The price of eggs in China, and other important facts for ag

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What is your connection to China? 

Grandma used to ask, “What does that have to do with the price of eggs in China?” 

And while a 5th grader can find it on a map, most people likely feel no connection.  On the other hand agriculture has a close connection. 

In addition to a myriad of foreign trade exchanges annually, educational exchanges, and a majority of Wal-Mart merchandise, China’s food consumption is rooted in US exports. And it would not hurt most farmers to know how eggs are priced in China.

Agricultural economists Bret Stuart and Richard Fritz of Global AgriTrends, a Denver-based market research firm, write in the current online issue of Choices Magazine that from “a meat, poultry, and livestock standpoint, China is a world superpower.” But instead of exporting, China has an extraordinary domestic production volume, and still needs to import.

USDA’s Foreign Agriculture Service estimates that 60% of the world’s hogs are raised in China, compared to 8% in the US.  For cattle, 23% of the world’s beef herd is in China, compared to 15% in the US.  Despite that level of production, China only claims 3% of global meat exports, compared to 28% for the US.  And while self-sufficiency is the national goal, there has been an increased level of importation of beef, pork, and poultry.

Because of the large livestock production, China has become a global producer and importer of feed.  71% of China’s growth in corn production is the result of more acres, and 29% due to higher yield.  And the economists say acreage growth has a limit.

Chinese consumers are paying a higher price for their animal protein purchases.  Stuart and Fritz report, “Meat price inflation in China has outpaced overall food price inflation in recent years. The calendar year 2011 saw a basket of retail meat prices rise by 24%; beef leg prices at retail averaged 35% annual inflation in November 2012 according to National Bureau of Statistics China….Chinese citizens’ ability to pay for food is outpacing the United States. A growing price disparity between domestic and imported foods leads to more imported meat, poultry, and dairy products. Any market with domestic prices well above U.S. prices or global prices will import products if access is granted. However, this stands in stark conflict to China’s self-reliance aims.”

China has the demand, the US has some of the supply, so what happens?  The economists say China was the largest market for US farm products in 2012 at $25.9 billion, a 38% increase over 2011. Interestingly, 5% of the purchases were for raw hides for processing and re-export.

Of the red meat imported by China, 39% was pork, but not hams, chops and loins, “Variety meat items such as ears, stomachs, and intestines bring a much higher value in China than here in the United States. Whole muscle cuts of pork have been imported for further processing into sausage and other processed products.”  In the poultry trade, 85% of US chicken paws are exported to China, but an attempt to export leg quarters resulted in trade sanction for alleged dumping.  In beef trade, China closed its doors to US beef following the 2003 discovery of a dairy cow with BSE, and the market has not been reopened.

China’s political policies and food needs are not on the same track say Fritz and Stuart.  China has a policy of self-sufficiency, low prices, and compliance with global trade rules are in conflict with each other. In the midst of that, they feel the current agricultural trade relationship with the US will grow, but with a strengthening of trust between the two.  They also say the USDA’s food Safety and Inspection Service along with the Food and Drug Administration should be allowed to do their scientific work without Chinese political influence trumping it. And thirdly China should embrace international standards.

Summary:

China has 1.3 billion people to feed and in a country with a policy of food self sufficiency, that can create some shortage issues.  The citizenry has economic power to purchase meat proteins and China is a global leader in pork and beef production, but also must import meats as well as import feeds for its livestock herd.  While the self sufficiency is not being met, China is also trying to produce a low cost food, but at the same time violating global trade rules which it recently accepted.  For US producers, China is expected to be a regular customer of feed grains, soybeans for livestock feed, and meats.

Source: FarmGate blog



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