February 21, 2011

China seen to import more grains in 2011

Even as its economy cools, China's demand for imported grain is likely to surge this year, providing a boon to the US and other exporting nations.

This week, China reported that strong imports had sharply narrowed its January trade surplus to US$6.45 billion from US$13.1 billion in December.

That reflects the country's growing appetite for commodities and other goods. China is one of the largest metals and energy consumers in the world. It is also a top importer of US agricultural products.

Analysts expect China's robust appetite for corn, wheat and soy to expand in 2011 as the country grapples with severe droughts in the north. Corn and soy are primarily used for animal feed, which is in high demand as incomes rise and people consume more meat.

In the 24 months ended in January, the International Monetary Fund's primary commodity index, which measures the average price for commodities such as energy, grains and industrial materials, has soared 79.5%. Prices for cotton and copper have hit records recently, in part due to high demand from emerging markets such as China.

Still, China's measures to cool its economy could crimp the country's imports short-term. The fear is, if the economy slows, China will not need the same amount of commodities.

"I don't see a collapse in commodity demand, but some moderation is possible from the last two years' healthy pace," a Chinese economist said.