese officials announced a new strategic approach to food security which tacitly acknowledges a need for imported feed grains. The strategy still stresses the importance of self-sufficiency, but it allows for “appropriate imports” and focuses concern on food grains - rice and wheat - while placing a lower priority on corn self-sufficiency.

As China’s livestock farms transition to a more concentrated mode of operations that use commercial feeds more intensively, USDA expects China’s demand for imported grains to increase, much of it from the United States. During 2013, imports of cereal grains rose to 18 million tons. That total includes 3 million tons of U.S. corn and 4 million tons of DDGS (distillers dried grains with solubles), a co-product of U.S. corn ethanol production that Chinese livestock producers use for feed. The U.S. also supplied 70% of China’s wheat imports. During 2013, China became a major importer of sorghum from the United States and Australia for the first time.

Huge corn reserves may limit corn imports

Policy adjustments in China make it difficult to forecast the country’s demand for corn imports. China’s price supports contributed to the surge of grain and oilseed imports during 2012-13 by lifting domestic corn prices 2 or 3 times higher than U.S. corn prices. Record corn harvests have led to mammoth state reserves that account for more than half of global stocks. The Chinese government supported prices by storing more than 100 million tons of corn - equivalent to half their annual domestic consumption. These overwhelming domestic supplies could slow China’s demand for imported corn for several years. The recent build-up of large corn inventories was not anticipated in USDA’s baseline corn import projections that had China becoming the largest global corn importer in the next 5 years. Huge domestic inventories could slow China’s future corn imports, similar to what happened in the late 1990s.

Leading to Larger Meat Imports

While USDA projects robust increases in China’s meat production, meat imports are also projected to rise. Pork imports are expected to rise from 750,000 tons to 1.2 million tons. The United States, Canada, and European Union are the main suppliers of pork and breeding stock to China. China’s meat imports could rise even further if production cannot sustain its current pace of growth, shifting from feed ingredient imports to meat imports, a pattern already being followed by some of its East Asian neighbors.

While China will continue to produce nearly all of its own meat, imports of beef have grown sharply since 2010 and are expected to rise to over 750,000 tons by 2023-2024. Despite this increase, imports will account for only 3% of China’s meat consumption by the end of the decade. China’s beef imports come primarily from Oceania and Latin America because China’s market has been closed to U.S. beef for the past 10 years due to BSE (bovine spongiform encephalopathy).
 
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