November 24, 2010

 

China's corn, soy imports jump this year

China's imports of corn and soy are soaring with the former increasing by 8,644% to 1.22 million tonnes in the first nine months of the year.

 

Under increasing pressure from the limited amount of arable farmland available and the process of urbanisation, moderate imports of grains are reasonable, said Cheng Guoqiang, a researcher for the Development Research Centre of the State Council.

 

"This year's supply shortage and surging imports should be a special case. If the government continues to take efficient measures on ethanol and citric acid production, imports (of corn) won't be a regular situation," said Cheng.

 

China's annual output for corn climbed to 166 million tonnes in 2008. Last year the output declined because of cold weather. However output this year may rebound to 2008's level, researchers said.

 

China is the world's second largest user of corn. Driven by rising living standards and consumption of meat, poultry and dairy products, the consumption of feed for livestock has increased, and now accounts for about 80% of China's corn output.

 

In addition, the deep processing sector for starch, citric acid and ethanol production consumes about 35 million tonnes of corn annually. A total of four million tonnes is used in making ethanol alone.

 

"There is no problem in meeting demand for feedstuffs from domestically grown corn. If there's a supply shortage for corn, it would be caused by the surging demand from the processing sector," Cheng said.

 

Many businesses have moved into deep processing because it has yielded high profits over the past 10 years. The average annual growth rate of the industry rose 20% since 2000, while that of feedstuffs increased by 1.26% during the same period.

 

The active participation by processing companies in buying grain also fuelled corn prices, as they competed with each other for stock, he said.

 

The closer linkage between corn and energy has become an important element in the price fluctuations of corn, said Zhang Hongyu, deputy director of the policy department of the Ministry of Agriculture.

 

Corn has been widely used in making industrial ethanol and biofuel in the US. Demand for corn will continue to increase given the shortage of oil supplies. "There's little wonder that it will have an impact on China too. China's agricultural industry will face many uncertainties in the context of agricultural globalisation," said Zhang.

 

Meanwhile, China has imported about 50 million tonnes of soy this year, a figure that will continue to increase, said researchers.

 

Since 1996, China shifted from being a net soy exporter to becoming a nation largely dependent on imported soy.

 

The crushing industry tends to use imported transgenic soy because they are cheaper. As a result, China's traditional transgenic-free soy has encountered a shrinking market for years. China's soy output now only accounts for about 6% of global output.

 

The way forward for the domestic soy industry lies in shifting to the production of edible soy food such as tofu and other vegetarian produce and developing its own competitive edge in both the domestic and global markets, said analysts.

 

There is no necessity for wheat imports with the nation's abundant stockpiles of the crop in the short term, but moderate imports of corn are possible in the future. Supplies of wheat are plentiful on the international market, Cheng added.