When it comes to producing grain, livestock and dairy supplies, China remains self sufficient. But it's demand for soybeans affects world markets. China's boom.
The global increase in grain and oilseed prices over the past 12 months can be explained by the world's lowest-ever grain-stocks-to-use ratio. Demand for grain has been increasing each year at an accelerating pace since 2000, so grain stocks have been liquidated globally to provide the balance between consumption and production. Producers have been responding to the rise in demand and, despite some poor yields (particularly in the EU and Australia), the largest world grain crop on record was harvested in 2007.
Grain
More than half of the grain stock drawdown over the past eight years occurred in China, where central reserves fell by two-thirds by 2007/08. Yet China has not started importing grain. If anything, it is a net grain exporter and is forecast to remain so in 2008/09 (USDA). Compared with its total grain consumption (over 380m tonnes per annum), volume of trade is minimal. Thus, China's drop in grain stocks has had little impact on grain values in the UK (or, indeed, anywhere else).
Meat and dairy
The Chinese population is rising by 0.5% per year. But simply increasing yields (and this is one thing China has been very good at) can meet this demand. Another issue is the impact of economic growth. China has doubled its wealth since 2001, and the population has built up an appetite for higher-value foods. Meat consumption has risen by a third in the last decade, led by beef, which has increased by 75%. Meanwhile, the consumption of dairy products has exploded by 400%. But China's livestock and dairy industries have managed to grow to meet this demand and remain self-sufficient, thus not affecting the UK's livestock market prices.
This self sufficiency raises the question of whether the country is impacting on the UK's agricultural prices at all. However, despite its commitment to food security, there is one commodity that China has not managed to grow in-house – soybeans.
Soybeans
China's imports of soybeans have mushroomed. Before 1994 it exported them, but it now imports over 35m tonnes, more than twice its soybean production and almost half of the entire international soybean trade. This quantity takes an area greater than the size of the UK to produce. This is where China has impacted on our grain and oilseed markets.
Over the past 45 years, China has invested heavily in agricultural research and development and now has over 60 research institutes. As a consequence, it has doubled its wheat yield twice (no other country has matched it), perfected double cropping with maize, cotton and rice, and raised agricultural output. Furthermore, every year, 2% of the rural population emigrates to urban life.
The Chinese have now invested in another agricultural research centre to study the biotechnology of maize and soybeans. One wonders what potential will be achieved when new soybean varieties are rolled out in a few years. Whether China ever manages to achieve self sufficiency in soybeans is anybody's guess but, in the mean time, its contributions towards supporting UK combinable crop prices remains firm due to its dependence on soybeans.
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