Navigating the Chinese agricultural economy through the lens of Iowa
With one in every four rows of U.S. soybeans exported to China, the significance of China on the U.S. agricultural trade and economy can’t be overestimated. This relationship is particularly unique to Iowans with Iowa’s long-time former Governor Terry Branstad now serving as the U.S. ambassador to China. A key reason for his appointment is his 30-year personal relationship with China’s President Xi Jinping, dating back to Xi’s trip to Muscatine, Iowa in 1985 when he was only a county leader. In this article, we showcase key aspects of China’s agricultural economy using Iowa as the measuring stick.
With trade valued at $21.4 billion in 2016, China is the second- largest agricultural trading partner with the United States, after Canada. Unlike many other sectors, the United States’ agricultural sector has a $17.1 billion dollar trade surplus with China. Since China joined the WTO in 2001, its demand for U.S. agricultural products has grown more than five-fold. Moreover, $14 billion of U.S. – China ag trade is about a key commodity Iowa specializes in - soybeans. While the bulk of China’s demand is for soybeans and pork, China’s appetite for U.S. beef, corn, and ethanol have all grown as well, due to a reversal of the 2003 ban on U.S. beef due to mad cow disease (USDA, 2016), the termination of China’s $9/bushel corn support price program (Wu and Zhang, 2016), and a nationwide E10 ethanol mandate for all gasoline by 2020 (Li et al., 2017).
China’s 1.39 billion population is more than four times larger than that of the United States. More strikingly, 20 percent (National Bureau of Statistics of China, accessed 2018) of Chinese people are engaged in agricultural production, compared to less than 2 percent in the United States. Most provinces in China, especially in southern China, have 10 times or more farmers than Iowa (Figure 1).
While China’s total land area exceeds that of the U.S., the 270 million farmers in China have less arable land compared to the U.S. One common saying is that with only seven percent of total arable land in the world, China needs to feed 20 percent of the world’s population. Figure 2 shows that an average Chinese farmer only has 1.4 U.S. acres of cropland to operate, which is a fraction of the 200 acres per farmer in Iowa (Ag Census 2012). In recent years, China started to experiment with a nationwide rural land transfer program that allows leasing of "operational rights" to another farmer in order to increase farm sizes. In 2015, about 33 percent of arable land was leased out to individual farmers (58 percent of leased land), cooperative and commercial farms (31 percent), and other entities (11 percent) (China Agricultural Development Report 2016).
Crop and livestock comparisons
China is the dominant soybean importer in the global market, and 87 percent of the Chinese soybean consumption is fed via export markets like Brazil and the U.S. Only four provinces in China, mostly in northeast China, with similar soil to that found in the Des Moines lobe, plant more than 10 percent of the area planted for soybeans in Iowa (Figure 3). Production totals at the national level are one-fifth the U.S. level in terms of soybean planted acres. Furthermore, the soybean yield is relatively low in China, with only 46 percent of the average yield achieved in Iowa.
Until very recently, China strived to be self-sufficient in corn production, and thus they have about the same acres of corn as the United States. While there is no single Chinese province that exceeds Iowa’s corn acres, there are still five provinces in Northern China with more than 50 percent of planted area in Iowa. In particular, Heilongjiang plants the most corn in China, with 93 percent of Iowa’s corn acres (Figure 4). However, the corn yield is also relatively low in China, with the highest yield (Jilin province) close to 60 percent of the Iowa average yield. So far, China has not imported much corn, less than two percent of its total domestic supply. However, the recent corn subsidy reform and E10 mandate led observers to suspect that China will start to import corn in large quantities in the near future (Li et al., 2017).
Pork is arguably the most important meat for the Chinese diet, and China is the dominant player in the global pork market. In fact, China produces 4.7 times the amount of the pork produced by the United States. Three provinces in China produce more pork than Iowa, the largest pork-producing state in the United States (Figure 5). Compared to the United States, pork production in China is much more dispersed and closer to urban centers, with many smaller-scale, backyard pig farms. Currently, China is driving small-scale pork production further away from population centers and closer to feed-producing areas. The long- term effects of this policy on the Chinese pork industry remains to be seen.
Beef is less popular in China, and Chinese people in general prefer beef stew over a steak. Even though the per-capita beef consumption is low, China is the 4th largest beef producing country with 58 percent of U.S. production level. However, as income grows, beef consumption in China is quickly catching up. Domestic beef production mostly concentrates in northern provinces, including Xinjiang province (at the northwest corner) (Figure 6). In 2017, China’s decision to re-open the market to U.S. beef, which was closed in 2003 due to mad cow disease, is widely expected to boost the U.S. beef exports.
To Iowa and U.S. agricultural producers, China is and will continue to be one of the major customers for our products. The abundant land, adequate precipitation, and advanced technology we enjoy here means that U.S. agriculture will continue to have bumper production and need critical export markets like China. In addition, China’s agricultural policies, including crop insurance and subsidies, are now increasingly similar to that in U.S. and Europe. In today’s globalized agricultural supply chains, one could not afford to and should not ignore China and its key developments in its agriculture and economy. We hope the newly founded ISU China Ag Center and articles like this help you make informed decisions.
National Bureau of Statistics of China
China Agricultural Development Report 2016 (in Chinese, available upon request)
USDA FAS Production, Supply, and Distribution Data
USDA FAS Global Agricultural Trade System Online
USDA NASS Quick Stats
Li, M., D. Hayes, W. Zhang, Y. Yang, X.Wang, R. Arthur (2017) "China’s new nationwide E10 ethanol mandate and its global implications" Agricultural Policy Review, Iowa State University.
Wu, Q. and W. Zhang (2017). "Of Maize and Markets: China’s New Corn Policy." Agricultural Policy Review, Iowa State University.
USDA Foreign Agricultural Service (2016). "China Livestock and Products Annual 2016." GAIN report number: CH 16043.
Wendong Zhang, extension economist, 515-294-2536, email@example.com
Minghao Li, Postdoctoral researcher, Center for Agricultural and Rural Development, Iowa State University