Report Highlights

In the first half of 2008, China experienced a negative trade balance in agriculture for the first time in years. There are a number of factors influencing this reversal: appreciation of the Chinese Yuan, government export restrictions, and domestic demand from an increasingly affluent middle class. Oilseed and vegetable oils increased over 100 percent, to almost $20 billion, while pork was the largest mover with an increase of 1300 percent during the first half of 2008. Post estimates that China to continue to be a net food importer for the remainder of 2008 and into 2009.

Current Outlook

In the first half of 2008, China’s food imports exceeded its exports for an extended period for the first time in recent history. In the past, any agriculture deficit was temporary and closed within a matter of a few months. However, China’s negative balance of trade in agriculture in 2008 is expected to last until at least the end of this year. Agricultural imports sky-rocketed 72 percent to $29 US billion in the first half of this year, while exports climbed 13 percent to $22 US billion. Oilseeds and vegetable oil products were China’s largest import segment and experienced a large jump in value due to prevailing international prices. Thanks to various measures to export restraints, grain exports, mainly of rice and corn, dropped 72.8 percent (to 1 million tons) and net imports dipped 3 percent (to 530,000 tons). Rising commodity prices have caused the Government of China (GOC), which has long worked for agricultural self sufficiency and is refocusing on a broader concept of food security, to place anti-export measures on major crops and import increasingly more commodities to meet its growing demand.

Major Movers

Compared to the first half of 2007, there were import increases across many categories in 2008, including oilseeds, vegetable oils, meat, and intermediate products. The main exceptions to this increase were in wheat, minor oilseeds (sunflower, safflower, and cottonseed), sugar, and certain prepared foods. The value of oilseeds and vegetable oils rose over 100 percent to almost $20 billion. Pork was the single largest mover, with an increase of 1,300 percent in value, followed by soybean oilcake at 700 percent. The sharp increase in the world price of several commodities and an appreciating yuan caused the growth in volume to be slower than value increases.

Pork imports to China rose sharply in 2007 as the United States leapt from a distant third with very little market share in 2006, behind Canada and France, to first in 2008 by seizing a 57 percent share of China’s total pork imports. This market expansion is still small relative to China’s massive production, but played a significant role in international markets. Disease outbreaks, escalating feed prices, and environmental protection measures hammered the industry, forcing Chinese consumers too look else where for their favorite meat.

If current trends stay in place, this deficit is expected to continue for some time. In terms of value, China's main agricultural imports are primary products (grains, soybeans, and edible oils), while its major exports are value added products (fish and fish products, vegetables, some grains, and fresh and prepared fruits and vegetables). This report focuses specifically on items listed under HS Code Chapters 1-23, excluding code 6, as these are typical food items.

Background

China’s long struggle with agriculture self-sufficiency, stemming from famines in the middle of the 20^th century, and their boom in wealthy and middle class citizens has lead to the current complicated agriculture and food policy environment. The GOC places self-sufficiency and food security in food production as a top national priority and is uneasy about deficits in general and the oilseed complex, in particular. Within this policy, the most extensive support is given to domestic production of grains, while processing of primary and intermediate products for domestic use and export is a key development tool. In the past year, as international prices has soared, China put export barriers on grains to maintain local supplies and moderate prices. However, at the same time, prices for oilseeds, vegetable oils, and other products sourced globally rose quickly. Thus, imports of certain commodities soared while Chinese exports of processed products only gradually increased.

Post estimates that this large deficit will remain for the next few quarters but may diminish rapidly, depending on international prices. Some forecasts predict that imports may have reached a plateau and will resume average growth trends. Reliable forecasts of exports are difficult as Chinese exports vary greatly from year to year and is not as consistent as imports.

Total Foodstuffs Import/Export Comparison (Monthly: Jan-06 Jun-08)

Further Reading

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