A grain market analyst says many of his colleagues are so consumed with figuring out the impact of the biofuel explosion that they have disregarded another potential market driver.
“Sixteen months ago the big ‘what if’ was, ‘when is China going to become a big corn importer and a big wheat importer?’ ” said Bill Tierney, executive vice-president of research and marketing with John Stewart & Associates, a grain market advisory firm headquartered in San Antonio, Texas.
“The China question didn’t go away. In fact, it got bigger. But no one is paying attention to it.”
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China’s economy grew 10.7 percent in 2006, the fastest rate since 1995. The country is poised to overtake Germany as the world’s third-largest economy.
As China becomes more affluent its 1.3 billion citizens are eating more meat-based protein, creating a strong demand for grain suitable for feeding the country’s growing livestock herd.
China’s corn exports have fallen to an estimated four million tonnes in 2006-07 from 11.3 million tonnes in 2003-04, according to the International Grains Council.
If that trend continues China could soon find itself a net importer of corn, which would be every bit as dramatic a market factor as the biofuel boom.
“If they go from being an exporter of four million tonnes to being an importer of four million tonnes, that independently is going to goose the market,” said Tierney, former principal grains economist for the U.S. Department of Agriculture’s World Agricultural Outlook Board.
Ethanol and China’s demand could make for extremely volatile markets, with a strong upward bias.
