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China's agricultural imports to challenge market in 2016

Staff writer |
China's slowing economic growth has been well documented in the last year due to concerns that it could derail several industries globally.

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However, China's economic slowdown is not the primary cause for what is expected to be a significant decline in its agricultural imports in 2015 and 2016, according to a new report produced by CoBank's Knowledge Exchange Division.

Instead, the decline can be attributed to multi-year highs of supplies in several different commodities – corn, wheat, cotton, milk powder and soybeans.

The issue brief, titled "Don't Blame China's Economy for Its Slowing Agricultural Imports," notes that despite slowing economic growth, China's urban disposable incomes – which drive the country's food and agricultural consumption – are increasing 10 percent year-over-year.

In actuality, China's subsidization of its agricultural sector, which has yielded mounting stockpiles of commodities and strained storage capacity, is the real culprit leading to decreased imports in most categories.

"Conventional wisdom might suggest that it's the economy. It's an easy target because China is the world's largest importer of several different commodities," said Dan Kowalski, director of CoBank's Knowledge Exchange Division.

"But this issue has been brewing for years and is a result of China's drive to achieve food self-sufficiency. They've subsidized their agricultural sector to the extent that supplies have considerably outpaced increasing consumer spending and consumption."

The report cites U.S. Department of Agriculture figures, which anticipate that China will import 46 percent less corn, 34 percent less cotton and 35 percent less milk powder during the current marketing year.

Wheat, soybeans and other food grains are expected to rise, but by smaller margins than in prior years.

China's economic decline and ample agricultural supplies are expected to present near-to-medium term challenges. However, the country's continuing rural-to-urban migration trend, an emerging service sector and rising middle class bode well for future growth opportunities.

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