Global food prices hardly need another reason to rise. But talk that China may have to increase wheat imports again this year due to poor harvests has added to market jitters, with wheat prices this month around 2½-year highs. Like so many other commodity markets, those for grains may have to get used to a hungry dragon.
Some perspective is needed. China's wheat imports rose to 1.4 million tons in the year ending June 2010, according to the International Grain Council, up 260% from a year earlier. Corn imports could jump fourfold this year, it forecasts. Dramatic that may seem, but China still only accounts for 1% to 2% of total world imports of both commodities. By contrast, its imports account for 60% of global trade in soy beans.
China's wheat imports are volatile; as recently as 2004-2005, they were as high as 6.8 million tons a year. The true effects of recent poor weather won't be known fully until later this spring. Changing diets could reduce pressures: the United Nations Food and Agriculture Organization says Chinese wheat consumption per capita has fallen in the last decade.
Meanwhile, Robert Ash, an economics professor at London's School of Oriental and African Studies, points out that China's need to produce 580 million tons of grain by 2020 to attain its goal of remaining 95% grain self-sufficient isn't outlandish. It produced 546 million tons last year. But he also points out headwinds. Water scarcity and land shortages are growing problems in China, while crop yields have stagnated.
That leaves the impact on wheat uncertain. Tensions could become apparent in corn markets first, given that commodity's use as animal feed. And if China does need to increase corn imports, much may need to come from the U.S, the world's leading producer.
A chance for closer Sino-U.S. ties and to shrink America's trade deficit? Maybe, but demands on U.S. corn are already high, with the growing use of biofuels. Instead, rising Chinese demand could turn into yet another source of tension.
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