US crop prices soar as China fuels demand

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Last updated at: (Beijing Time) Friday, November 14, 2003

US crop prices soar as China fuels demand

China's soaring demand for US crops is fueling a big price rally that is sending a jolt through the American farm economy, Thursday's Wall Street Journal reported.

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China's soaring demand for US crops is fueling a big price rally that is sending a jolt through the American farm economy, Thursday's Wall Street Journal reported.

The size of China's appetite is far from clear, in part because Beijing makes it hard for outsiders to accurately gauge its grain supplies. But the U.S. Agriculture Department sharpened the picture somewhat yesterday by significantly increasing its one-month-old forecasts of the amounts of soybeans and cotton China will import over the next year from the U.S. and other countries.

Likewise, the USDA said a smaller corn harvest in China this year is expected to cut its exports by 44% next year, perhaps creating opportunities for U.S. corn exporters to do business in Asian markets dominated by China in recent years, such as South Korea.

Heavy rains and flooding across China's northern plains in recent months caused extensive damage to farm fields. Some provinces might have lost close to half of their cotton, for example.

The calamity follows several years of stagnant yields. The combination of production problems and China's rising population has significantly reduced the size of crop reserves maintained by the Chinese government. While the reserves are widely believed to be adequate by the standards of most developed countries, grain prices inside China have climbed so sharply in recent weeks that officials there are warning the public against panicking.

The USDA expects China to import a record 808 million bushels of soybeans over the next year, up 55 million bushels from its October estimate and more than double the amount China imported from all sources during the 2002 marketing year. If the forecast is accurate, China will import more than half of the soybeans it uses for such things as feeding livestock and making cooking oil.

U.S. soybean prices have jumped in recent months in part due to a buying binge by China, which has purchased at least 219 million bushels of U.S. soybeans since Sept. 1, a record pace for China for this time of the year and far more than traders had expected. The price farmers in central Illinois are paid for their soybeans has jumped 28% since Sept. 1, adding to their incomes.

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