April 12, 2011

 

China's record pig herd drives shortage on Iowa's soy stocks

 

 

The soy supply of US' Iowa will not be enough to meet the foreseen surge in China's imports over the next four years as China feeds a record pig herd and drives soy prices to its highest record.

 

China, which doubled meat consumption in the past two decades, may boost international soy purchases 33% to 66.9 million tonnes by 2014, a 16.6 million-tonne increase that is more than Iowa, the largest US grower, produced last year, government data show. US farmers are cutting back on planting, meaning prices will rise 21% to US$16.80 a bushel by December 31, a survey of 20 analysts shows.

 

Almost half the world's pork comes from China, which has 689 million pigs and will be responsible for all of this year's increase in global supply, the USDA estimates. That's adding to China's dependence on raw-material imports from Brazil to Australia to the US, making it vulnerable to inflation that Premier Wen Jiabao has pledged to combat without derailing economic growth.

 

The 13-fold expansion in China's economy in the last two decades has meant an almost doubling in meat consumption by the country's 1.34 billion people, World Bank and government data show. While the US trade gap with China widened by about 13% to US$23.3 billion in January, exports of US farm goods are the highest ever and the Asian nation is the top customer.

 

China may increase soy imports to 68 million tonnes by 2014, a 17.7 million-tonne increase from last year that would exceed the purchases forecast by the USDA, according to Grant Kimberley, director of market promotion for the Iowa Soybean Association. Farmers in the state reaped 13.5 million tonnes in 2010. China consumes one in every four tonnes produced globally.

 

It takes about 2.8 pounds of feed to produce one pound of pork, according to the American Soybean Association. Increased meat production and demand for feed is coming at a time of near- record global food prices that contributed to protests across northern Africa and the Middle East, toppling leaders in Egypt and Tunisia. Rising prices pushed about 44 million people into poverty since June, the World Bank said in February.

 

China will import a record 57 million tonnes of soy in the 12 months to October, more than twice the amount five years ago and 60% of the global total, the USDA estimates. As domestic agricultural output failed to keep pace with demand last year, China's imports jumped 34% to US$17.52 billion. Pork accounts for about three-quarters of Chinese meat demand, the USDA estimates.

 

While growth in China will slow to 9.5% this year, from 10.3% in 2010, that will still be more than three times the pace of the US and five times the speed of the euro region, according to the median estimates from surveys of 89 economists.

 

The average person in China will consume a record 39.3 kilogrammes (86.6 pounds) of pork this year, compared with 19.7 kilogrammes in 1990, based on estimates from the USDA and the US Census Bureau. The population increased by 182 million people over two decades, the equivalent of Mexico and France. At the same time, gross domestic product jumped to more than US$5.7 trillion last year from US$390 billion in 1990, the International Monetary Fund estimates.

 

To keep pace with rising consumption, China is expanding its herds, flocks and fisheries, using more feed. The country was a net importer of corn for the first time in 14 years in 2010 and will need to buy 13% more soy this year, USDA data show. About 80% of processed soy is fed to livestock as meal, with the rest converted to vegetable oil used in food, chemical products and fuel.