Iowa State Researchers: U.S. Ready To Meet China’s Surging Demand Import Demands

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hina’s demand for U.S. corn is surging. And, according to researchers at Iowa State University’s Center for Agricultural and Rural Development, the U.S. is ready to meet that demand.

“The recent derecho caused a great deal of damage to Iowa’s corn and soybeans, but total predicted national corn production for the 2020/21 marketing year is still the largest ever,” said Dermot Hayes, a professor of economics at Iowa State. “So, yes, the U.S. has the capability to deliver on China’s record-setting demand,” he said.

China’s surging corn demand isn’t the only good news for U.S. farmers either. In May, Hayes, with Xi He and Wendong Zhang, authored a study that found China would import about $18.6 billion worth of U.S. agricultural products in 2020, which would ultimately fall short of phase one trade goals.

Now, however, Hayes, He, and Zhang have updated the study, “China’s Agricultural Imports under the Phase One Deal: Is Success Possible?” with the most recently available data, and they now predict that China will import $21.63 billion in agricultural products from the United States in the first year of the phase one trade deal, an increase of nearly $3 billion from May’s prediction.

“Our prediction is still a little behind the $36.5 billion target, but recent market signals indicate that China has record demand for U.S. corn, poultry, and pork,” said Zhang.

China’s increased demand for U.S. corn and pork relates to an outbreak of African swine fever that started in 2018 and has decimated China’s hog inventory. “It’s generally believed China has lost around 40%-60% of its hogs since 2018,” said He. “China’s surging corn imports as of now are driven by its feed demand while it rebuilds its hog inventory.”

Zhang said it would take about two years for China to rebuild its hog inventory, but U.S. farmers don’t need to worry that China’s demand will slow down significantly after that. “China’s national ethanol mandate was suspended earlier this year due to a lack of corn,” Zhang said. He also noted that China purchased large quantities of U.S. corn for ethanol production before the trade war. “If China continues developing its ethanol industry, the demand for U.S. corn will not slow down after its hog inventory is rebuilt,” Zhang said.

China’s increased need for U.S. corn may cause them to increase their corn tariff rate quota, according to Hayes. “Tariff rate quotas are policy instruments that give countries the option of restricting imports if they want,” Hayes said. Simply put, if China increases its corn tariff rate quota that means the U.S. can export more corn to China this year and China won’t impose extra tariffs on it. “China is very likely to exceed its tariff rate quota of 7.2 million metric tons this year,” Hayes said. “U.S. and Ukraine corn farmers will benefit most if China does decide to increase it,” he said.

U.S. soybean farmers are also starting to see increased demand from China, fitting what the researchers note is a seasonal pattern-U.S. agricultural product exports to China are higher from September to March. USDA daily export sales report shows new soybeans sales to China reached a minimum of 13.2 million metric tons for marketing year 2020/21 as of August 31.

China’s farmers are also currently dealing with production troubles that may further extend the need for U.S agricultural products. Since June, severe floods along the Yangtze River have wreaked havoc in China, severely affecting agricultural production in Chongqing, Hubei, Hunan, Anhui, Jiangxi, Jiangsu, and Zhejiang provinces. In 2019, these seven provinces produced just over half of China’s rice, as well as about one-third of its pork and vegetables.

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