October 31, 2005

 

China's grain, oilseeds imports may rise 10 percent every year
 

 

China may significantly increase the import of wheat, corn and soybeans over the next five to 10 years, as the country will seek to concentrate on growing crops that are labor-intensive, an industry analyst told Dow Jones Newswires.

 

"Fertile land and water are scarce in China, while labour availability is abundant. In such circumstances, I think the country may concentrate on growing more vegetables, tea, fruits, poultry and meat that are labor-intensive," said Adrie Zwanenberg, global head of food and agriculture research and advisory for Rabobank.

 

Zwanenberg said he expects Chinese grains and oilseeds imports to grow as much as 10 percent annually, over the long term.

 

In 2004, China imported 7 million tonnes of wheat and 20 million tonnes of soybeans. However, it exported 2.3 million tonnes of corn, though the Chinese government expects the country to turn a net corn importer over time.

 

Zwanenberg said China is unlikely to encourage rice imports, as paddy cultivation is a means of livelihood for a vast number of Chinese farmers.

 

According to an official at the Institute of Market Economy affiliated to the Development Research Centre under the State Council, by 2020, China is projected to import a net 36.32 million tonnes of soybeans, 24.70 million tonnes of corn and 8.29 million tonnes of wheat annually, while exporting a net 3.33 million tonnes of rice a year.

 

But the extent of corn and soybean imports by China and its impact on global prices will, to a large extent, depend on how exporting countries augment production to meet Chinese demand, Zwanenberg said.

 

The Black Sea region, comprising nations such as Turkey, Bulgaria and Russia for example, is reemerging as a major wheat exporter, and could become a major source of wheat for China, he said.

 

India's influence in the global grains market, on the other hand, will be mostly neutral as the country remains self-sufficient in most commodities.

 

"India's exports and imports of farm products may balance each other out in the longer term. The country could therefore continue to be self-sufficient in meeting its food and feed needs," said Zwanenberg.

 

WTO farm talks failure may lead to bilateralism

 

Zwanenberg said he expects little progress in the ongoing round of World Trade Organization talks on farm trade.

 

"I hope someone puts together some solution which can ensure global, liberalized trade in food and agriculture. But the feeling is not good," said Zwanenberg.

 

He pointed to conflicting agenda of various governments, saying the EU alone has 25 member nations, all with different views on agricultural trade.

 

"Even within the EU, it is difficult to generate consensus on agricultural trade issues because of the diversity in opinions," said Zwanenberg.

 

He said, in his opinion, while liberal global trade in food and agriculture is good for all nations, it is hard to ignore the reality of protectionism.

 

"I am not blaming the countries for protecting their farmers. I think change in world trade order should come gradually rather than overnight so that farmers and farm companies have time to adjust to new realities," said Zwanenberg.

 

However, a failure of WTO farm talks could pave the way for bilateralism instead of multilateralism in global farm trade, with various nations hammering out agreements with each other, rather than at a global forum, he warned.

 

Bird flu may affect small farmers more

 

Zwanenberg said the issue of bird flu, hitherto mostly present in Asia, but now spreading to the rest of the world, could have serious implications for the poultry and feed industries if governments and private businesses don't do enough to contain it.

 

"Many of the bigger meat companies are diversified, so they can switch from poultry to other types of meat, and therefore manage the risk of bird flu," said Zwanenberg.

 

But small farmers in many Asian countries, who depend only on poultry farming for livelihood, will be hard-hit as they lack the resources or expertise to switch to producing other meats.

 

Zwanenberg said if the bird flu spreads globally, the two largest global poultry exporters, the US and Brazil, will also be seriously hurt.

 

Indonesia, one of the worst affected by the epidemic, has already seen a fall in demand for poultry and feedmeal, he noted.

 

"In Indonesia, many people have substituted poultry with fish for meeting their protein needs, as beef is much more expensive," said Zwanenberg.

 

Meanwhile, large retailers in most countries are raising their food safety standards to assuage public concern about the safety of the products they buy.

 

"I think farmers and farm companies shouldn't resent these higher food safety standards, but rather respond by improving their products to meet these standards," said Zwanenberg.

 

"Retailers are not insisting on higher standards to harass suppliers, but (they are doing it to) ensure their own competitiveness."