Big potential in China for U.S. corn, livestock exports
Recent government policy changes in China have the potential to boost U.S. agriculture, particularly the corn and livestock sectors, according to Iowa State University economics and finance professor Dermot Hayes.
Speaking at Kansas State University’s 2014 Risk and Profit Conference Aug. 22, Hayes said that most of China’s population density is also where the best agricultural land is and there have been recent signs that citizens in its rural areas are being encouraged to move to urban areas.
China is similar in size to the United States, but has the world’s largest population, estimated at 1.355 billion people as of July, 2014, according to the U.S. Central Intelligence Agency. That compares with India at 1.236 billion, the United States at 319 million and Russia at 142 million.
“In China, the amount of corn and soybeans planted is determined by the government” and not by market forces, Hayes said, plus China has about one-fifth of the per capita water resources that the United States has. Thirty percent of the pork in China comes from smaller “backyard” producers that readily quit raising pigs once they can afford a car to drive to the grocery store and to find employment.
Hayes, who is the Pioneer Hi-Bred International Chair in Agribusiness at Iowa State, added that while China’s Ministry of Agriculture has traditionally protected its farmers, China’s new Premier Li Keqiang has been quoted as saying that protectionism is a blind alley, and that free trade can help achieve a global economic recovery. Li was a pupil of free-market economist Li Yining and is the first Chinese premier to have a doctorate in economics.
“I don’t know how this will turn out,” Hayes said but noted that private Chinese firms spent more on U.S. investments in the past 15 months than in the previous 11 years. He cited the purchase of Smithfield Foods Inc. in 2013 as an example.
Smithfield, whose brands included such familiar U.S. names as Armour, Farmland, and its own namesake, was bought by Shuanghui International Holdings Ltd., the largest shareholder of China’s biggest meat processor. At the time of the sale, the company had grown to annual sales of $13 billion and had about 46,000 employees, according to published reports.
Hayes acknowledged however that despite signs of potential in China, the Chinese government owns much of the country’s farmland and does not disseminate accurate land use data which makes it difficult to get accurate information.
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