November 29, 2012

 

 

China will continue to import huge amount of soy while increasing its corn imports.

 

Renault Quach, director and assistant general manager of China's Dongling Grain and Oil Company, told farmers at the Iowa Soy Association/Rabo AgriFinance profitability summit in Cedar Falls that China's corn imports will grow in the next five to seven years at a rate similar to what soy imports have grown in the past decade.

 

Kirk Leeds, chief executive officer of the Iowa Soy Association, has visited China 12 times in 10 years, and he respects Quach's data.

 

"You get one set of information from people like Renault who are competing in the marketplace and buying commodities all the time," Leeds said. "That set of information is a little better than what you receive from Chinese officials. We have found Renault's information to be the most insightful."

 

China's population is 1.3 billion with a net addition of eight million people each year. "You can imagine how big a food supply we need to feed our people," Quach said.

 

China's economic growth averaged 10% annually for the past 10 years. Due to a worldwide economic slowdown, growth has backed off to 7%. Per capita GDP grows annually, and in 2011 was US$5,000.

 

Meat production has increased 3.1% per year in the past decade, Quach said. A growing meat industry means an expanding feed industry. Chinese meat production will be nearly 120 million tonnes by 2015. The country's feed industry has been growing 8% per year over the past decade, and Quach sees 4% per year growth in coming years.

 

For 2011 total feed production was 168.85 million tonnes with 40.52 million tonnes of soymeal and 101.31 million tonnes of corn. Soymeal consumption grew 9.2% per year the past decade while domestic soy production remained stagnant creating a widening soy supply deficit, Quach said. Government policy rewards corn growers to guarantee adequate grain production and causes farmers to switch from soy to corn.

 

"This soy deficit will continue, and so we will have to import a lot of soy," he said.

 

China imported just a few million tonnes of soy in 1998. By 2011 imports grew to 59 million tonnes from the US and South America. USDA is forecasting China will import 63 million tonnes in 2013. Quach said actual imports will be 61 million tonnes due to a glut of palm oil and slowing hog production. To put that in perspective, Iowa grows 13 - 15 million tonnes of soy each year, Leeds said.

 

The average growth in corn consumption for the past 10 years has been 4%. USDA's figures show China's corn supply has kept pace with that demand by increasing 4.1%, but Quach said supply is only growing at 2%.

 

USDA data is based on the pro-government China National Information Centre while Dongling has toured crop producing areas and talked to farmers and grain elevators to collect its data, Quach said. "Our government said corn production was 200 million tonnes, we would say it's 170 million tonnes," he said.

 

China has limited arable land so if farmers are going to grow more corn, it has to come from soy acres, Quach said. Corn yield is at a high level already, and is not likely to increase much. Farmers are using more GMO seed and already fertilise at high rates. They do not rotate corn with soy.

 

"If there is a big weather problem in China, it will not be a surprise if China imports a tremendous amount of corn," Quach said. He estimates that China's corn imports will increase rapidly in the future as demand grows faster than what China can grow locally.