Corn has been caught in the doldrums, dragging down hopes of American and Canadian farmers, with no signs of recovering decent profitability.
But Iowa State University agricultural economist Dermot Hayes said Chinese corn imports and consumption are about to surge.
And that’s going to be nothing but good news for beleaguered midwestern farmers in the United States.
“Just as China did for soybeans, it’s letting markets dictate its corn, and it’s not a good use of scarce Chinese land to grow a low-value crop like corn,” Hayes told farmers at the Keystone Agricultural Producers annual meeting Jan. 24.
“Eventually, we are going to see an enormous opportunity for corn imports into that country.”
The same applies for pork sales to China.
“China will remain a major importer of pork,” said Hayes, who has visited China multiple times and is a keen China observer.
“They can’t be food self-sufficient without $100 steaks, as Japan discovered. So, for their own economic best interests and food security… they’re going to have to import.”
The corn and pork demands have been generated by China’s rapidly expanding economy, but differing dynamics underlie the situation.
Hayes’s expectation for rapidly expanding corn imports comes from its government’s decision two years ago to liberalize corn market rules, allowing market prices to play a bigger role.
That caused domestic stocks to flood out into the market, depressing prices. That made importing corn unattractive, and it’s part of what’s behind China’s current soft corn import demand.
However, those stocks are quickly winding down and Chinese farmers have had little reason to keep planting corn since the prices are now much lower.
That will probably prompt Chinese buyers to turn to offshore markets once domestic prices start to rise and stocks fall. Even with improving prices, Chinese farmers are unlikely to focus on corn.
More money can generally be made by growing fruits and vegetables, some even for export, than in producing low-margin cereal grains.
“In general, there is room for optimism on the corn export side once China has worked through its stocks,” said Hayes.
For pork, the imposition of new regulations has driven a shift in production from thickly populated regions to frontier regions near Mongolia and in Manchuria. However, production can’t expand in China as quickly as it can in the U.S. when facing good demand and good profits, which is today’s situation in China, because China does not have a region similar to the vast expanses of the U.S. Midwest. Expansion is occurring in drier regions as urbanization pushes hog production out of the warmer and wetter central regions.
The continued presence of ractopamine, a growth-boosting substance used in large parts of the U.S. herd, means that U.S. pork sales to China have been flat, while pork from countries like Canada have increased.
The U.S. is making gains by backfilling other sources ignored by competitors.
“The fact that Germany, Spain and Canada are so busy taking advantage of this Chinese opportunity created pork-exporting opportunities for (U.S. pork in) other countries,” said Hayes.
There is tremendous uncertainty in the U.S. about market access and trade due to the Trump administration’s tempestuous approach to situations like the Trans-Pacific Partnership and the North American Free Trade Agreement, Hayes said.
But the underlying reality of China’s urban growth probably means U.S. farmers will see continued gains from China, whether directly or indirectly.
That will also apply to Canadian farmers, but perhaps at lower levels than many expect. Canada has better access to China’s pork market because of the disappearance of ractopamine from the Canadian herd, but North American prices are set on a continent-wide basis and that gives Canadian producers the same baseline as their less-well-connected U.S. counterparts.