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ISA: China market comes into better focus

By Staff | Aug 10, 2014

Delegates from the Iowa Soybean Association’s July trade mission to China said they returned Aug. 1 with a greater understanding of the complexity of the ag sector there, taught commodity buyers on the science behind GMO crops and advocated for U.S. soybean producers in relation to imports and product availability.

Grant Kimberly, ISA market development director, said the Chinese market continues to grow, with soybean imports over the last two years hovering around 50 million metric tons.

This year he said projections point to that number rising to the upper 60 mmt range, and next year’s projections rise to 72 to 75 mmt.

The five-year outlook shows that number increasing to 85 mmt, according to sources there.

Kimberly said the dairy industry is especially thriving in China, with 14 million cows producing milk.

That figure compares to U.S. dairies, where about 25 million cows produce milk annually.

He said people in China consume 39 to 44 pounds of dairy products each year, and said that number is projected to double to 88 pounds in the next 10 years.

The group toured an inner Mongolia dairy farm that featured a 2,000-head milking herd, with the total number of cows coming in at 4,000 at that facility.

Kirk Leeds, ISA’s chief executive officer, said the growth in the soybean import market for China is driven by the livestock industry, where most imported soybeans are fed.

He said China has six to seven times more hogs than the U.S., and the poultry and aquaculture industries are growing just as much.

China feeds 300 million bushels of soybeans to its aquaculture system alone, Leeds said.

“One out of every four Iowa soybean growers goes to feed our friends in China,” said Leeds. “As the livestock, poultry and aqua systems grow they will continue to use more soy.”

Tom Oswald, Cleghorn farmer and ISA president-elect, said he was struck by the contrast between China’s small farms and big production.

“(This trip) has helped me wrap my brain around the fact that what seems logical to Iowa doesn’t seem logical to people who manage 25 percent of the world’s population during a transition from some darker ages into the future,” Oswald said.

Leeds said he’s been to China more than a dozen times, and said the culture of China is richly founded on relationships. He said U.S. competition – Brazilian farmer delegates – make frequent trips to China as well, adding to the importance of U.S. trade mission trips.

Leeds said the trip confirmed ongoing strong demand for Iowa soybeans, and brought to light the challenges U.S. corn growers face in the world market as countries like China focus on their domestic supply of corn and worry about biotech issues in the U.S.

He said the Chinese government has failed to successfully communicate the positives of biotechnology to its people.

Leeds added that misinformation on social media used by 700,000 to 800,000 Chinese people means China’s government has a real issue on its hands.

Leeds said the Chinese people have a high level of distrust for their government with a number of food scares in the past, where people died after consuming something their government said was safe to eat.

China’s domestically-grown soybeans are fed to its people, while imported soybeans feed livestock.

Leeds said even though Chinese the Chinese don’t embrace biotechnology, they would find a way to approve GMO corn if they needed to import corn because of short domestic supplies.

Leeds said China’s government has asked that U.S. farmers step in and become spokespeople for the controversial GMO issue.

Brian Kemp, ISA’s president, said understanding GMOs needs to get into the higher levels of China’s government.

Leeds said it’s important for U.S. delegates and farmers to take the role of partnering with exporting countries like China, not just acting as suppliers.

He said domestic soybeans in China sell for $18 to $19 per bushel, and that commodity buyers there are interested in knowing how big the coming U.S. soybean crop will be.

He said China is hoping to see a continued reduction in prices for U.S. soybeans.

Leeds said the delegation pointed out that if there is a continued reduction in soybean prices in the U.S., it will be difficult to see continued growth in soybean acres.

“It will be the same reality in Brazil,” Leeds said. “If we see a reduction in price in the global market place there will be a stagnation of production in Brazil.

“The entire chain has to be profitable or they won’t be able to buy soybeans in the market place.”

Jane Li, international consultant and expert on China’s food policy, said China’s leaders continue to place emphasis in domestic food production, especially for rice and other cereal grain.

But the combination of its growing population, shrinking productive land due to urbanization, desertification, water shortages and soil pollution – along with increasing meat consumption – make food self-sufficiency a challenge.

She said China’s appetite for food quality was illustrated in a scare last May when high levels of cancer-causing cadmium showed up in rice supplies in Southern China.

“China may have the capacity to feed its people with homegrown grains,” said Li, but “the question is if the Chinese consumers will allow it in their daily diets.

“Despite (being) the world’s largest rice producer, China became the world’s No. 1 rice importer in 2013.”

She said in response to the growing meat demands, land and water resource constraints, environmental concerns and animal disease in China, the structure of its livestock industry has changed, and that attention to producing quality and safe products and managing risks is a top Chinese government priority.

Li said Chinese livestock producers are focusing on maximizing growth and substituting commercial feed for wastes and pasture-like forages.

“This change has shifted the demand for feed, and accelerates China’s development of a multi-billion dollar feed industry,” said Li. “Over the past 10 years, domestic feed demand has risen about 8 percent per year, making China the second largest feed industry in the world.

“With China’s livestock farm transition to a more concentrated mode of operations that uses commercial feeds more intensively, China’s combined use of corn and soy meal for animal feed is expected to rise over the next 10 years.”

Li said she expects China to become a more significant importer of soybeans and other grains in the near future, resulting in a likely increase in commodity prices worldwide, and shifting in the trade balance between China and the rest of the world.

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