Agricultural Outlook Report forecasts rising degree of self-reliance

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Dr. Michaela Boehme | Agricultural Policy Expert | 07 June 2022

On 20 April, the 2022 China Agricultural Outlook Conference released its annual outlook report for 2022-31. Issued since 2014 by the Early Warning Committee of China’s Ministry of Agriculture and Rural Affairs (MARA), these reports review annual agricultural production and consumption trends and offer 10-year projections for key agricultural products, providing important insights into the country’s agricultural development goals and anticipated trade patterns.

The 2022 report underlines the leadership’s resolve to reduce dependence on feed grain imports amid rising geopolitical uncertainties. In line with current policy goals to boost production of soybeans and other oilseeds, MARA’s projections see soybean imports decline over the next ten years – a historic first since the Agricultural Outlook Report was initiated in 2014. Corn imports are also projected to drop, even as they will remain above China’s corn tariff rate quota, as per the report.

Importantly, the drop in feed grain imports will occur alongside continued growth in the consumption of animal protein, according to the projections, highlighting policymakers’ resolve to ensure that growing self-reliance does not come at the cost of dietary choices for Chinese consumers. While the report does not give away details on how agricultural officials expect to reduce feed grain imports while boosting animal protein consumption, it suggests that high-performing seeds and animal breeds, biotechnology, continued agricultural upscaling and modernization, as well as improvements in soil quality will be key tools in the pursuit of these goals.

Review of 2021

Despite challenges posed by the COVID-19 pandemic, rising input costs, and losses to domestic pig breeders, total grain output remained above 650 million tons for seven consecutive years, according to the report. Meanwhile, the agricultural sector recorded production increases for non-grain food products such as eggs, dairy, vegetables, meat, and aquatic products.

On the consumption side, the dietary shift towards diversified, high-quality foods further accelerated. While the share of direct grain consumption dropped to 37 percent, feed grain consumption rose to about 30 percent, highlighting the growing importance of animal protein in the Chinese diet. Overall, 2021 registered a y-o-y increase in the consumption of beef, mutton, dairy, and aquatic products by 5.3 percent, 4.9 percent, 11.8 percent, and 2.3 percent, respectively, as per the report.

Despite record-high domestic yields, grain imports continued to skyrocket, reaching 167 million tons at the end of 2021, up 17 percent from the previous year. The report specifically mentions wheat imports, which, at 9.77 million tons, exceeded the wheat tariff rate quota for the first time since China’s accession to the World Trade Organization (WTO) in 2001. Similarly, corn imports exceeded the tariff rate quota for two consecutive years, reaching 28.35 million tons, while sorghum and barley imports increased by 95.6 percent and 54.5 percent, respectively, reflecting their growing importance as alternative feed grains. Direct imports of meats also increased, says the report, in the case of beef and mutton by over 10 percent.

Outlook for 2022-31

For the first time since the inception of the Agricultural Outlook Report, MARA projects a drop in soybean imports – China’s key feed grain – from 96.1 million tons in 2021 to 85.84 million tons in 2031. According to the projections, use of soybean by the crushing industry will increase by a modest 4 million tons between now and 2031, supported in part by current efforts to develop low-protein feed formulas. Meanwhile, domestic soybean output is expected to more than double from last year's 16.4 million tons to 35.1 million tons in 2031, boosted by soybean subsidies, high-yielding seed, and the new corn-soybean intercropping strategy announced in the No. 1 policy document for 2022.

Domestic corn production will continue to recover, the report says. A corn glut and high reserves in 2015 had prompted initiatives to cut back on domestic corn production, until 2020 saw a reversal of the policy amid emptied-out warehouses and rising corn prices. MARA expects corn output to reach 324 million tons in 2031, driven by the continued expansion of the corn planting area to 43.3 million hectares and yield increases of 18.3 percent, likely due to improved seed, including GMOs. Corn imports are projected to fall from their current record-high levels, but, at a projected 7.57 million tons per year, will remain above China’s corn tariff rate quota of 7.2 million tons.

Meanwhile, wheat output is expected to increase steadily, reaching 144.7 million tons by 2031. With the area sown to wheat remaining stable at 23.3 million hectares, policymakers will have to rely mainly on yield improvements to achieve the output target, the document suggests. Feed use consumption of wheat—driven by high corn prices as well as efforts to reduce reliance on imported soybean—is projected to fall back to “normal” levels, as per the report, while improvements in production quality are hoped to reduce import demand for high-quality and special-purpose wheat from its peak of 9.8 million tons in 2021 down to 5.2 million tons by 2031.

With growing incomes and urbanization set to continue, consumption of animal protein products is expected to keep expanding. Meat consumption, including that of tradition meat staples such as pork, will increase at a modest 1.4 percent per annum to 101.27 million tons by 2031, suggesting that meat is close to reaching a saturation point in Chinese diets. Meanwhile, dairy products will see faster growth at 4.1 percent a year, MARA predicts, offering room for growth in dry dairy products such as cheese and butter. While a catch-up in domestic production capacity for meat products will see imports decline to 5.09 million tons by 2031, MARA predicts continued growth of dairy imports at 5 percent a year, reaching 35.86 million tons at the end of the outlook period.

Despite the push for more self-reliance, the report anticipates that agricultural trade will continue to play a key role. Given limited land and water resources, China will remain the world’s main importer for many agricultural products, stresses MARA. Feed grain demand, for example, will continue to exceed domestic production capacity until the end of the outlook period in 2031. Yet, with output growth projected to surpass consumption growth, imports of most agricultural products will follow a downward trajectory.

Source: 2022 China Agricultural Outlook Report, public version expected to be available from August 2022 at the Agricultural Outlook Conference website

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