slowing economy: effect on china’s agricultural imports
TRANSCRIPT
Slowing Economy: Effect on China’s Agricultural Imports Fred Gale Senior Economist Economic Research Service www.ers.usda.gov
Chinese port celebrates first shipment of corn from Ukraine
U.S. agricultural exports to China fell 16% in 2015
Major Products
2014-15 change in
value (percent)
Soybeans -27 Hides & Skins -15 Cotton -22 Dairy Products -35
Pork Products -10
Poultry -84
Sorghum +44 Distillers Grains +27 Corn +56
Other feeds +5 Hay +28 Tree Nuts +9 Fresh Fruit +37 Ethanol (non-bev.) +1,494
0
5
10
15
20
25
30
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Billi
on d
olla
rs
Agricultural Exports to China
Source: ERS analysis of USDA/FAS Global Agricultural Trade System data.
Note: calendar years.
Cotton: China’s slowing demand and policy-driven imports created a stockpile that needs to be digested
• China’s cotton consumption peaked in 2009/10
• China’s cotton imports peaked in 2011/12
• Both are declining as China tries to digest a 2-year supply of cotton in inventory
0
10
20
30
40
50
60
1980 1985 1990 1995 2000 2005 2010 2015
Million bales
China cotton consumption and imports Peak
consumption
Peak imports
China’s Cotton use
China’s Cotton imports
China feed industry output reflects slow-down
0
50
100
150
200
250
1980 1985 1990 1995 2000 2005 2010 2015 2020
Mill
ion
met
ric to
ns
China feed, meat and egg output, 1982-2024
"New normal" On-farm feed sources predominant
"Modern- ization"
Manufactured feed output
Meat and egg output
projection by China MOA
Source: ERS analysis of China Ministry of Agriculture projections and data from China National Bureau of Statistics.
Puzzle: China’s import volume of many commodities has accelerated as the economy slowed Calendar year 2015: • Oilseed imports were
up 13% by volume • Grain imports up 68% • Beef imports up 58% • Pork imports up 38% Demand for high-end foods: • U.S. salmon up 17% • U.S. cod fish up 19% • U.S. cherries up 28%
0102030405060708090
100
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Million metric tons
China imports of oilseeds and grains calendar years
oilseeds
grains
Source: ERS analysis of China customs data.
Depreciation of competitor currencies against the dollar erodes U.S. market share in China for some commodities
0
20
40
60
80
100
120
J F M A M J J A S O N D J F M A M J J A S O N D J F
2014 2015 2016
Inde
x (J
an20
14=1
00)
Currency values vs. Chinese Yuan, 2014-16 US$ appreciated, other currencies depreciated against Yuan
U.S. Dollar
Euro
AU$
NZ$
Brazil Real
Ukraine HRV
Source: ERS calculations using data from Federal Reserve Bank of St. Louis.
China’s predicament: Its commodities have flipped from cheap to expensive Stockpiles are high after trying to prevent prices from falling
• Exchange rate appreciated 35% against dollar, 2000-14
• China’s farm prices doubled in Chinese currency.
• By comparison, CPI rose only 40%
• Global prices have fallen since 2013
100120140160180200220240260280
2000 2002 2004 2006 2008 2010 2012 2014
Index (2000=100)
China corn price soared 250% in a decade
China corn price up 250%
Exchange rate
"Cheap" commodities
"Expensive" commodities
up 35%
Source: ERS analysis of China farm price data from China Development and Reform Commission and exchange rate.
In China, it’s all about the price
• Chinese authorities tried to insulate their market from falling farm prices since 2013
• Domestic prices are now 25%-40% higher than import prices
• Quotas limit some imports, but not all
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500
2000 2002 2004 2006 2008 2010 2012 2014
Dolla
rs p
er m
etric
ton
Corn prices, 2000-15
China (Guangdong)
China (Jilin Province)
U.S. (Gulf ports)
Ukraine
Gap Between China and International prices
Source: ERS analysis of data from China National Grain and Oils Information Center and USDA.
Chinese officials cannot fully insulate Chinese prices from the world market
• China’s demand for soybeans boomed as world prices fell – imports displace
domestic soybeans and other protein feeds
• China’s imports of substitutes for corn boomed – Displaced domestic
corn and feed-grade wheat/rice, purchased by government 0
5
10
15
20
25
30
35
40
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Mill
ion
met
ric to
ns
China imports of corn substitutes
corn imports
sorghum
barley
distillers dried grains
cassava
cassava starch
0
200
400
600
800
1000
2000 2002 2004 2006 2008 2010 2012 2014
Dolla
rs p
er m
etric
ton
Soybean prices, 2000-15 China(Heilongjiang)Imported,coastal ChinaU.S.
Source: ERS analysis of China customs statistics.
Near-term outlook • China grain and cotton imports slow as Chinese authorities seek to
dispose of stockpiles – Allow internal prices to decline – Limit imports when possible – Subsidize processors?
• Oilseed imports remain strong – China’s soybean production may rebound slightly – Domestic supply of rapeseed and cottonseed plunging
• Import demand for meats strong – High grain prices mean high production costs for livestock – Environmental concerns constrain livestock production
• High value of the U.S. dollar versus competitor countries remains a disadvantage for U.S. exports
China remains the predominant soybean importer
• USDA underestimated China’s soybean imports 10 years ago
• USDA now projects growth in imports to near 110 mmt in 2025
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80
100
120
2000 2005 2010 2015 2020 2025
Mill
ion
met
ric to
ns
China soybean imports USDA baseline
Projected
Projected ten years ago
Moderate growth in corn and pork consumption/production
• China’s pork and corn production will grow moderately
• Corn imports recover after inventories are reduced, reach 6 mmt 2025
• Pork imports projected to be about 2% of consumption
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1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
mill
ion
met
ric to
ns
Mill
ion
met
ric to
ns
China corn and pork production USDA baseline
Projected
Pork (right axis)
Corn
10-year outlook • Robust demand
– income growth, urbanization, consumption patterns shaped by new habits, preferences and prices
• Supply depends on an ambitious makeover for Chinese agriculture – A new “great leap” to capital-intensive, high-tech farming faces
institutional obstacles – Environmental and resource protection constrain production
• Markets for a new era – e-commerce – upgrading inspection/quarantine to accommodate increased trade – Overseas investment by Chinese companies to procure food supply,
technology, and attain geopolitical objectives – Conflict between rigid “food security” concerns and flexibility needed
for modern food market
USDA reports China’s Growing Demand for Agricultural Imports Development of China’s Feed Industry and Demand for Imported Commodities “U.S. Agricultural Trading Relationship With China Grows,” Amber Waves magazine “Get Ready for Chinese Overseas Investment in Agriculture,” Choices magazine