Projecting China's Ag Imports: Differing Opinions

China projected that its imports of farm commodities will decline over the next decade, the mirror image of USDA predictions that China's imports will keep growing. 

China's Academy of Agricultural Sciences (CAAS) and USDA both release 10-year projections of Chinese agricultural supply and demand at their outlook conferences each year. USDA released its projections to 2033/34 for China (and for all other countries) at the USDA Agricultural Outlook Forum in February. USDA projections are available online. CAAS released its projections this week at the Ministry of Agriculture and Rural Affairs China Agricultural Outlook meeting in Beijing.

CAAS's projections were predictably bullish on China's grain production outlook. CAAS predicts that grain output will rise from 695 million metric tons last year to 704 million metric tons in 2024 and to 766 million metric tons in the 2033/34 marketing year. The 71-million-ton increase would easily meet China's target of increasing grain production capacity by 50 million metric tons.  

China's projections imply steady area planted in grain, so gains in grain output will be achieved by raising yields. CAAS expects growth in grain yields to accelerate. CAAS projects that grain yields will grow 585 kg per hectare (10 percent) over the next 10 years, faster than the cumulative 469-kg growth over the last decade. This projection goes against the general pattern of decelerating growth of crop yields around the world.

Projected by Chinese Academy of Agricultural Sciences, April 2024.

CAAS said the "tight balance between supply and demand" in grain will continue, but "pressure will ease." Imports will fall and China will attain 91.5 percent self-sufficiency in grain by 2033.

CAAS is confident that policies designed to reduce reliance on imported soybeans will work. CAAS expects soybean output to increase at a blistering annual rate of 6.4 percent over the next decade as both area and soybean yields grow at a robust pace. CAAS expects soybean use in China to barely change over the next 10 years. CAAS projects a decrease in soybean imports from near 100 million metric tons in 2023/24 to just 78.7 million metric tons in 2033/34--reverting to the volume imported in 2014. In contrast, USDA projected that China's soybean imports will grow to 138.3 million metric tons in 2033/34.

Projected by USDA and Chinese Academy of Agricultural Sciences in 2024.

China and U.S. projections of China's corn imports also diverge. CAAS projected that China's corn imports will drop dramatically in the next 2 years and eventually fall to 6.8 million metric tons in 2033/34. USDA projected a gradual increase in corn imports to 26 million metric tons in 2033/34.

Projected by USDA and Chinese Academy of Agricultural Sciences in 2024.

CAAS projects that wheat imports will fall to 4.85 million metric tons in 2033/34, while USDA projects 9.67 million metric tons. CAAS projects rice imports of 3 million metric tons in 2033/34, while USDA projects 4.4 million metric tons. 

CAAS expects pork production to remain steady at a "reasonable level" while poultry output grows 1.7 percent annually, beef output grows 1 percent annually, and sheep meat grows 1.2 percent. Milk output is projected to grow at a rapid 4.1 percent annual rate, and aquaculture output will grow just 0.9 percent. 

According to CAAS, China will succeed in diversifying the sources of its agricultural imports and will progress in "high-level" opening of its economy with continued growth in agricultural trade. 

CAAS expects agricultural prices to be on a rising trend. This point seems meant to reassure Chinese producers with rising production costs that they will be able to maintain their profit margins. CAAS asserted that the linkage between Chinese and international agricultural commodity prices will weaken as China expands its domestic output. This is wishful thinking intended to assert China's independence from American commodity markets and to assert China's role as an "agricultural power"--a theme of last year's China outlook conference. 

In fact, the linkage between Chinese and international prices seems to be strengthening. Weak corn, wheat and soybean prices due to diminishing impacts of the 2022 Ukraine invasion spike and Brazil's exporting of commodity price deflation are being felt in Chinese markets. Conversely, strong Chinese rice prices reflect a tighter international rice market after India's restraint of exports last year.

Disease is China's Hog Industry's No. 1 Problem

Disease is the biggest of 10 problems facing China's pig farms according to a 2023 article in the Chinese industry periodical Pigs Today (今日养猪业). The author, a member of a swine industry commission, identified a cocktail of viruses and bacterial infections that keep nearly all swine herds unhealthy. Another article in the same issue focused on disease problems listed the same diseases, warned that diseases are becoming more common, new virus strains are appearing, and pigs are periodically poisoned by mycotoxins in feed. 

Moreover, disease contributes to other problems identified by the Pigs Today author. Diseases undermine productivity, raise production costs, reduce the Chinese industry's international competitiveness, contribute to overuse of antibiotics, and epidemics are usually the cause of cyclical gyrations in the industry.

The pig-problem author pointed to African swine fever (ASF) as the most harmful disease and described the ASF situation as severe--even though China has not officially reported any cases since a handful in early 2022. ASF no longer kills pigs en masse as it did 5 years ago, but the virus spread widely in northern provinces each of the last two winters and moved southward before warming weather brought relief. 

A year ago there was controversy about a warning of widespread ASF infections issued by a Chinese futures analysis firm. Another surge of ASF infections during the past winter remained largely covered up. 

A securities company's February 2024 field trip report on the aftermath of severe disease outbreaks in Shandong Province during October-December 2023 found that severe epidemics each winter have driven many swine producers out of the market in Shandong. The province has many slaughterhouses but relatively few pigs, so Shandong imports a growing number of animals from other regions. The survey team visited a facility that specializes in butchering sows that have produced only one litter of piglets. Sows were said to be cheap (just over 6 yuan per kg) due to disease, and the enterprise's largest supplier of culled sows is China's largest hog producing company. (According to the report, sows having produced just 1 litter have a strong flavor preferred by older consumers; older sows have tougher meat).

Sichuan Province's animal husbandry association issued a document in December warning of the risk of the ASF epidemic spreading from Shandong to Sichuan and demanded that the Sichuan Province agriculture department restrict shipments from the affected region. A recent field trip report to Sichuan and Guizhou found those areas are protected from the spread of disease due to their isolated geographic location, but they also suffered severe disease outbreaks during 2023.

The Pigs Today article on swine disease said ASF and PRRS (aka "blue ear disease") are the two most complex and difficult diseases to deal with on pig farms and cause the greatest losses. PRRS has been in China since the 1990s and caused havoc during 2007 but has rarely been mentioned by authorities since then. The disease article also called out other decades-old diseases: porcine epidemic diarrhea (PEDv), classical swine fever, pseudorabies, foot and mouth disease, and swine influenza. 

Many problems contribute to the growing disease problem: import of infected breeding stock, the proliferation of vaccinations--including use of unapproved vaccines containing live viruses--and indiscriminate use of antibiotics contribute to destruction of immunity, mutation and recombination of viral strains. The disease article's author warned that excessive disinfection destroys beneficial flora, damages pigs' mucosal barrier and stresses pigs.

The shift to large-scale company-owned farms was supposed to improve biosecurity, but the author pointed out that the technology and skills of workers and managers have not kept pace. Construction and management of pigs in such facilities is not based on behavioral features of pigs, he said, and there is a lack of individualized disease prevention that leads to frequent emergencies and safety accidents. Total enclosed, high-density, and lack of natural light lead to reduced resistance to infection. He said procedures for feeding, management and environmental control are not always followed on such farms. The author observes that PRRS is often spread when swine are moved between farms owned by the same enterprise. Large farms and high-rise "cluster" farms have higher incidence of PRRS, the Pigs Today author said.

The number-2 problem is cost, but this is also related to disease. The author said high cost of feed--attributed to the excessive cost of corn, soybean meal, and wheat bran in China--is one of the factors that pushes production costs one-third higher than those in North America. He also pointed to costs of disease prevention and veterinary treatment. The author said hog production costs for the two largest producers rose about.4 yuan per kilogram after ASF arrived. The pig disease expert pointed out that poor quality feed can damage animals' physiological function. Adequate protein in feed promotes healthy internal organs, reducing the ASF infection rate. China's pigs suffer when authorities restrict imports of feed grains and oilseeds to promote so-called "food security."

Chinese Crackdown on Meat Crimes: Rinse, Repeat

China launched a crackdown on illegal practices in livestock production last week. The 8-month campaign will address problems that have persisted for decades: 

• Illegal use of muscle-promoting chemicals like clenbuterol
• Trading in meat from animals that died of disease
• Operation of illegal slaughter facilities 
• Injection of water, medications or other substances into animals before slaughter
• Production and sale of counterfeit beef, mutton, and donkey meat products
• Use or sale of livestock and poultry products of unknown origin lacking inspection certificates

According to the April 4, 2024 announcement on China Central TV (CCTV), the State Council's Food Safety Office, the Public Security Bureau, Ministry of Agriculture and Rural Affairs, and State Administration of Market Supervision issued a circular ordering local officials to carry out an 8-month "special rectification" targeting illegal behavior in meat production. 

Comments posted on "The Paper's" announcement of the crackdown observed that:

• "We hear this all the time, repeated bans, endless!"
• "Bans are not enough; punishment is not enough; publicity is not enough; problems must be traced to the roots"
• "Violations will continue as long as rewards are too big and punishments too light"
• "Why not check the factories producing the [banned chemicals]?"
• "You should check the school cafeterias"

Three years ago, a March 15, 2021 CCTV exposed widespread use of clenbuterol and other substances in sheep farming. CCTV asked ""Why is it repeatedly banned?" noting China's agriculture ministry had launched a major crackdown a year earlier. CCTV revealed that farmers received warnings from village officials of impending inspections. More crackdowns were announced by provincial authorities in Hebei, Henan, Beijing, Tianjin and Shanghai the day after the 2021 CCTV expose was aired.

In 2011 CCTV exposed collusion between farmers, slaughterhouse officials and pig traders to hide use of clenbuterol in muscular "body builder pigs" supplied to prominent meat company Shuanghui. The CEO of Shuanghui issued public apologies and promised to transition from being a "killer of pigs" to a "raiser of pigs." In 2013 Shuanghui's CEO got the green light to buy U.S. company Smithfield Foods. 

Crackdowns on illegal slaughter facilities and sale of meat from diseased animals date back at least to the 1990s.