CHINA is undergoing a political and economic transition of sorts, and in a very real sense, in its food and agricultural policy.
While the country's gross domestic product (GDP) growth is on the wane, its imports of corn and soybeans are quite clearly on the rise, much to the concern of the nation's farmers.
In February, the Chinese government changed leadership, with President Xi Jinping taking control of the world's most populous country from Hu Jintao.
According a recent outlook report issued by CoBank, Xi's ascendency may well mark the beginning of a broader shift in policy reform that will affect the country's role in the global marketplace.
"China's new leaders are walking into an incredibly difficult situation," Ian Bremmer, president of global political consultancy Eurasia Group, explained. "Over the past five years, the global economy has changed in ways that are fundamentally negative for China's economic growth, and internally in China, a growing middle class is demanding more economic reform — and even political reform — from the government."
China's economic growth, as gauged by the country's GDP, has definitely cooled from the blistering 12.6% midway through 2007 to an anemic 7.7% in the first quarter of 2013 (Figure 1).
According to data compiled by Trading Economics, China's annual GDP growth from 1989 through 2013 averaged 9.22%.
Agriculture, forestry and fishing accounts for roughly 9% of the country's GDP, while industry and manufacturing make up 40%. Because manufacturing is such a critical part of its economy, Bremmer said China's new leadership is likely to push policy that will foster higher-value-added manufacturing and new job creation.
"It's very difficult to find a senior leader in Beijing (China) or even a lower-level official in China who thinks that nothing needs to change on the economic front," he said. "In fact, there is a broad consensus within government that the current economic structure is not sustainable."
Bremmer noted that the current Chinese economy is driven largely by corporate and government investment and by exports to the global marketplace rather than by household consumption, which is a key driver in many other major economies. He pegged 2013 GDP growth at roughly 7.5% for the year.
One of the near-term risks to the growth of China's economy this year is inflation. Because of the excess capital in the global financial markets, and, in no small part, due to the country's own excess liquidity, inflation may be creeping upward and has hovered between 2% and 3% throughout 2013 (Figure 2).
One of the major shifts underway in China is its basic view on how the country feeds its population.
"The Chinese government maintains aggressive food security goals and historically has been unwilling to allow too much overreliance on foreign sources for its basic foodstuffs, but the past couple of years have shown that's an increasingly difficult strategy to maintain because of the outsized consumer demand and the diminishing levels of clean water and arable land within China," Eurasia senior analyst Nicholas Consonery told CoBank in February.
Consonery predicted that China may be forced to abandon its goal of food self-sufficiency, which would provide U.S. farmers with another opportunity to market food and feed across the Pacific. In fact, earlier this year, a high-ranking Chinese official was quoted as saying as much — that the country could no longer hope to feed its own people with its own agricultural output.
According to the U.S. Soybean Export Council, China imported 849 billion bu. of U.S. soybeans in the 2012-13 marketing year, nearly all of which was used for poultry and livestock feed.
From 1990 to 2012, China's soybean meal consumption increased from 1,028 metric tons to nearly 51,000 mt, a gain of almost 5,000%.
From 2000 to 2012, Chinese pork production grew by 14.94 million mt, an increase equal to 66% of the European Union's total production. This year, China's pork production could reach an estimated 51.6 mmt, which is equal to nearly half of total global production.
Meanwhile, Chinese broiler meat production has increased 4.46 mmt since 2000. Projections for this year put China's broiler meat output at 13.73 mmt, making it the second-largest producer after the U.S.
Farmers and some policy-makers in Beijing worry that with China now importing roughly 80% of its total demand, the food and livestock markets are too vulnerable to global price shocks.
China's National Grain & Oils Information Center said May 15 that it projects total soybean imports for 2013-14 to hit a record 66 mmt, nearly two-thirds of global imports.