World Grain - June 2014 - 68

Cereals
Europe
2014
FEATURE

hat one expert at the recent Cereals Europe 2014
Conference called China's "giant economic experiment" is having a huge impact on the grains market, and any change in direction will change trade across the
globe. Speakers at the conference held in March in Geneva,
Switzerland also considered the inﬂuence of the Black Sea
countries and the effects of uncertainty in that region as well
as taking a view of the wider market.
Fred Gale, USDA Asia/China Chair, gave a detailed presentation on the agricultural trade situation in China. "China,
right now, is in the midst of a major boom in imports of agricultural commodities," he said.
Changes in the Chinese economy are increasing demand.
"There is rising costs and prices in the Chinese economy,"
he said. "There's been an exodus of people from the countryside. China is also dealing with land and water scarcity.
"They have been producing more of almost every commodity, and that is straining the resource base. China has had an
increase in grain production and production of almost everything, but that has come at an environmental cost," he said.
"China is a very resource-poor, land-scarce economy."
Soybeans are the perfect product for the Chinese economy,
he said.
"They not only provide cooking oil, they also provide
soy meal that provides the protein for China's animal production industry."
Historically, China has been an erratic trader in grains, Gale
said. "In the last four years, since about 2010, China has been
a net importer of grains, for the ﬁrst time. Its grain exports
have disappeared. China's grain imports have really boomed
in the last two years. China has also become a market-leading
rice importer all of a sudden."
China imports barley for beer, and it has been importing
DDGS, he said.
68

by Chris Lyddon

Conference speakers ponder grain
market uncertainties
"Those imports actually exceed their corn imports. China
has also just recently emerged as an importer of grain sorghum. Last summer is when it started. China has started to
emerge as a major importer of meat," he said, referring initially to pigmeat. "It actually makes more sense to produce
the meat in the U.S. or Brazil or elsewhere. It is more efﬁcient.
China's domestic production costs had been rising due to feed
costs in China."
Milk has been the other big import that has emerged seemingly out of nowhere. The rise in dairy imports followed the
2008 incident with melamine adulteration in milk, he said.
"In the last ﬁve or so years, China has been trying to give
more ﬁnancial support to the farm sector," he said. "The grain
price has increased by about 150% since 2000. Hog prices
have been much more volatile, but following the same upward
graph. On top of this is rising grain production costs."
There are increases in the opportunity cost of labor or the
actual cost of labor, and in the actual cash rent cost of farms,
he said. Mechanization and the increased use of fertilizer also
add to costs. The exchange rate has been appreciating.
"That also is contributing to the escalation of Chinese domestic prices versus international prices," he said.
China has started raising support prices for grains and oilseeds, but he also noted that that means increasing costs for
livestock farmers.
"There is a very strong incentive for Chinese buyers to
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World Grain - June 2014

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