U.S. Could Feed Asia's Grain Appetite
August 21, 2000
by Dennis T. Avery
Bridge News August 4, 2000
CHURCHVILLE, Va. – At first glance, statistics for world grain trade show a stagnant export market. Trade in wheat and coarse grains averaged 199 million tons in 1989-1990, and only 203 million tons a decade later in 1999-2000. Who can blame export farmers for being discouraged?
A second glance at world statistics, however, reveals that grain import demand outside the old Soviet Union has increased by 50 million tons in the last decade.
If we hadn't lost the old Soviet market for grain, there would be a strong growth trend in farm exports. The Soviets almost single-handedly created the agricultural boom of 1974-1981 with a huge surge in imports of grain and meat.
The Soviet leaders wanted to reward workers with foodstuffs that their own collectivized farms couldn't produce. Soviet grain imports soared from very low levels in the 1960s to 22 million tons per year in 1972 and a peak of 46 million tons in 1981.
But that was the last year of big Soviet grain imports. By 1990, the USSR was importing only 26 million tons of wheat and coarse grains. Recently, they've imported only about 7 million tons a year, and their meat imports have collapsed as well.
Essentially, many people in the former Soviet republics have stopped eating much meat, milk or eggs. There's not much point in wishing the Russians would become rich again.
Ukraine, right next door to Russia, has one of the world's prime stretches of cropland. The Russians will not get rich again until they reform their economy. As they do, Ukraine will likely adopt similar reforms.
When the Russians can afford meat again, they will almost certainly buy most of it from Ukraine. Happily, that will leave the rest of the world's export farmers with more than 4 billion affluent consumers in Asia and the Middle East, 14 times as many people as live in the former USSR.
Even better, Asian incomes has risen rapidly, and continue to rise. The people in the former Soviet republics are trapped in poverty and economic collapse.
Wheat imports have risen significantly in such countries as Algeria, Indonesia and the Philippines. Mexico has gone from about 500,000 tons of wheat imports a year in the late 1980s to a projected 2.6 million tons for 2000.
Brazil stopped subsidizing domestic wheat and its imports doubled in the last decade, to an estimated 7.2 million tons in 2000. The Philippines more than doubled its wheat imports, from about 800,000 tons to 2.6 million tons over the same period.
Rising consumption of meat, milk and eggs is also fueling more feed grain consumption. Algeria's feed grain imports rose from 800,000 to 2.3 million tons a year over the past dozen years. Egypt's feed grain imports more than doubled, from about 1.8 million in the late 1980s to 4.6 million tons in 2000. South Korea's feed imports also doubled, to more than 9 million tons a year.
The North American Free Trade Agreement has made Mexico a star among grain importers. Mexico's total grain imports jumped from 3 to 4 million tons a year to over 11 million tons annually. Mexico is importing more U.S. wheat and more corn, mainly for feed.
Mexico's recent strong economic growth and political liberalization will mean even more imports in the future, especially feedstuffs, meat and dairy products.
The end of the so-called Asian collapse is also good news for future grain exports: Indonesia's feed grain imports rose from 1.5 million tons in the late 1980s to a peak of 4.2 million in 1997. Indonesia slumped to 3 million tons of feed imports in 1998, but its poultry consumption is already back above pre-crisis levels and set to expand further in the years ahead.
South Korea, Thailand and Malaysia are once again seeing growth in their economies, gains in income and rising demand for high-quality diets.
China is the biggest Asian market, of course, and the Chinese economy continues to forge ahead.
Economic growth is forecast at about 7 percent this year. China will import 2.5 million tons of wheat this year and a net 3 million tons of corn.
In future, however, China's feed requirements will soar, and the Chinese government is keenly aware it's paying 40 percent more for Chinese grain than it would pay for imports. China is likely to import considerably more grain in the next decade than it did in the 1990s.
If export farmers can overwhelm Europe's objections to liberalizing the farm trade rules of the World Trade Organization during the current round of trade negotiations, Asian market growth could make farmers forget they ever cared about Soviet grain sales.
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.