April 24, 2014

 

 

A recent forecast from the USDA underlined that China will become the world's largest corn importer by 2020.

 

China, which is already the world's leading importer of soy, will overtake Japan in 2020 at the top of the corn purchasing leader board. The world's most populous country will leapfrog South Korea as the third top corn importer in 2017 and take Mexico's number two spot in 2019.

 

China's corn imports, which are currently five million tonnes, are projected to rise to about 16 million tonnes by the end of the decade and 22 million tonnes by 2023-24 as increased demand for meat fuels the need for livestock feed.

 

By 2023-24, the USDA projects China to increase its pork, poultry and beef output to reach 90 million tonnes, a rise of about 30% from 2012.

 

The sharp rise in meat demand underlines the country's need to secure grain imports and also explain recent transactions by China National Cereals, Oil and Foodstuffs Corp (COFCO) where the state-owned group is paying between US$1 billion-US$2 billion for a stake in a sugar, soy and wheat joint ventures with Noble Group, and separately purchased a controlling stake in Dutch agricultural trading house Nidera valued at about US$1.3 billion.

 

With its rising dependence on grain imports, COFCO is trying to buy directly from farmers around the world and reduce its reliance on international traders such as Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus Commodities.

 

Over the next decade, China is expected to account for 40% of the rise in global corn trade, as well as increase its share of soy imports to 70% from the current 65%. Its rising dominance as a buyer as well as its presence as a trader in grains will increase its influence in the global agribusiness sector.

 

US corn producers are expected to be the main beneficiaries of China's appetite for corn imports, but other exporters such as Ukraine, Argentina and Brazil will also play key roles, according to the USDA.

 

China's rising demand for corn is likely to support prices going forward. The record US harvest in 2013-14 depressed the market and some analysts expect prices to remain in the doldrums through 2015-16 before they begin to recover. "More robust demand from China could stem the decline and support an earlier recovery of US corn prices," says the USDA.

 

Apart from corn and soy, Chinese animals also consume a variety of other grains, protein meals, bran and hulls from grains, and growing use of these is expected to support the expansion of meat output.