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China Wildcard on Imports Could Have Impact

China Wildcard on Imports Could Have Impact

Rabobank analyst says the Asian giant could double imports in 2011.

Talk to anyone in grain risk management and the demand discussion eventually turns to China. This giant market which is growing at 8% a year or faster, has a growing population of middle class citizens who want more protein in their diets. To achieve that, the country's ag industry has to import more feed grains to produce more meat.

According to a report from Rabobank International, reported by Dow Jones, China's corn imports this year could rise many times over last year's volume. According to the report, analysts admit it's hard to estimate how much China will bring in, however one Rabobank expert does say the amount could be "several times larger" than last year.

China has rebounded production after facing a foot-and-mouth outbreak and swine flu concerns, rebuilding herds of pigs to boost pork output. To fatten up those animals the country will need more corn. Estimates have the Chinese hog population growing 1% this year, which will be the key driver in corn imports.

As with other commodities, demand pressure is mounting. Another change in China is the rise of larger hog operations which are pushing out smaller herds. Those smaller herds rely less on corn for feed, using rice and wheat, but large-scale commercial herds are fed more corn due to it's increased energy efficiency.

To put things in perspective, last year China imported 1.6 million metric tons of corn, a 17-fold increase over 2009. So far the country has already purchased more than 1 million metric tons - according to reports.

Rising demand from China will put pressure on a corn crop that's already at a 53-day record low level. Those pressures combined with continued lagging crop progress will boost market volatility into the rest of 2011. Talk with your risk management adviser to make sure you've locked in key opportunities for the rest of year.

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