China's grain demand should boost U.S. exports
China's grain demand should boost U.S. exports
By Kathy Chu, USA TODAY
Updated 2h 16m ago
Even as its economy cools, China's demand for imported grain is likely to surge this year, providing a boon to the U.S. and other exporting nations.
This week, China reported that strong imports had sharply narrowed its January trade surplus to $6.45 billion from $13.1 billion in December.
That reflects the country's growing appetite for commodities and other goods.
China is one of the largest metals and energy consumers in the world. It's also a top importer of U.S. agricultural products.
In China, "strong imports-growth momentum is supported by strong domestic demand," Goldman Sachs economists Yu Song and Helen Qiao wrote in a report Monday.
Many analysts expect China's robust appetite for corn, wheat and soy to expand in 2011 as the country grapples with severe droughts in the north. Corn and soy are primarily used for animal feed, which is in high demand as incomes rise and people consume more meat.
"At the end of the day, (China) needs these commodities because of the population's growth," says Kevin Kerr, president of Kerr Trading International.
Steel and iron — whose prices have soared amid China's building boom — might slip if the country's property bubble bursts, he says.
But overall, China's long-term appetite for commodities of all kinds will be sustained by its massive transportation, housing and infrastructure projects, along with the needs of its up-and-coming middle class.
In the 24 months ended in January, the International Monetary Fund's primary commodity index, which measures the average price for commodities such as energy, grains and industrial materials, has soared 79.5%. Prices for cotton and copper have hit records recently, in part due to high demand from emerging markets such as China.
Still, China's measures to cool its economy could crimp the country's imports short-term. The fear is, if the economy slows, China won't need the same amount of commodities.
"I don't see a collapse in commodity demand, but some moderation is possible" from the last two years' healthy pace, says Jian Chang, China economist for Barclays Capital.
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