Iowa Public Television

 

U.S. Farmers Hope to Soon Sell More Corn to China

posted on August 6, 2010


DES MOINES, Iowa (AP) -- China could be about to increase its corn imports, offering American farmers a chance for greater profits but making it likely U.S. meat producers who use the grain for feed would have to raise their prices.

U.S. farmers said they're cautious but hopeful about doing more business with China, which needs more corn to feed the expanding livestock herds that supply meat to its growing middle class. They note Hanver Li, chairman of the market research firm Shanghai JC Intelligence Co. Ltd., estimated last month that China's corn imports would climb from 1.7 million tons this year to as much as 15 million tons by 2015.

China has been reluctant to import corn because a history of devastating famines has demonstrated the importance of self-reliance. But, land and water shortages combined with a resistance to mechanized equipment that could eliminate jobs has made it difficult for farmers to grow all the corn the country needs.

Speaking at the U.S. Grain Council's annual meeting in Boston, Li said production is being quickly outstripped by the Chinese people's growing demand for meat, milk and eggs.

"We have gotten to the turning point," Li said. "We've come to the conclusion that a new era of China importing corn is here."

That would be good news for American farmers, said Paul Bertels, director of economic analysis for the National Corn Growers Association. But he's not ready to celebrate yet.

"A couple of more years of steady, consistent or growing levels, and I would be more willing to say we're going to be on a path to where we're going to be exporting more corn there," Bertels said.

Bertels said his skepticism is rooted in history and China's inconsistency in importing.

"You go back to 1995, the year they come in real hard and bought 4-5 million tons, and everybody was singing happy days are here forever, that we had finally broken into the Chinese market," he said. "Then two years later, they turned into being a net exporter again and that went on for 10 years."

China's Ministry of Agriculture didn't immediately respond to inquiries about the nation's demand for corn. However, China's economic planning agency, the National Development and Reform Commission, said in a statement that the country can grow most of the corn it needs, adding that the increased imports were due to rising domestic prices.

Nonetheless, if imports increase as forecast, China will challenge Japan as the largest importer of U.S. corn, Bertels said. Japan imports about 15 million tons a year.

The U.S. also could set new export records, he said, topping 2008 when 61 million tons of corn were exported.

To meet such demand in China, U.S. farmers would have to expand corn production by 4 million acres, said Darrel Good, a farm economist at the University of Illinois. Even with that, prices would likely remain relatively high, pushing up livestock feed costs and ultimately prices for meat and eggs, Good said.

Julius Schaaf, an Iowa corn producer who sits on the grain council's executive board, said he expects exports to China to increase because the government is now stressing food security over self-sufficiency.

Also, the country no longer sells surplus corn to industrial users, such a biofuels and bioplastics, leaving those customers needing U.S. corn, Schaaf said.

"I'm optimistic about what I see over there. The sheer expansion of that country is mind-boggling," he said. "I think the U.S. is going to be their chief source of grain and I'm 100 percent positive we can meet that demand."

The U.S. produced about 13.2 billion bushels of corn in 2009, with about 2 billion bushels exported.

If exports don't grow to 2.5 billion to 3 billion bushels a year, some corn will go unused because of increased productivity, Schaaf said. The U.S. already carries over about 1.4 billion bushels a year, he said.

Akio Shibata, chief representative of Japan's Marubeni Research Institute, said that while the U.S. is likely to meet China's needs for more corn, the country could have to buy from other nations, such as Brazil, as well.

"Global corn prices will certainly rise," he said.

Jay O'Neil, an agricultural economist at Kansas State University, added that China's switch from corn exporter to importer could lead to more dramatic price fluctuations as the world relies on fewer countries to supply corn.

"This means there are fewer countries supplying the needs of a growing world and the potential for crop production shortfalls is a greater risk to everyone," he said.

Corn is the world's No. 1 crop, making up 37 percent of all grain production, followed by wheat at 30 percent and rice at 20 percent, said Jerry Norton, a grain analyst with the U.S. Department of Agriculture.


Tags: agriculture China corn crops foreign relations meat news trade