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China remains important customer and competitor for U.S.

GRAND FORKS, N.D. -- China's economy is slowing and evolving, but the world's most populous country remains an important market for Upper Midwest agriculture, according to a North Dakota professor. The fast-growing Chinese middle class -- already...

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GRAND FORKS, N.D. - China's economy is slowing and evolving, but the world's most populous country remains an important market for Upper Midwest agriculture, according to a North Dakota professor.

The fast-growing Chinese middle class - already more than 400 million - "is where the action is, in terms of the market," said Tom Wahl, a professor in the North Dakota State University Department of Agribusiness and Applied Economics.

Wahl spoke Oct. 24 in Grand Forks, N.D., at the annual NDSU Extension Service Agricultural Lender Outlook Conference. About 100 ag lenders attended the event, at which seven NDSU officials spoke on a wide variety of ag issues.

NDSU repeated the event Oct. 25 in Minot, N.D., and has scheduled another session Nov. 3 in Fargo, N.D. Registration for the Fargo session is closed.

Wahl's presentation was geared for North Dakota agriculture, but applies to Upper Midwest ag in general.

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Despite the slowdown in the Chinese economy, it remains the world's fastest-growing economy, Wahl said.

China's population, which now stands at about 1.3 billion, is leveling off and, according to some projections, will decline sharply in coming years. That reflects China's one-child policy.

In China, roughly half of the people are living in rural areas and half in urban areas, though rural is defined as cities of less than 1 million, Wahl noted.

There's a huge, ongoing shift from rural to urban areas, which creates opportunities for North Dakota ag, he said.

Incomes in urban areas, where China's middle class is growing, are three to five higher than in rural areas.

"It's a huge segment of the population with money to spend," Wahl said of the middle class. As their incomes rise, middle-class Chinese move away from grains and other staples and buy more meat, meat products and processed food, while demanding better quality and convenience.

Supermarket sales are growing rapidly, especially for meat and milk. Delivered food sales are increasing, too: China's largest food delivery app already has 80 million users, with 5 million daily food orders.

Food safety and traceability are important to Chinese consumers, reflecting problems of farmland there with industrial pollution and excessive chemical use. Chinese consumers place particular importance on the retailer's reputation when buying meat, on appearance when buying fruits and vegetables and on brand when buying processed foods, Wahl said.

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U.S. food and U.S. brands have a good reputation for safety among Chinese consumers, he said.

The opportunities for North Dakota agriculture include more meat exports, soybean exports (to feed to Chinese livestock), food-grade soybeans, cooking oil, high-quality ingredients for speciality products and increased demand for beer and baijiu. The latter, pronounced by-JOE, is a grain-based alcoholic beverage considered the national drink of China.

Upgrading is ag sector

About 34 percent of China's' population are considered farmers, compared with less than 2 percent in the U.S. But the number of China's farmers is dropping as the country shifts to a high-tech and consumer-based economy, Wahl said.

As part of the transition, China is committing $450 billion for ag modernization in 2016 to '20. That money will be spent on modernizing the seed industry and promoting innovation in ag science and technology, among other things, Wahl said.

That's expected to increase Chinese domestic production, though it's unclear how much. Limited water supplies and the lack of impartial expert information, among other shortcomings, will hold down production increases, Wahl said.

Still, China's domestic food production will increase with better technology, with the country's demand for food rising, too. The net result of those two trends depends on the new technology and how much food the growing middle class demands, he said.

What is clear, however, is that China is likely to be a net food importer in the future, Wahl said.

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