China’s demand for imported corn is about more than just the rebuilding of its swine herd from the devastation of African swine fever. It’s also about a strengthening Chinese currency (which makes United States corn and other ag exports cheaper), an increasing concern for soil health within China, and the fact that corn is part of an import regime that allows the state to build up internal stockpiles, according to Bryan Lohmar, China Director for the U.S. Grains Council.
Lohmar was speaking at the annual U.S. Department of Agriculture’s Agricultural Outlook Forum, which was held virtually this year. Lohmar has more than 20 years of experience working on agricultural and economic issues on China; prior to joining the USGC, Lohmar served as a director of economic research at Bunge China.
Lohmar began, as he often does, by showing why Chinese ag statistics don’t give a complete picture of the real situation within the country. He noted that in September 2018, China’s Bureau of Statistics released the results of a 10-year crop acreage survey that showed an increase of 25 million acres for corn over previous estimates—which amounted to a 50% increase. Other Chinese agencies adjusted their figures accordingly, but tellingly, yield estimates didn’t go up.
“I always say that we really don’t know what’s going on in China,” said Lohmar. Nevertheless, he believes there are many signs that there is a “systemic, structural” demand for corn imports in China.
Restructuring after ASF
Lohmar reiterated that China took the opportunities created by African swine fever to completely revamp its hog production system, replacing inefficient small operations that fed hogs with food swill and scraps with bigger, more modern operations that used at least 75% corn feeds. That meant that its needs for imported corn feed would not stop growing even after it reached pre-ASF levels of hog feeds, because it was not going back to the old way of doing things.
In response to a question, Lohmar said he doesn’t foresee food waste feeds returning in China unless and until it succeeds in completely eradicating ASF or in introducing an effective vaccine, neither of which has happened. While the hog herd is rebounding, partly helped by CRISPR cloning techniques that allow swine numbers to rapidly increase, local outbreaks of ASF continue to be reported. The ASF virus is one of the most difficult viruses to map, and any vaccine is reportedly years away.
Sorghum hedging against corn
Lohmar noted that other grains make up the other 25% in livestock feeds. In particular, he said, China has been buying virtually all of the U.S. sorghum export crop lately. That may be because corn—unlike sorghum, barley and dried distillers’ grains, also used as livestock feeds—falls under a Chinese tariff rate quota system, under which the state partly manages internal corn prices by allocating a certain amount of corn and maintaining some in reserve. Private traders remain wary of state enterprises that can release corn into market in large quantities and therefore lower prices.
Sorghum is under no such trade constraints, so sorghum traders are free to respond to market conditions and can use sorghum imports as a hedge against state intervention in the corn markets. Wheat is also increasing as a livestock feed in China, said Lohmar, along with rice and imported barley.
Soil health concerns
Lohmar also said Chinese officials in recent years have become more concerned about soil health and soil exhaustion. While parts of China benefit from the loess plateau, with some of the world’s most fertile soils, overall China only has 7% of the world’s arable land to feed its population, a fifth of the global total. In 2016, Chinese officials launched a number of efforts to address soil pollution.
Continuous corn plantings can exhaust soils and reduce future yields. Lohmar said that while China is likely to introduce GMO corn within the next few years, even that may not substantially increase yields as long as soils in some areas are depleted by corn monocropping and need to be restored.
For all these reasons, he said, imported corn is “the only game in town” for China as least for the next few years. He predicts that corn imports into China will continue to remain high. While the U.S. remains the world’s single biggest producer, Lohmar expects that China will also develop corn sources in Brazil and elsewhere that have not yet become major exporters to China.
David Murray can be reached at [email protected].
