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China: demand for food continues to grow

Porto Alegre - RS - Brasil - 20230816

Projection of China's imports of major agricultural commodities by its two largest suppliers.
Projection of purchases of the main agricultural commodities imported by China.

Source: Noticias Agrícolas and graph from S&P Global and World Bank

Despite the Chinese economy being quite fragile and in need of more stimuli, food consumption remains high, not being affected like other sectors of the economy.

The post-pandemic still reflects on consumption and the lack of investment by Chinese consumers in the sector, especially capital goods, such as civil construction, vehicles, appliances and jewelry - preferring to save rather than spend - and, even with the efforts of the Chinese authorities, it still it was not enough to curb deflation.

At the same time that the sluggish economy is reflected in the reduction of imports of metallic commodities, for example, such as copper, whose main consumer is civil construction, followed by the machinery and consumer goods industry, food imports continue to grow.

In the period from January to July, Chinese soybean purchases totaled 62.3 million tons, 15% more than in the same period last year, according to data from the General Administration of Customs. Already imports of beef and by-products, in the first half of 2023, were 1.25 million tons, 6.3% more than in the same period last year, a year that broke a record for purchases of the product by China, reaching 2.69 million tons, with 42.38% of this product being of Brazilian origin.

The chart below shows that China ranks first in global imports of soybeans, corn, rice, sorghum, barley, beef, pork; third in imports of chicken meat and fourth in wheat. For 2032/33, projections are that, in corn, it will become the second largest importer in the world, as well as assume the first position as a buyer of chicken meat.

China is and will be the world's biggest food buyer for the next 10 to 12 years.
Ranking China's food imports over the next 10 to 12 years.

Source: Noticias Agrícolas and graph from S&P Global and World Bank

A study led by the USDA (United States Department of Agriculture) shows that income growth and improvement in Chinese housing standards were key fuels to promote the growth of agricultural imports in the country over the last 20 years. In this same interval, grain consumption decreased and protein consumption increased. Per capita consumption of chicken meat, for example, increased by 32%, soy oil consumption more than quadrupled and milk consumption tripled.

Recent events such as the trade war with the US in 2018, the Covid-19 pandemic and the war between Russia and Ukraine that has lasted more than a year have exposed some of its vulnerabilities when it comes to food security for the Chinese giant.

However, food security remains one of the priorities at the top of Beijing's list - a recurring theme - whose government has been seeking solutions to ease its dependence on food or raw materials to produce it internally.

As long as there is no internal solution, China will continue buying food from the rest of the world, regardless of the price, respecting the limits between supply, demand and security stocks, because it is dependent and needs to feed its inhabitants, but with the clarity which will always aim to reduce supply risks, consequently avoiding - at all costs - social tensions and more economic discomforts than the current ones.

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