Wednesday, June 22, 2011

India Will Join China as a Net Corn Importer

India is now following China as a net grain importer. For pundits who question the underlying US trade deficit, agricultural exports continue to compose a core component of international trade.

Corn and corn derived products are used in the manufacture of animal feed products. As populations grow richer in emerging market nations they also develop an appetite for more complex proteins - e.g. meat.

India To Be Net Corn Importer By 2014-15 -US Grain Council CEO
India will join China to become a net corn importer by 2014-15, placing increased pressure on world corn markets, the head of the U.S. Grains Council said.

Speaking at an agriculture investment summit here, Thomas Dorr forecast that India will import as much as 300,000 metric tons of corn in 2014-15, rising to 808,000 tons in 2018-19. In 2009-10 India exported 995,000 tons of corn.

"We believe that in four short years India will turn into a consistent importer," he said.

This shift is expected to come as Chinese demand for corn rockets. Dorr said that despite a push by Beijing to improve domestic production, the Asian giant will increasingly rely on imports to meet rising consumption by its rapidly-expanding livestock industry.

"China's government is now coming to grips with the fact that food security and food self-sufficiency aren't necessarily the same thing," he said.

World corn production is expected to set a new record in the coming 2011-12 season and yet rising demand from emerging countries and ethanol blenders mean global corn ending stocks are expected to fall by 3 million tons, to near-historic lows.

This pressure is only expected to increase in the future. According to the World Bank, developing country populations with incomes of more than $16,000 a year are expected to rise to 2.1 billion by 2030 from 352 million in 2000, driving demand for meat.

Dorr, who is also former under secretary for rural development of the U.S. Department of Agriculture, said producers and investors have a huge opportunity to benefit from such demand growth, but it will require openness to technology, trade and investment.

The use of genetically-modified crops, which is already widespread in the U.S. corn industry but extremely restricted in other parts of the world like the European Union, will also become increasingly important in order to meet growing demand, he said.

"Non-scientific objections [to GM] must be weighed against the moral imperative to feed a world of 9 billion people by 2050," he said.

Source: CME News for Tomorrow

The Bottom Line: Both India and China will continue to experience food volatility as their immense populations grow. A government focus (rightly so) on social order and stability will have the retarding effect of hampering domestic growth in discretionary consumer spending.
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