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Monday, November 18, 2013

There are some folks who are not happy about Chinese purchases of US commodities.



 

Every Thursday the grain market anxiously anticipates the export sales for the week, indicating the amount of corn and soybeans to be shipped abroad, and particularly how much will be going to China.  That nation is hungry, growing larger, and has more money to buy what it not only needs, but wants.  Subsequently, the US corn and soybean producer has been a willing seller to China, and the nearly one billion bushels of US beans and hundreds of millions of bushels of US corn will be sold to China.  Most folks would say that is a good thing.  Most.  Not all.

 

The Chinese economy has been growing for the past four decades and recorded a 9.1% expansion in 2011.  It is currently the second largest economy and is growing.  The US is the largest economy and it is shrinking.  Along with this dynamic is the economic growth of the livestock revolution which is a demand-driven factor necessary to feed the nation’s people.  To supply the necessary feed for livestock has become a US responsibility, but that is causing concern to University of Nebraska agricultural economists Azzeddine Azzam and Sarah Rehkamp.

 

They report that pork is the leading meat consumed in China, followed by chicken, and beef at a distant third.  And its consumption of pork has outpaced US pork consumption for the past four decades, and is now six times higher.

 

The economist’s characterization of Chinese need for US livestock feed is a mixed blessing, and while demand for US grain is a good market, it results in higher US food prices, and puts added stress on water resources.  60% of global soybean production is consumed in China, and 35% of the soybeans shipped to China originate in the US and represent 25% of US production.  A similar case is made for corn, due to the need for corn-based feed for livestock production.  The Nebraska researchers say China harvests as much corn acreage, as does the US, but with poor fertility, the production is cut by half.  Consequently, the Chinese demand for US corn will be felt in the US economy, “Combined with competing demands for feed grains (think India’s demand for food), higher meat consumption in China is expected to lead to higher food prices here at home. The strain is expected to be felt by U.S. households, particularly low earners.”

 

The researchers also express concern about China’s food demand impacting the US water supply.  “Producing more soybeans and corn in the U.S. to satisfy domestic and international demand, particularly China’s, will require more water, adding more stress to this natural resource, especially in the face of climate change.”  Azzam and Rehkamp both report that economists expect studies to show the weather being stressed by having an insufficient supply of precipitation for both big crops.  And that will lead to more water use, “Moreover, feeding a growing number of pigs and chickens and raising them to slaughter in China will require even more water.”

 

Summary:

The Chinese economy is growing rapidly allowing its citizens to have more food, particularly more meat in their diet.  While much of the meat is produced in China along with livestock feed, China has to import significant quantities of corn and soybeans, as well as pork and poultry from other nations, the US being one of the prime suppliers.  Such foreign demand may bolster US commodity values, but it also competes with the US consumer for the supply, raising domestic food prices.  With water being a necessary ingredient for both grain and livestock production, pressure is also put on US water supplies.

Posted by Stu Ellis on 11/18 at 11:18 PM | Permalink

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