In a speech/essay in August 2013, the head of one of China's leading commodity analysis groups argued that China's grain self-sufficiency status is not as grim as it seems because big imports in 2012 mostly went into warehouses to build up inventories. China doesn't "need" to import grain, said Shang Qiangmin, director of the China National Grain and Oils Information Center.
Mr. Shang acknowledges that imports of "grain" by China's official definition--cereals, soybeans and potatoes--hit 80 million metric tons during 2012, including 14 mmt of cereals and 58 mmt of soybeans. This brings China's "grain" self-sufficiency rate down to 87.7 percent, well below the 95-percent threshold the Chinese government proclaimed as the minimum for "food security."
Mr. Shang implies that this ratio is misleading because it is the ratio of imports to consumption that is important. Although there are no statistics on grain consumption, Mr. Shang insists that domestic production of cereal grains is still close to being in balance with consumption. (Soybeans are another matter--just 18 percent self-sufficiency.) Despite the surge in imports, he claims that China is still 100 percent self-sufficient in rice, wheat and corn. He says the cereal grains imported during 2012 were added to grain reserves. Mr. Shang presumably knows this because his organization is affiliated with the National Administration of Grain which has numbers on grain reserves.
These grain reserve numbers are a "state secret" and are not released to the rest of us. Thus, the rest of us cannot know the true state of the Chinese grain market. We must pay a subscription to buy Mr. Shang's reports so we can see the change in grain inventories shown in the balance sheets in their reports on the presumption that Mr. Shang's analysts have inside information on grain reserves. Actually, the detailed statistics on grain reserves presumably provided to Mr. Shang's analysts probably are no better than ours since the grain depots who report their inventories routinely hide or double-count grain. (See the recent news on widespread corruption in the grain reserve system.)
Mr. Shang claims that China is still 100 percent self-sufficient in rice, despite becoming the world's largest importer of rice this year. Imports of wheat during 2012 filled a temporary deficit in feed grains that has dissipated this year. Corn demand is weakened by the slow global economy and low sugar prices that discourage industrial processing of corn, the government's order to scale back banqueting, and this year's avian influenza outbreak. Shang is optimistic that technological improvements will boost corn yields to keep up with rising demand. He takes a jab at "organizations from exporting countries" that have worked to sell corn to China for many years with no results. He also pokes fun at people who have predicted big corn imports in China for many years but act "more like fortune tellers than scientists."
Mr. Shang also admits that China has had to sacrifice any hope of self-sufficiency in soybeans and vegetable oils to maintain self-sufficiency in cereals. He says in the 1990s no one anticipated how much soybean imports would grow.
Mr. Shang surmises that China's support-price strategy is now moving out of sync with a long cycle in the grain market. Since 2008 China has been boosting support prices to increase farmers' incomes and stimulate production. While world grain prices were on the rise, Chinese prices moved roughly parallel to world prices. But now world prices are falling while China's are still rising, and big gaps are appearing between Chinese and world prices. This is the main force attracting grain imports, acknowledges Mr. Shang.