As China loses population to urban areas, imports of US grain may grow

Written by Jonathan Eisenthal

China’s aging farmers, most between the age of 58 and 62, make up 55 percent of the 1.1 billion population, but that is changing quickly. In less than five years, forecasts predict only 40 percent of the citizens of the world’s most populous nation will live and work on farms. The implication for world corn supply and demand is “a matter of intense interest,” according to experts.

This rapid population shift was just one fact picked up by Minnesota corn grower Lori Feltis, one of seven producers who took part in a US Grains Council survey team trip to China’s northern corn growing provinces in late May and early June.

“The country is facing a challenge of figuring out what to do with all these people pouring into the cities,” Feltis reported. Feltis is a corn producer near Stewartville, Minnesota, and serves as a representative for the Minnesota Corn Research & Promotion Council. She said, “The government has a lot of incentives and benefits to keep people out on the farm. They subsidize half of medical costs, and subsidize many of these inputs.”

“Currently, China’s near term purchasing intentions are a matter of intense interest,” said Floyd Gaibler, a director of trade policy for US Grains Council, who accompanied the survey team on its trip. He said, “China has significant policy commitments to self-sufficiency.  It also has a rapidly urbanizing population, rapidly increasing swine and poultry consumption, growing land-use pressure, and the financial capability to chart its own course.”

While China has been an import customer of US soybeans for some time, 2010 marked the first year when China became a major corn importer, purchasing 1.5 million tons of US corn last year.  This year, China has already imported more than a million tons of US corn to date, and it is anticipated that they will buy more this year.

“They have also been importing DDGS since 2004 and purchased three million tons of distillers grains products in 2010 and 500,000 tons in the first quarter of 2011,” said Gaibler.

Feltis noted that Heilingjong and Jilin Provinces, which are at a similar latitude to Minnesota, have also experienced a cold wet spring. They do not modify planting choices accordingly, the survey team found.

“They plant 130-day maturity corn, harvest it at 35 to 40 percent moisture and then lay it out on the roofs of their homes and freeze dry it and then shell it by hand,” Feltis said, describing what an industry that stands at the stage of development seen in the US in the 1940s or even earlier. “About 90 percent of harvest is done by hand. In the north, planting is equally split between hand and machine. But the machine they use is about three-foot tall, and contains just a few quarts of seed…There are no planters or harvesters like we use. All of the tillage is done by machine. They ridge plant and they have four-inch high, four-inch wide ridges, planted 22 inches apart. They plant about 10-12,000 population, compared to typical US rates of 32,000-36,000. Pioneer (the seed division of DuPont Co.) is there trying to educate farmers. Corn producers see yields between 65-70 bushel per acre, on good land. Other land produces much less than that. “There are over 8,000 seed businesses in the area. Pioneer has about 20 percent of the marketshare, but apparently many farmers view it as a more expensive option…They don’t have GM seed because the government doesn’t allow that.”

The group flew from Beijing up to the corn producing region, but then spent two days driving back, so that they could stop and talk to farmers, livestock farmers and other agribusinesses.

‘We asked how much nitrogen and potash they use and found that the government does soil tests and advises them on how much fertilizer they need,” Feltis said. “They also recommend which weed control products to use. They have the equivalent of 2-4D similar to what we use here in states. You go into the store and get all chemicals–the store clerk acts as an extension agent, has a list, to tell each farmer how much to use.”

The survey team found that small, backyard hog operations are a growing phenomenon in China. A typical operation will have a single sow and bring in 15 feeder pigs in the course of a year and finish them and sell them. These operators typically grow their own corn, but they can only keep about a three month supply on hand, to meet government requirements. After that, they go to the millers where they sell the rest of their grain and buy back a compound feed product, the ingredients of which they do not know exactly.

“We did try to visit some national corn storage facilities,” Feltis said. “Most are under high security. It’s unknown how much they have in reserve. We are assuming the stocks are very low. Because prices are phenomenally high for corn.

Among the other aspects of crop production and marketing observed by the team: local elevator companies use grain bins with woven wheat grass tops that hold 1500-3,000 bushels. Most such bins the team observed were about three-quarters full. They learned that the Chinese use coal-fired grain driers to bring the corn down to 14 percent moisture for storage. The use of 130-day maturity corn in a region with only 120 days frost-free means much of the product is under-matured. Elevators deliver about 70 percent of their corn to millers, and only 30 percent directly to livestock farmers.

Because the activity of the millers is more transparent, observers of China’s agricultural production feel confident in the assessment that China’s own stocks are low and that its import volume is bound to grow.

Japan, the export largest customer for US corn, has a fifty year head start over the market in China. USGC began a campaign to encourage consumption of milk, meat and eggs in Japan in 1961, as part of its work to develop a market there for our grain.

Other than Japan, the top importers of US corn are: Japan, Mexico, Korea, Taiwan, Egypt, China, Canada, Venezuela, Colombia, Dominican Republic with the remainder among several other countries, according to Gaibler.  

“Through this reliable US supply, Japan has become food secure without becoming self-sufficient,” Gaibler said. “While it will continue to be our most important market, Japan does have an aging population which will limit the growth of demand for livestock and poultry products.  Mexico has been an important growth market for corn and DDGs to meet increased demand for poultry, swine and dairy products.  Each market involves educating buyers and producers on the value and efficiency of incorporating corn, DDGS, sorghum and other co-products in feed rations.  The level of adoption varies as does the utilization of feeding technology, transparency of markets, infrastructure, and trade barriers.  China is experiencing strong growth in their swine and dairy sectors and the Council is working to help them with not only feeding programs, but disease and veterinary training, genetics and breeding, housing design, forage lab and corn silage demonstrations, among other activities.  It also has significant policy challenges:  commitment to self-sufficiency; biotechnology constraints; trade barriers; grain and food security and safety concerns. So while we utilize similar programs and tactics in capacity building, each market presents its own specific challenges and tactics to respond to them.”

The U.S. Grains Council develops export markets for U.S. barley, corn, grain sorghum and related products. The Council believes exports are vital to global economic development and to U.S. agriculture’s profitability.

Founded in 1960, the Council is a private, non-profit corporation with 10 international offices and programs in more than 50 countries. Its unique membership includes producer organizations and agribusinesses with a common interest in developing export markets. Membership funds trigger matching market development funds from the U.S. government and support from cooperating groups in foreign countries to produce an annual development program valued at more than $28 million.

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