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Agricultural News

Despite Current Corn Glut, US Grain Council Analyst Sees China as a Feed Grain Importer in Future Years

Fri, 26 Feb 2016 04:55:30 CST

Despite Current Corn Glut, US Grain Council Analyst Sees China as a Feed Grain Importer in Future Years China's demand for animal products will continue to rise in the coming years, driving demand for feed grains including from imports, said Dr. Bryan Lohmar, director of U.S. Grains Council programs in China at the U.S. Department of Agriculture's (USDA's) Agricultural Outlook Forum being held Thursday and Friday near Washington, D.C.

Lohmar spoke as part of a panel examining China's economic situation and it's impact on agricultural markets. He walked the overflow crowd through multiple estimates of production and consumption numbers out of the country - which vary more widely than they do in other countries - as well as his scenarios for how these changes will impact feed grain demand.

Using estimates based on food consumption from other, higher-income Asian populations, he suggested actual pork consumption could rise to about 40 kilograms per person per year, dairy consumption could triple and poultry meat consumption could double, with eggs and beef also increasing.

"If the consumption increases are met through domestic production and not through importing animal products directly, the implied demand for feed grains is likely beyond China's production potential, generating demand for imported feed," Lohmar said.

He spoke to the Council's work in China partner with Chinese companies and agencies working to sustainably increase meat production.

Because of environmental concerns and other constraints, many in China support the import of meat rather than grains to feed animals, though others want to capture the added value of livestock production locally. The Council is heavily involved in local programs to help develop sustainable manure management methods.

Regardless of whether increased demand for animal products in China is fulfilled domestically or through imports, it will mean increased overall world demand for feed grains.

"When demand for animal products exceeds domestic supply, China will import either finished agricultural products or feed grains - either way, global demand for grains will rise," Lohmar said.

Lohmar also said that China's policy-makers are committed to resolving market distortions generated by corn policies in China, which will dampen import demand in the short term but is ultimately expected to result in moderate feed grain imports.

Lohmar spoke as part of a panel on China moderated by USDA's Foreign Agriculture Service (FAS) Administrator Phil Karsting.

Other speakers included Dr. Nicholas Lardy of the Peterson Institute for International Economics, who reviewed the overall economic picture in China, and Dr. Fred Gale, senior economist at USDA's Economic Research Service, who spoke to China's ongoing agriculture demand.

Lardy said China's rapid growth in income and declining savings rate are contributing to an increase in consumption, largely through the service sector that creates creates jobs at about twice the rate of the industrial sector.

Gale reviewed how changes within the Chinese economy have affected ag imports, with major commodities down significantly in value while feed ingredients and commodities related to consumer consumption are up overall.

China has a quota that limits imports of corn, so imports of corn substitutes have boomed to 37 million metric tons, displacing corn that then adds to China's grain reserves.

He said that while China thought they would run out of corn a few years ago, they now have "a massive glut" of the commodity and local prices that have diverged from global prices such that Chinese corn is now twice the cost of Iowa corn.



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