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Feeding a growing giant

DANIEL LOOKER 11/17/2010 @ 3:55pm Business Editor

China is HUGE. The most populous nation on earth, with 1.3 billion people, is now the planet’s second biggest economy after the U.S. It’s big in area, too, ranking fourth in the world.

Big as China is, two groups of Midwest farmers nearly bumped into each other while visiting corn and soybean regions there last summer. On August 1, marketing adviser John Roach took 22 growers to Beijing and three northeast provinces that include China’s largest soybean producer. Five days later, the Iowa Soybean Association followed a similar path to China’s capital, then visited the cities of Harbin, Changchun, and Dalian, a booming port and home to the Dalian Commodity Exchange.

What inspired these latter-day Marco Polos to rediscover China?

For one, China consumes 60% of the planet’s soybean exports, making it a key buyer for both U.S. and South American growers. Then, for the first time since 1994, China started buying U.S. corn last summer, adding fuel to a global feed grain rally sparked by Russia’s drought. Everyone, it seems, wants to know more about America’s dynamic and sometimes inscrutable customer.

And, as the U.S. corn crop shrank during a disappointing harvest, futures markets responded to jitters about the size of China’s own harvest. “The word ‘China’ is just electric in those markets right now,” says Purdue ag economist Chris Hurt. Anticipation of more imports by China is adding “probably 50¢ a bushel on corn prices,” he says.

In this country, the potential to grow corn exports to China brings debate. China must feed four times as many people as the U.S. with just three fourths as much cropland. But it’s a big producer on its own, ranking above all nations in wheat, rice, and pork. It remains secretive about state-owned corn reserves. Even with a massive migration to booming cities, it still needs to support some 700 million farmers and rural people whose fields average less than 1 acre in size. So government buying, price supports, and tight supplies team up to keep Chinese corn prices around $7 a bushel. And official policy limits imports of feed grains to 5% of China’s own production.

Yet both Midwest groups returned to this country bullish about continuing exports of beans and new growth for corn in China.

“All we saw and heard from people was increased demand potential,” says Roach of Roach Ag. Marketing, Ltd. “We didn’t hear anybody giving out cautions about their economy.”

Roach already knows breathtaking statistics about China. Its pork and poultry production nearly tripled in the last 20 years. Demand for soybeans to feed livestock grew 460%.

Still, seeing China firsthand amazed him. Roach was impressed by the scale of Chinese cities, “some of which you’ve never heard of, but they’re bigger than almost every American city,” he says. “There were four-story restaurants that were huge. I just came away thinking this is a huge consumer economy. These are hard-working people who are figuring out how to make a living and live what I would call the American dream.”

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