Chinese hunger for US food boosts ties

With America exporting increasing amounts of food to China, mainland authorities are looking to diversify their agricultural trade partners

PUBLISHED : Tuesday, 21 May, 2013, 12:00am
UPDATED : Tuesday, 21 May, 2013, 4:34am

When President Xi Jinping visited Iowa in February 2012 as vice-president, he underscored the importance of the American agricultural sector to China by visiting a farm.

Participating in a China-US Agricultural Conference, Xi spoke warmly of his first time in the farm-rich state which he visited 28 years ago. China is now the largest export market for United States farm products, which are seen as safe and reliable.

"President Xi said the agricultural relationship between the US and China is like the ballast in the ship, it keeps our relationship upright as the ship travels through storm-filled waters," said Bill Northey, Iowa's agriculture secretary, at a recent hearing of the US-China Economic and Security Review Commission (USCC).

"The agriculture relationship between the US and China is one of the most mutually beneficial areas of trade between our countries."

Frederick Gale, a senior economist at the US Department of Agriculture (USDA), said the US is well-positioned to be a major supplier of food to China's urbanising and increasingly affluent consumers. But China is now also seeking other suppliers lest it relies too much on the US.

In the first quarter, agricultural products were the biggest US export item to China, accounting for 19.7 per cent of American exports to the mainland, according to official US data. In 2012, US agricultural exports to China soared 42 per cent to US$20.83 billion.

"We are now at a key juncture where China is transitioning from a nation of villages and farmers to an urban-industrial society. As China becomes a nation of urban consumers there will be greater impetus to import agricultural products," Gale said.

We are now at a key juncture where China is transitioning from a nation of villages and farmers to an urban-industrial society. As China becomes a nation of urban consumers there will be greater impetus to import agricultural products

According to the USDA's forecasts, over the next 10 years China will account for 90 per cent of the growth in world soya bean demand, importing 103 million tonnes of the product by 2023. USDA projects China's corn imports will reach 19.6 million tonnes by 2023, which will make China the world's largest corn importer, while the US will be the world's largest corn exporter.

"The US-China bilateral relationship is important, as China is expected to account for 40 per cent of the increase in global corn imports over the next decade," said Julius Schaaf, vice-chairman of the US Grains Council.

Cotton and soya beans make up over 40 per cent of China's agricultural imports, while China is the world's largest importer of soya beans and cotton, accounting for over 60 per cent of global soya bean imports and 40 per cent of global cotton imports, said Colin Carter, professor of agricultural economics at the University of California at Davis.

China reversed its status as a net agricultural exporter to a net importing country in 2004, said Carter. The US enjoys an agricultural trade surplus with China, which exceeded US$20 billion in 2012. Based on dollar value, the top five US agricultural exports to China are soya beans, cotton, corn, hides and swine offal in that order, said Carter.

If China's annual per capita consumption of poultry meat were to grow to Japan's present level of 17kg, the additional poultry needed would equal all current world exports of poultry meat, said Kevin Brosch, trade consultant to the USA Poultry & Egg Export Council, the national association for the US poultry and egg export industry.

China has had problems with food safety, including melamine in its milk supply, and is currently trying to deal with the H7N9 strain of avian influenza, Brosch pointed out: "Because of these problems, there is a perception, even among the Chinese consumer, that food produced in China is not always safe and there is often a preference for imported products.

"Our industry sees China as the most important export opportunity. China's huge population and growing prosperity mean a large growth in demand for poultry meat, and China's problems of limited arable land and food safety concerns make importation of poultry meat from the US a logical choice."

Gale said Chinese officials assert the potential demand from China is so large that the country's imports would outstrip the capability of world markets to supply the country. "They also express concerns that reliance on imports of any particular commodity will leave the country vulnerable to global price fluctuations and manipulation of prices by other countries or multinational companies," he said.

Wary of relying on a single country, Chinese authorities have a strategy of diversifying agricultural trade partners, which is likely behind Chinese initiatives to develop Argentina and Ukraine as potential suppliers of corn imports in 2012, Gale added.

In 2000, the US exported US$1.7 billion of agricultural products to China; that figure leapt to US$25.9 billion in 2012, said Veronica Nigh, of the American Farm Bureau Federation.

Since China's accession to the World Trade Organisation in 2001, US beef exports to China had grown 235 per cent to US$343 million by the end of 2012, while US exports to China of pork products have jumped 1,638 per cent to US$886 million.