On Dec. 22, Syngenta announced that Chinese regulatory authorities issued a safety certificate for the Agrisure Viptera trait (MIR 162). This biotech trait is used in various corn hybrids to control several above-ground insect pests. Issuance of the safety certificate formally grants import approval for corn and corn by-products containing MIR 162 into China.
The announcement marks the potential end of a year-long disruption of U.S. corn shipments to China. China’s approval of Syngenta’s MIR 162 biotech trait and the reestablishment of that country as a U.S. corn buyer is good news for U.S. producers.
Since late 2013, China has routinely rejected U.S. shipments of corn allegedly containing traces of MIR 162. According to reports, MIR 162 was first detected by Chinese officials in corn shipments from the U.S. in November 2013.
Corn containing MIR 162 has been approved for production in the U.S., Argentina, Brazil, Colombia, Paraguay, Uruguay and Canada. Corn containing the trait has also been approved into major corn import markets, such as the EU, Japan, South Korea, and Mexico. Syngenta first submitted MIR 162 for Chinese approval in 2010, but for unknown reasons that request was not granted until late 2014. As a result, China began rejecting shipments of U.S. corn in December 2013 and by January 2014 U.S. corn exports to that country had essentially ended (Figure 1).
Figure 1. Monthly U.S. Corn Exports to China. Source: U.S. Grains Council
Chinese consumers in the past have obtained a large portion of their dietary carbohydrates from vegetable sources such as cereals, beans and tubers. Prior to 1980, sources of protein in the average Chinese diet consisted mainly of fish, shellfish and some pork. However, increased urbanization, a higher average income, and an improved standard of living have led to a significant increase in China’s per capita meat consumption (especially poultry and pork). This increase in the demand for livestock products has also resulted in a greater demand for cereal grains to be used as feedstuffs.
Before 2008, China was not a major importer of U.S. corn (Figure 2). During this period China imported very little corn and was actually a net exporter of this grain. This was partly a result of Chinese livestock producers satisfying some of the demand for livestock feedstuffs with crop residues, forages, and other non-grain feeds. Chinese producers also grew corn for economic reasons. Compared to other crops, such as soybeans, corn was a higher yielding and more profitable crop.
China’s corn consumption since 2005 has equaled or been slightly less than their domestic production. A recent shift in the Chinese livestock sector, however — more specialization and a substitution of commercial feeds for forages and crop residues — has increased the demand for cereal grains as livestock feed. Other factors that will continue to influence China’s demand for corn include its population growth and an increase in per capita meat consumption.
Additionally, China recently announced a renewed commitment to securing food security for its population of 1.355 billion. This strategy includes a willingness to increase the importation of cereal grains to be fed to livestock and less emphasis on domestic corn self-sufficiency.
Figure 2 shows the effect of China’s renewed commitment to import U.S. corn. In the marketing year 2011-12, China imported more than 5 MMT of corn from the U.S. Figure 2 also shows U.S. corn exports to China slowing in the past 2 marketing years.
Figure 2. Annual U.S. Corn Exports to China (Marketing Year). Source: U.S Grains Council
A relatively high U.S. corn price likely affected Chinese imports in the marketing year 2012-13. Imports of only 4 MMT in 2013-14 reflects China’s refusal to import U.S. corn for most of 2014 because of MIR 162. Now that U.S. corn prices have declined and MIR 162 has been approved, China can again import U.S. corn to meet their needs. Although historically a net exporter of corn, China’s domestic consumption of corn is projected to overtake the country’s production of this grain as early as 2016.
According to a recent outlook report, USDA anticipates the gap between China’s corn consumption and production to continue to widen each year. With China’s increased demand for livestock products driving corn utilization, a modest increase in yields and fixed acreage suitable for cultivation limits that country’s domestic corn production. In summary, USDA projects that China will need to begin importing significant amounts of corn as early as 2016 and ultimately close to 22 MMT by 2023-24. This corn deficit will likely be filled by the U.S. and a few other corn-exporting countries