When China abandoned its soybean self-sufficiency quest almost 20 years ago and started importing the oilseed feeding its hunger for livestock, it transformed the industry. Today, it's poised to do the same for corn.
The world's most populous nation is expected to triple corn purchases next crop year and, by its own admission, become a significant importer by 2015, putting more strain on global food supplies at a time when inflation is gnawing away at economic growth and the population nears seven billion.
China has become the dominant force in the global soybean market since emerging as a buyer in the early 1990s. It is now the world's biggest importer and consumer, taking in some 55 million tonnes, or 60% of annual global trade. If the soybean scenario is a precedent for corn - and traders say all the signs point in that direction - benchmark corn prices in the United States, the biggest producer, could in the long term exceed the $8 a bushel record set in June.
US stockpiles are expected to fall to their lowest levels in 16 years in 2011/12, an ominous sign of how China's rising imports will squeeze supply. Demand for the grain, crucial to fatten the animals that feed the world's growing hunger for meat, shows no sign of abating.
Competition for supplies with Japan, the world's biggest corn importer, will intensify and farmers from as far away as Argentina will start planting more acreage while the amount of corn used to make biofuels could shrink.
Driving this seismic change in the corn industry is a fifth of the world's population, which has developed a voracious appetite for pork, poultry and eggs that China's government is striving to make affordable. For Beijing, high food prices are a potential trigger for social unrest it wants to avoid.
Last year, China returned to importing corn in earnest after years of blocking foreign grain, buying a record 1.57 million tonnes, up 18 times from the previous year, because domestic production just couldn't keep up.
China is likely to boost imports to four million tonnes in the 2011/12 crop year beginning October from an estimated 1.3 million this year, a Reuters poll showed.
Imports could be even higher, with one analyst forecasting China could ask for as much as 9 million tonnes, which would put it on par with Mexico, the world's second biggest importer.
Because of their market dominance, any changes to the food patterns in the United States or China will have big repercussions for the rest of the world, and grain prices.
Relentless demand has also driven China's domestic corn prices to an all-time high this month, depleting reserves to less than one month's supply.
In the long term, analysts say higher grain prices will provide a bigger incentive for farmers to boost corn production. Brazil and other South American nations are leading the way with investments and farm expansion.
Read the full article here.
Major global challenges are just decades away and today's reports on global warming, trading imbalances and escalating demand for resources are only the beginning. At Growth Green Agriculture, we know that we can show investors that socially responsible green investments can lead to both great profits and a better world for future generations. Our goal is to find new, ecologically responsible and profitable solutions to global environment dilemmas.
Growth Green Agriculture Plc is a UK based agricultural investments company specialising in emerging markets offering unique opportunities to invest in Ghana. GGAgriculture acts as consultant on green and socially responsible investments to the private and institutional investor community in Europe. http://ggagriculture.com/
