U.S. corn exports to China

Farm Forum

BROOKINGS — China’s approval of Syngenta’s MIR 162 biotech trait and the reestablishment of that country as a U.S. corn buyer is good news for U.S. producers, said Kim Dillivan, SDSU Extension Crops Business Management Field Specialist.

He explained that the recent safety certificate issued by the Chinese regulatory authorities for the Agrisure Viptera trait (MIR 162) marks the potential end of a year-long disruption of U.S. corn shipments to China.

“This formally grants import approval for corn and corn by-products containing MIR 162 into China,” Dillivan said.

MIR 162 is a biotech trait used in various corn hybrids to control several above-ground insect pests.

U.S. Corn Exports to China

Since late 2013, China has routinely rejected U.S. shipments of corn allegedly containing traces of MIR 162. According to reports, MIR 162 was first detected by Chinese officials in November 2013 in corn shipments from the U.S.

Corn containing MIR 162 has been approved for production in the U.S., Argentina, Brazil, Colombia, Paraguay, Uruguay and Canada. Corn containing the trait has also been approved into major corn import markets, such as the EU, Japan, South Korea, and Mexico. Syngenta first submitted MIR 162 for Chinese approval in 2010 but for unknown reasons that request was not granted until late 2014.

“As a result, China began rejecting shipments of U.S. corn in December 2013 and by January 2014 U.S. corn exports to that country had essentially ended,” he said.

China’s Demand for Corn

Chinese consumers in the past have obtained a large portion of their dietary carbohydrates from vegetable sources such as cereals, beans, and tubers.

Prior to 1980 sources of protein in the average Chinese diet consisted mainly of fish, shellfish and some pork.

“However, increased urbanization, a higher average income and an improved standard of living have led to a significant increase in China’s per capita meat consumption (especially poultry and pork),” Dillivan said. “This increase in the demand for livestock products has also resulted in a greater demand for cereal grains to be used as feedstuffs.”

Before 2008, Dillivan explained that China was not a major importer of U.S. corn (Figure 2). “During this period, China imported very little corn and was actually a net exporter of this grain. This was partly a result of Chinese livestock producers satisfying some of the demand for livestock feedstuffs with crop residues, forages and other non-grain feeds,” Dillivan said.

Chinese producers also grew corn for economic reasons. Compared to other crops, such as soybeans, corn was a higher yielding and more profitable crop.

Outlook for U.S. Corn Exports to China

China’s corn consumption since 2005 has equaled or been slightly less than their domestic production. A recent shift in the Chinese livestock sector however – more specialization and a substitution of commercial feeds for forages and crop residues – has increased the demand for cereal grains as livestock feed.

Other factors that will continue to influence China’s demand for corn Dillivan said include its population growth and an increase in per capita meat consumption.

Additionally, China recently announced a renewed commitment to securing food security for its population of 1.355 billion. “This strategy includes a willingness to increase the importation of cereal grains to be fed to livestock and less emphasis on domestic corn self-sufficiency,” he said.

Figure 2 shows the effect of China’s renewed commitment to import U.S. corn.

In the marketing year 2011/2012 China imported more than 5 million metric tons (MMT) of corn from the U.S.

Figure 2 also shows U.S. corn exports to China slowing in the past two marketing years. Dillivan said this is likely a result of the relatively high U.S. corn price.

However, Dillivan said imports of only 4 MMT in 2013/2014 marketing year reflect China’s refusal to import U.S. corn for most of 2014 because of MIR 162.

“Now that U.S. corn prices have declined and MIR 162 has been approved, China can again import U.S. corn to meet their needs,” he said.

Although historically a net exporter of corn, Dillivan said China’s domestic consumption of corn is projected to overtake the country’s production of this grain as early as 2016.

“According to a recent outlook report, USDA anticipates the gap between China’s corn consumption and production to continue to widen each year,” he said.

With China’s increased demand for livestock products driving corn utilization, a modest increase in yields and fixed acreage suitable for cultivation limits that country’s domestic corn production.

The USDA projects that China will need to begin importing significant amounts of corn as early as 2016 and ultimately close to 22 MMT by 2023/2024.

This corn deficit will likely be filled by the U.S. and a few other corn exporting countries.

To learn more, visit iGrow.org.