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UPDATE ON CHINA'S AGRICULTURAL TRADE ISSUES
Source: U.S. Grain's Council news release

Recent disruption in U.S. corn exports to China have focused renewed attention on the uncertainties surrounding the enormous potential of the world's largest emerging market. Delegates who attended the U.S. Grain's Council's 11th International Marketing Conference and 54th Annual Membership Meeting in Long Beach, Calif., this past week devoted extensive attention to China and related issues in their sector and Advisory Team (A-Team) meetings.

They also heard from two key China experts - Scott Sindelar, the agricultural minister counselor in the U.S. Embassy in Beijing, and Bryan Lohmar, USGC director in China - on the fast moving situation impacting trade today, as well as the long-term factors driving the evolution of China's policy on self-sufficiency, corn imports and biotechnology.

"China's leaders are acutely aware that, despite their success in increasing grain production," Sindelar said, "China's agricultural industry lags behind in the development and use of the latest technologies that increase agricultural productivity with less strain on the environment."

China's leaders have responded with numerous recent major policy statements indicating commitment to modern technology, including biotechnology, and greater openness to markets and trade. At the same time, however, Sindelar noted that important forces in China continue to view food security in terms of self-sufficiency and that modern technology is not uniformly accepted. This means that there can be, and clearly is, a gap between nominal policy and implementation.

"As we've seen in recent months," Sindelar said, "the rhetoric is not matched by the reality on the ground. China's cumbersome regulatory approval process for agricultural biotechnology, both for domestic utilization and for import, is simultaneously preventing Chinese farmers from improving domestic production capabilities and limiting the supply of the imported grains that are in demand. The current trade disruption is the latest and most important example."

Lohmar also acknowledged the policy tensions within China, and that there is great uncertainty about basic production and consumption trends. However, he presented evidence that indicated long-term demand growth for animal products will remain strong.

Chinese farmers have posted very impressive corn production gains in recent years, with about two thirds being from acreage expansion. They are approaching their limits in this area, and are facing growing water pressure as well.

Plant populations already exhaust the soil's nutrient supply, so continued robust yield growth will necessitate not only adoption of new technologies, but also adoption of agricultural practices that improve soil quality. Therefore demand for grain imports is expected to remain strong.

"Short-term imports will be constrained," Lohmar said, "but the in the long term there will likely be significant import growth in feed grains."


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