China will rapidly become a net importer of corn over the next few years, according to a U.S. Grains Council delegation that visited the country in March. USGC president and CEO Kenneth Hobbie, who returned from a tour of Asia recently, said he didn't have figures on what the development would mean to U.S. corn producers, “but I see us moving rapidly toward an event that will cause a change in our trading patterns over the next two or three years.”
According to USDA, China's exports of corn have dropped from 15.2 million metric tons in 2002-03 to a projected 4 million metric tons for 2004-05. The country's imports this year are projected at 200,000 metric tons.
During the last two weeks of March, Hobbie and other USGC officers visited emerging markets in Indonesia, Malaysia, China and Vietnam to evaluate the level of economic development there and the level of market-building efforts needed. The officers discussed their trip during a teleconference on April 5.
Vic Miller, an Iowa corn farmer and treasurer of USGC's board of directors, said lack of infrastructure continues to be a major problem overall in the four countries, but it's not an insurmountable one. “Roads are not in the best shape, and bulk shipments cannot be easily handled. In the short-term, containers are probably the best bet, cost-wise and for meeting the demands of the customers in that area.”
Miller said that DDGs, a feed source that is a by-product of ethanol, “are the bright spot in the area. They are getting a great deal of attention. People are beginning to understand and realize that this is just not an energy source, but a protein source as well. With the rise of the ethanol industry in this country, it's imperative that we find a home for all those DDGs or we're going to have a problem in our own ethanol industry.”
He said that value-added corn “is an area that we could really hit a home run with. The entire region is seeking high starch and high oil. They want the traits that U.S. producers provide. Economies are starting to recover and as people have more disposable income, they increase protein in the diet, which means more milk and eggs are consumed. And if that's the case, we're going to have more corn in that area to feed livestock.”
Major competitors in the region are local growers, according to Miller. “Of course, every government is going to take care of its own people first. But the local corn grown isn't a huge amount, and aflatoxin is a problem with local corns. So they are not going to be that stiff a competitor.”
Indonesia's transportation system is a bump in the road toward new markets for U.S. growers, according to Miller. “It's going to take a lot of work, but they fully understand the value of U.S. corn, and they are importing a great deal of it. Corn gluten meal is also viewed very favorably in the country. In fact, there are about 700,000 metric tons of corn gluten meal in the market.”
Indonesian officials told USGC they intend to become self-sufficient in food production in about 10 years. “However, they've been saying this for the past 30 years. One problem is the lack of disposable income. It's going to be a while before we move those people to a higher protein diet.”
China's assertion that it would become a net importer was echoed by private industry as well, according to Miller. “This is the first time we've gotten that message. It isn't a matter of if, it's when. Sometime within the next two years, China is going to be an importer.”
The change signals China's shift from self-sufficiency to self-reliance, according to Miller. “To us, the terms mean the same thing. But in China, self-sufficiency means going to any means to not import a specific product because enough will be grown to feed the entire population. Self-reliance means that some will be grown and some will be imported.
“The government is also predicting that 250 million people will relocate from rural areas into coastal cities over the next 15 years. As that happens, the protein demand is going to skyrocket for those people. We're also expecting a huge increase in China's ethanol industry. Four years ago, they had one ethanol plant. Today they have five.
“Another bright spot in China is the development of its dairy sector. They understand that corn is going to be the fuel for that sector. There are some problems in that their form of silage is just the corn stalk. That's just an educational process that we have to undertake in China.”
The group also visited several freshwater and saltwater aquaculture operations in Vietnam. USGC officer Paul Williams, a barley producer from Washington state, said the freshwater ventures use formulated feed, “so we will be looking for opportunities there to work with feed millers. The one saltwater operation we went to raises grouper. They were a freelance operation that feeds trash fish. While they were making a good profit doing that, we don't foresee much building in that market for feed grains.”
In Malaysia, USGC is recommending research programs to show the benefits of feeding high quality corn to the broiler and livestock industries. “We can also work with consultants to show the opportunities of importing container shipments during this time of high freight rates.”