International trade with China and investment by the Chinese in the U.S. will continue to be big news, according to an outlook co-authored by John Grobowski and Kim Walker with the law firm of Faegre Baker Daniels.
“It is clear that China presents U.S. agribusiness with both opportunities and challenges over the next five years. At the same time, China investments in the U.S. itself will also increase, which will create more competition domestically for U.S. business interests. While there are restrictions in a number of states on foreign land ownership, there are ample opportunities for other China participation in U.S. agribusiness.
“Simply put, it is critical for large multinational agribusiness companies, as well as companies operating at a mid-market level, to establish and implement both an offensive and defensive China market strategy; and senior management teams need to be prepared to adjust those strategies as public policy in China and U.S., along with consumer trends and characteristics, change and evolve,” the two writers summarized in a report this week.
The basis for the report was Walker’s participation in a recent Department of Agriculture agribusiness trade mission to Shanghai. The trade mission was led by USDA Under Secretary Michael Scuse. State agriculture secretaries and commissioners for Iowa, North Dakota, Oklahoma and South Dakota were on the mission. Walker was one of about 50 other persons from a wide range of agribusinesses. Of course, there was a contingent of USDA staff along, too.
It was common knowledge by everyone involved in the mission that China is the U.S.’s top market for agricultural goods. The Chinese purchase in the neighborhood of $20 billion per year.
Several general findings were included in the report. Interesting points as authored by Walker, with input from Grobowski, were as follows:
- “The Chinese economy continues to grow at a strong pace, and consumer purchasing power is increasing.
- China does not have sufficient land and water resources to meet the food needs of the growing population.
- At the same time, China wants to be self-sufficient in corn, wheat and rice, but it is also the largest importer of soybeans.
- So to work toward food security for its citizens, the Chinese government recognizes the importance of biotechnology but still has not fully embraced its utilization.
- The government also is prioritizing the modernization of its agricultural system, which relies heavily on small segmented producers (as an example, more than 50 percent of hog production is from herds of 100 or fewer). This is a long-term focus with short-term challenges, but the government has set its third highest spending on agriculture.
- The resource and agricultural system limitations are resulting in China's support of international investment in agricultural and food production, including in the U.S., and significant investment resources are available.”
In addition to the general trends of investment in agriculture and food production to meet demand, Walker came back with opinions about sentiments and trends specific to food purchasing by the Chinese people. Bullet points of consumer trends are below:
- “A growing group of Chinese consumers are able—and choosing—to spend greater amounts on food, and pork remains a primary meat choice.
- The Chinese people have very strong concerns about food safety (in light of a number of significant incidents, such as melamine in baby formula), and they blame the Chinese government for this problem.
- Imports will likely continue of pork and poultry because of their strong demand as diet staples (with growth contingent on increasing consumer spending capacity), and beef has the largest meat growth potential (trade restrictions remain, but efforts to eliminate them continue).
- Chinese consumers enjoy U.S. food products and believe the products are safer; double-digit growths in purchasing demand is anticipated.”
Faegre Baker Daniels represents many of the world's leading food and agriculture companies, with more than 120 attorneys serving agriculture. Walker is the head of the firm’s Food & Agriculture Industry Group.
Various meetings were held as part of the trade mission with presentations and discussions including government officials and representatives of various companies with Chinese operations.