China has long sought to maintain self-sufficiency in
the production of basic foods, but with its large population and
rising living standards, China’s demand for grains and oilseeds
is outpacing its ability to produce them. China has already become
the world’s largest soybean importer and is expected to become
a significant grain importer as well, with profound impacts on global
commodity prices.
In recent years, China’s grain production has
lagged behind domestic demand, the result of unfavorable weather,
loss of grain
area to more profitable crops and urbanization, removal of price
supports for low-quality grain, and retirement of environmentally
fragile land. Huge grain stockpiles accumulated during the late
1990s allowed China to avoid imports and to even export grains,
but those reserves now appear to have been drawn down to critical
levels. Sharply rising prices in late 2003 signaled tighter supplies
in China at the same time that markets in the United States and
other countries were also tightening. Chinese officials responded
by restricting corn exports in 2004, purchasing wheat to replenish
government reserves, and introducing direct subsidies for grain
producers.
China has quietly become the world’s largest importer of soybeans.
Although soy-based foods, such as tofu, have long been mainstays
in the Chinese diet, it was only during the 1990s that demand for
soybeans took off. Livestock producers began including more high-protein
soy meal in animal feed rations, and Chinese consumers developed
a taste for soy-based cooking oil. Demand outstripped China’s
production capacity, and China now relies on imports for more than
half of its soybean use. China’s demand has become a key
factor in the world soybean market.
Chinese officials would prefer the country to rely
less on imported grain and soybeans, but China cannot be self-sufficient
in all
food
products. Boosting soybean production would entail a reduction
of corn output since the two crops compete for the same land area.
In 2004, officials sought to boost production of grains. Production
did rise in response to higher prices, subsidies, and good weather,
but low profitability, dwindling water supplies, and loss of farmland
to urbanization will prevent China from attaining grain self-sufficiency.
Chinese farmers could produce enough grain and soybeans to meet
all of China’s needs, but they would have to divert land
from production of horticultural crops, orchards, livestock, and
aquaculture,
which earn much higher returns per hectare.
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