Many have projected that China would import a large quantity of feedgrains, especially after its WTO accession. However, China is unlikely to become a major feedgrain importer in the foreseeable future.
Increasing demand for animal products worldwide in the past three decades has led to a rapid expansion of livestock industries. This trend is expected to continue in the decades to come, according to a recently released report by FAO, World Agriculture: Towards 2015/2030, An FAO Perspective (Bruinsma 2003). Hence, globally, the next three decades will see a strong increase in demand for feed, especially, cereal feed.
On the other hand, it is noted that the rapid expansion of worldwide livestock production is to a large extent attributable to the remarkable growth of livestock industries in China. During 1989-99, world annual growth rate of total livestock production was 2%. Excluding China, this rate, however, was merely 0.8% (Bruinsma 2003, p. 161). Not surprisingly, the demand for feedgrains by China’s fast expanding livestock industries has subsequently attracted much attention.
Many have forecast that by 2000 China would need to import a large quantity of feedgrains to satisfy the strong demand and its import would be even much greater after its accession to the WTO. Some predicted that in 2000 China would require feedgrain imports of over 20 million tonnes. The fact is that in 2000 China exported over 10 million tonnes of feedgrains. Since 2000, China has been exporting feedgrains in the order of 10 million tonnes per annum. By July 2003, China had already exported some 8 million tonnes of feedgrains.
Deviations in projections from the realized actual observations are not something new. Nonetheless, some understanding of the causes that might have led to such deviations is useful. A detailed account on the possible causes is given in the report which we recently completed for GRDC on China’s feedgrains market, entitled China’s Regional Feedgrain Markets: Developments and Prospects (Zhou and Tian 2003). According to this report, fundamental to the discrepancies are problems of China’s data availability, data coverage, data reliability, model choice by researchers, and researchers’ understanding of some realities that are peculiar to China, such as diverse feeding practices and uncertain policy environments. These problems result in the derivation of different income elasticities, feed-meat conversion ratios, and animal product demand projections, which then lead to projections that differ between researchers or that deviate from the actual observations.
Some studies may have also overestimated China’s total feedgrain demand and feedgrain import requirements for the next couple of decades. According to some projections, China’s feedgrain supply in 2010 will be in the order of 280 million tonnes, while demand will be some 310 million tonnes. Thus, by 2010, China would require feedgrain imports of some 30 million tonnes or even more (for a more detailed survey of existing projections, see the GRDC report by Zhou and Tian 2003).
However, based on our own simulations, China’s feedgrain demand and import requirement in 2010 is likely to be much smaller than some earlier projections. Our simulation reveals that technological improvements in animal raising, income growth, and the export growth of animal products all have relatively greater impacts, compared to other simulated factors, on the demand for feedgrains. Assuming technological progress and income growth maintain their current rates to 2010, China’s demand for feedgrains is expected to grow by 25-30% by 2010, and so too will its domestic feedgrain production. China’s demand for feedgrain in 2010 will be around 202-207 million tonnes and the supply of feedgrains will be in the range of 198 to 203 million tonnes. The feedgrain import will be in the range of 3-4 million tonnes.
China may need to import more feedgrains if it experiences a faster per capita income growth and is able to export livestock products to the world market. Currently, consumer income growth and ability to export livestock products are the two major constraints on further development of China’s livestock industries. There has been a slowing down in consumer income increase in both urban and rural areas in the past several years. During 1997-2001, per capita income growth in urban areas was 7.4%, down from 24.2% during the previous five-year period (1992-96). In rural areas, it was only 3.2% during 1997-2001, down from 25.2% during 1992-96. The decline in income in rural areas is most notable, where 70% of the country’s population reside. On the other hand, China’s ability to export its livestock products to the world market, especially, to high-income markets, is limited due to the insurmountable barriers of SPS and TBT categories. In addition to these two variables, whether the Chinese will consume more livestock products or aquatic products remains to be seen when their income further increases.
Assuming that there will be a faster increase in consumer income and that China can increase its livestock product export (though both are unlikely in the near future), a further 5 million tonnes of feedgrain may be demanded and imported from the world market. This would lead China’s feedgrain demand in 2010 to being in the vicinity of 210 million tonnes and its import requirement to being still less than 10 million tonnes. This suggests that, in the near future, China is unlikely to become a large feedgrain importer. Coincidently, the recently released FAO report presents a similar view that China will not become a permanent large net cereal importer in the future (Bruinsma 2003, p. 71).
(Implications of feedgrain market developments in China on Australian industries are addressed in the report, China's Regional Feedgrain Markets: Developments and Prospects, which can be obtained by contacting GRDC on 02-62725525 or through its website at www.grdc.com.au).
Bruinsma, J. (ed.) 2003, World Agriculture: Towards 2015/2030, An FAO Perspective, Earthscan, London.
Zhou, Z.Y. and Tian, W.M. 2003, China’s Regional Feedgrain Markets: Developments and Prospects, Grains Research and Development Corporation, Canberra.