China and India may not turn out to be dream markets as hoped

Exporters eager to tap the growing markets of India and China may have to do a reality check before jumping on the bandwagon, a US agricultural expert cautioned.

Daryll Ray, the Director of University of Tennessee's Agricultural Policy Analysis Center (APAC), said in a newspaper column in The Prairie Star, that companies venturing into these markets often ignore half the factors that indicate a viable market.

Companies cite the fast-growing incomes of the two countries and soaring demand as excellent reasons to tap into their markets, but trade data suggest that US agriculture has benefited relatively little so far.

For corn, China exports more than it imports. For soy, even though US soy exports to China have increased, Brazil has captured the lion's share of the growth. For chicken, most of the US poultry exports to China are chicken parts such as chicken feet for which there is no lucrative market in the US. While pork exports to China are growing, meat production in China continues to rise at a rapid pace, he said. 

India currently is not an importer of any major agricultural commodities at present.

It would be wrong to assume that the recent increases in incomes in China and India are a major cause of the US demand and price increases, he cautioned.

The future of any increased demand for foreign imports in these markets is hazy at best, he added.

Warning about unbridled enthusiasm on these markets, he said that focusing on demand growth and ignoring supply growth would make for a disproportionately upbeat presentation.

Daryll further added that while India and China are seeing greater demand, the potential of these two countries to expand their own supplies have never been greater.

This is because of the advances brought about by technology in genetical engineering, which are easily transferred across borders. For instance, he pointed to Japan's experience at providing Brazil with soy research so that the country can later serve to supply Japan.

Increased globalisation since then meant such technology from the likes of Monsanto, Dupont and Cargill could be passed easily to India and Brazil, he added.

In fact, he pointed out that China is buying up land for growing its agricultural crops in Africa while Saudi Arabia is renting land in Thailand to do the same. This pattern has been repeating itself throughout Asia as grain prices climbed, he added.