China Ag Imports Deflate

China imported $73.2 billion of agricultural products during the first eight months of 2016--but that total was down 7.2 percent from the same period last year. The volumes of some grain and edible oil imports was down 20-to-30 percent, but pork and beef imports continue to surge due to high prices in China.

The Ministry of Agriculture's analysis of the import data shows that grain imports during January-August 2016 totaled 15.9 million metric tons, down 30.8% from the same period in 2015. Imports of rice and wheat rose 18.9%, while imports of corn dropped 32.2%. Imports of corn substitutes dropped even faster: barley was down 59.2%, sorghum was down 29%, DDGS was down 44.1%, and cassava was down 28.7%. Cotton imports continued to shrink by 34.6%. Sugar imports were down 31.2%.

China agricultural imports, January-August 2016
Commodity	Imports	Change from last year
	1000 metric tons	Percent
Wheat	2,451	18.9
Rice	2,347	18.9
Corn	2,961	-32.2
Barley	3,027	-59.2
Sorghum	4,982	-29.0
DDGS	2,426	-44.1
Cassava	5,325	-28.7
Cotton	844	-34.6
Sugar	2,115	-31.2
Soybeans	53,993	3.1
Rapeseed	2,764	-11.5
Palm oil	2,601	-30.3
Rapeseed oil	453	-14.8
Sunflower oil	651	44.3
Soy oil	379	-21.5
Pork	1,138	160.0
Swine offal	953	85.3
Beef	400	47.6
Lamb/mutton	173	7.0
Milk powder	627	18.6

Soybean imports were one of the few commodities to post a gain in imports, but the increase was modest, at 3.1%. Sunflower oil imports were up too, as importers ramped up imports from Russia to supplement purchases from Ukraine. Rapeseed imports were down, as were imports of other edible oils. MOA does not mention a four-fold increase in peanuts from the United States and Senegal (430,000 metric tons this year). Nor do they mention 700,000 metric tons of sesame seed imports from Africa (up 19 percent).

China has whipsawed the global market by importing massive volumes and subsequently cutting them off. Cotton was the first commodity where this happened (see chart below). China's imports soared during 2011/12 as imports poured in to replace domestic cotton sucked into State reserves at high support prices. China piled up huge reserves through this process until 2014/15 when they eliminated the cotton price support, allowed the domestic cotton price to plummet and choked off cotton imports by shrinking the import quota.

A similar pattern is underway for corn, with a twist. Corn prices at least double those in the United States created huge incentive to import, but corn imports were tightly controlled by an import quota. Instead, Chinese mills and processors imported substitutes for corn that had no import quota limits--sorghum, barley, cassava, and DDGS. Now Chinese authorities are allowing their domestic corn price to plummet--as they did for cotton prices in 2014/15--and they are force-feeding their corn reserves to domestic producers. Antidumping duties on DDGS are helping to tamp down imports. In 2015, the government canceled the rapeseed support price and has been trying to offload old reserves of rapeseed oil. This month, they have been selling off old soybean reserves which may slow imports in later months. The peanut imports may prove temporary--many localities are targeting increases in peanut plantings as part of the structural adjustment program that will shift land out of corn production to alleviate the country's corn glut.

Wheat and rice prices are still being maintained at high levels--for now. The scarcity of wheat in the Chinese market this spring (because so much wheat is in government reserves) and widespread quality problems with this summer's wheat harvest bumped up this year's wheat imports. The government bought up early rice over the summer and has just launched its price support program for the fall rice crop. The amount of wheat and rice going into government stockpiles this year exceeds the volume imported.

China's imports of livestock products are increasing because domestic prices are high, and most of the world has abundant and cheap meat and dairy products available. Unlike the cotton and grain imports, the meat and milk imports may be a permanent fixture--there are no price supports for meats, there are no massive meat reserves, and China does not have the capacity to ramp up meat and milk production.

Unlike previous pork-price surges in China, record-high pork prices since last year have not prompted a rebound in domestic pork output. Thus, prices remain stubbornly high, creating great opportunities for exporters in Europe and the Americas. Beef prices in China stopped rising when authorities started opening their market to bovine meat several years ago. After removing the ban on Brazilian beef last year, that country has become the leading source of China's beef imports in 2016. China's lamb prices have fallen this year. Lamb imports are not as large as beef imports and grew only 7 percent this year.

The MOA statistics don't mention poultry imports, but other statistics show a 41-percent increase in 2016. China's domestic broiler chicken production is constrained by the ban on imports of U.S. and French birds which deprives their industry of "white-feather" grandparent breeding stock.

The MOA statistics also fail to mention a 25-percent increase in imports of alfalfa hay (to 1.1 million metric tons). This reflects another supply constraint--there aren't enough quality forage crops in the country to support a massive herd of dairy cattle.