China Still Seen Becoming Grain Importer

Despite improved crop production this year due to favorable weather, China is expected to become a net importer of grains over the long term due to limited land resources and rising domestic demand, experts say.

They also see China’s soybean imports continuing to rise steadily despite Chinese crushers’ current difficulties.

Dow Jones News Service reported Friday that in a speech that was to be delivered over the weekend, Ke Bingsheng, director of the Rural Economy Research Center under China’s Ministry of Agriculture, said China may experience short-term surpluses in domestic grains production, but in the longer term, supply tightness will be a major issue.

According to Dow Jones, Ke didn't specify when China will turn a net importer of grains. He said while the country's rice exports may continue, though at a declining rate, wheat imports will rise in the coming years. However, he said China's grain imports may not rise substantially, as that would have a direct impact on global grain prices, which in turn will limit imports.

"One percent of grain consumption in China equals 2 percent of global grain trade," Ke said in the speech prepared for the 2004 Summer China Grain, Oils and Feedstuff Market Conference. "Grain prices will soar if imports sharply increase, and in turn, higher prices will curb imports."

China's 2004 grain demand has been estimated at 490 million metric tons, while production is expected to reach 455 million tons in the best-case scenario, according to a late-Juen report from the official Xinhua News Agency, which cited a senior government official.

A senior USDA official told Reuters News Service on Saturday that China was likely to become a net importer of corn soon.

"They are about to become net importers...I don't know exactly when the turning point is, but it is getting awfully close," Gerald Bange, chief economist at the USDA's World Agricultural Outlook Board, told Reuters.

"If you look at the (export) numbers, they've come down from 15 million to eight million to four million...One would have to conclude not too far into the future that they will be net importers," he said on the sidelines of the conference in Beijing.

Asked if China might continue exporting from the producing north, while allowing imports into the consuming south due to difficulties in internal transport, he told Reuters: "No, I think they will discontinue exporting in the near future."

In a speech prepared for delivery at the conference, Bange also expressed doubts on whether Chinese farmers might increase grain output despite Beijing's support. There was also the continuing problem of water scarcity, he said.

"Unlike a decade ago, China's farmers may now be more motivated by the profits from cash crops which they currently enjoy and less responsive to government subsidies unless made very attractive," the economist said.

Chinese grain officials told Reuters on Saturday China is likely to increase its corn export quotas for the second half to help the northeastern producing provinces cut stocks amid prospects for a bumper 2004 crop.

But Reuters reported that many officials expressed doubts on whether China could sell corn, due to its high prices, though some said China might reduce its prices later in the year.

"Chinese corn is not competitive," Wang Xiaohui, an analyst at the State Grains and Edible Oil Information Centre, told the grain conference, adding it was quoted at $140 per tone, FOB.

Referring to oilseeds, Bange said China, already the world's top soy importer, would see increases in annual import demand to more than 40 million metric tons per year within 10 years, compared with around 20 million at present.

"The significant investment in oilseed crushing facilities China has made in recent years will push global trade toward oilseeds, limiting expansion of trade in oils and meals," he said.

Bange expects much of that increased Chinese demand to be met by Brazil, which he said would add a projected 27 million tons to their soybean exports within 10 years.

Wang said Chinese 2004 crop was likely to top 120 million tons, up from 116 million last year as recent rains had put an end to droughts in northeastern growing areas. USDA currently estimates China’s crop at 115 million tons.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.