Chinas Grain Imports: Behind The Boost

Time:2013-05-06 Browse:53 Author:RISINGSUN

China has played a major role in the soybean trade for the last decade (importing 58mt in 2012, accounting for 61% of global imports and 80% of domestic soybean consumption), but has only recently emerged as an importer of increased volumes of wheat and coarse grain. While imports of these grains in 2011/12 still represented just 3% of domestic grain use, the pace of import growth in recent years has nonetheless been notable.

 

Net Shift

 

China is the world’s largest grain producer, and historically has been a net exporter. However, in the last five years, China has become a net importer of grain. As shown on the Graph of the Month, China’s net exports of grain exceeded 6mt in 2006/07, but in 2008/09, net imports of coarse grain rose to 1.5mt. By 2011/12, net imports of coarse grain and wheat had climbed to 9.8mt in total. This change has resulted in China’s share in the global grain trade shifting from 8% of total exports in 2002/03, to 0.8% of imports in 2008/09, and then to 4% of imports in 2012/13.

 

Feeding Demand

 

One driver of this trend has been growth in Chinese grain demand, especially for feed grain. China’s grain output has risen in recent years, as has the proportion used as agricultural feedstuff (from 41% in 2008/09 to 49% in 2011/12). This firm growth in feed consumption has boosted demand for coarse grain in particular.

 

 

In turn, feed demand growth has been driven by higher meat consumption. At the end of 2011, per capita consumption of meat and poultry by urban and rural households was up 7% and 4% respectively from 2005. While a recent outbreak of bird flu is likely to limit feed demand in the short-term, meat consumption is expected to rise further in the long-term as urbanisation increases and living standards continue to improve.

 

Price Driven

 

The other major factor that has encouraged imports has been grain price movements. In 2011/12, Chinese corn prices reached a record high as feed demand had increased and domestic supplies were relatively tight. This incentivised over 4mt of corn imports from the US during the year. Favourable wheat pricing has also supported imports, as the gap between Chinese and Australian wheat has become more significant in recent years, standing at around 20% in October 2012. Lower wheat prices in comparison to corn also helped support imports, as local feed producers increasingly substitute wheat for corn, leading Chinese wheat imports from Australia to reach almost 2mt in 2011/12.

 

So, in the last few years, China has shifted from a net grain exporter, to the world’s sixth largest importer of grain. Given the continued expected growth in Chinese grain and feed demand in the long-term, it seems likely that Chinese imports will remain a feature of the global grain trade going forwards, although this will partly depend on favourable price dynamics. The International Grains Council projects that China will increase its market share in global grain trade further in the coming years (for corn, to 14% by 2017/18). This may mean that grain becomes another seaborne trade in which China’s role and importance is continuing to increase.