3C
THE DAILY ASTORIAN FRIDAY, FEBRUARY 26, 2016
SHRINKING APPETITE
Growers,
investors
nervous as
China reduces
its imports of
U.S. crops
By MATEUSZ
PERKOWSKI
Capital Press
C
hina’s appetite for U.S.
farm products once
seemed limitless.
The nation of 1.3 billion
people, with its wealthy emerg-
ing middle class, demanded
shiploads of American crops
ranging from almonds and
apples to raw materials such
as cotton. Overall, the annual
value of food exported to
China surged in value roughly
15 times over since the dawn
of the 21st century, peaking at
nearly $26 billion in 2012.
No longer.
Since then, demand has
ebbed. Imports of farm goods
leveled off in 2013, receded a
bit in 2014 and fell in value by
17 percent in 2015.
However, experts say the
slowdown in imports from the
U.S. isn’t necessarily cause for
alarm, especially in light of the
white-hot growth seen over the
past decade.
‘No miracle markets’
But they add that the anx-
ieties are ampli¿ ed by the
uncertainty about the true state
of China’s economy — as
well as investments made by
U.S. farmers and food compa-
nies that assumed the growth
would continue unabated.
While it’s still possible to
make headway in the Chinese
export market, people were
fooling themselves if they
thought the nation’s demand
was boundless, said Nick
Kukulan, CEO of Paramount
Export, an Oakland, Califor-
nia , company that ships fresh
fruits and vegetables to China .
“There are no miracle mar-
kets,” he said. “It’s all just
global competition.”
Cotton provides a harsh
example of the vicissitudes of
the Chinese market.
When China was a top
buyer of cotton around 2011,
the crop was fetching more
than $2 per pound for U.S.
farmers.
Now, the country isn’t even
in the top ¿ ve of global cotton
buyers and prices are hovering
around 60 cents per pound.
“It’s one of the key factors
keeping cotton prices low. Chi-
na’s policies had a large impact
on the world’s market,” said
Jody Campiche, vice president
of economics and policy for the
National Cotton Council.
To some extent, the
reduced value of overall U.S.
farm exports to China can be
attributed to the global price
decline for major commod-
ities, particularly soybeans,
said Michael Swanson, chief
agricultural economist for
Wells Fargo Bank.
Soybeans that topped $14 a
bushel in 2013 are now selling
for about $8.70 a bushel.
China’s economy is also
growing at a slower clip, but
it must be remembered that its
underlying economic base is
now a lot bigger, Swanson said.
‘Poor visibility’
Investors are also nervous
because of the “poor visibil-
ity” into the Chinese economy
offered by its government, he
said.
While China’s of¿ cial eco-
nomic growth rate was about
FREE
PUBLISHED THE FIRST FRIDAY
OF EACH MONTH
January 2015
Don Jenkins/Capital Press
Dockworkers unload containers in January from the OOCL Rotterdam, a Hong Kong-registered vessel.
U.S. agricultural exports to China, 10 years
China vs. U.S. —
agricultural production
and trade statistcis
(Billions of dollars)
17.6
Statistic
China
United States
1.37 billion
321.4 million
270.1 million
10.9 million
3.7 million
3.8 million
54.7%
44.5%
266,440
87,200
8.9%
1.6%
Total value of ag imports
$140.4 billion (2013)
$111.7 billion (2014)
Total value of ag exports
$79.8 billion (2013)
$150 billion (2014)
Population (2015 est.)
Labor force in ag (2012 est.)
Total land area (sq. mi.)
Ag land as percent of total (2011 est.)
Irrigated land (sq. mi., 2012)
Ag as percent of GDP (2015 est.)
12.1
6.7
2006
Until now, China’s momen-
tous economic rise was sup-
ported by massive govern-
ment investment in bridges,
highways, ports and housing,
which was accompanied by a
mass migration of people from
rural areas to the cities.
That cannot go on forever,
so China must now shift from
an economy that depends pri-
marily on exporting goods and
Capital Press
ess
Chronicling the Joy of Busin
tlight:
Taylor remain
in the Columbia-Pacific
Region
exact growth rate, but experts
generally agree China is not in
a recession and its economic
expansion is still faster than
that of the U.S.
Even so, the slackening
in China is seen as having a
destabilizing effect.
‘Tesla of the world’
With an annual growth rate
that once topped 15 percent,
China’s economy was viewed
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Volume 10 • Issue 1
as being similar to a hot Internet
company or technology startup.
“China is the Tesla of the
world,” Swanson said, referring
to the electric luxury car com-
pany whose shares have quin-
tupled in value in recent years
despite posting net losses in the
hundreds of millions of dollars.
Surging stock prices for
such companies are based on
their “growth story” of future
earnings, rather than current
Massive spending
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2015
building infrastructure to one
that’s oriented toward domes-
tic consumers, said Lindsey
Piegza, chief economist with
the Stifel investment ¿ rm.
“That’s not a transition that
occurs overnight,” she said.
With China’s extensive, and
perhaps excessive, building
boom winding down, there’s
bound to be a negative impact
on the price of raw materials.
“You’re talking about a
decline in aggregate demand,”
Piegza said.
The effect is already appar-
ent in the U.S. log market.
U.S. log shipments to
China plummeted 40 percent
in 2015 largely because build-
ers have bought fewer hem-
lock logs, which are used for
concrete formwork, said Gor-
don Culbertson, international
business director for the For-
est2Market consulting ¿ rm.
“Their housing construc-
tion is down a great deal. It has
reduced the competition for for-
est products,” Culbertson said.
Meanwhile, U.S. goods
are more expensive in China
because the dollar has gained
in value against the yuan by
more than 8 percent in two
years, from roughly 6 yuan in
2014 to 6.5 yuan today.
As the U.S. dollar has
strengthened against the Chi-
nese currency, it has prompted
China to buy logs from other
countries such as New Zealand,
he said. “It’s magni¿ ed by the
exchange rate.”
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BOAT OF THE MONTH
’09
7 percent in 2015, some U.S.
analysts believe it was actu-
ally as low as 4 percent based
on factors such as steel output
and coal use.
“People still doubt the data
that comes out of China,” said
Dan Kowalski, director of
industry research for CoBank,
a major agricultural lender.
“Are they telling us it is as bad
as it is, or is it worse?”
Estimates may vary on the
Alan Kenaga/Capital Press
$20.2
billion
Down 16.6%
from 2014
8.3
Konnie Kong, right, speaks with Henry Chen of Guangzhou Yangcheng Food Co. and in-
terpreter Willow Zheng during a recent meeting in Portland, that was part of an inbound
trade mission by Chinese food buyers.
Source: USDA ERS, FAS; www.cia.gov
18.9
24.2
13.1
pro¿ ts and dividends, he said.
If that story begins to appear
too optimistic, people fear
they’ve overpaid even if noth-
ing catastrophic has occurred.
“Any change in that growth
projection suddenly panics
that investor,” Swanson said.
The analogy is pertinent to
agricultural sectors such as the
almond industry, whose for-
tunes were propelled to new
heights by China’s explosive
economic growth.
China “came out of
nowhere” to become a major
almond buyer, which caused
the value of California almond
orchards to triple in the past
¿ ve years, Swanson said.
Farmers who planted or
bought orchards at peak prices
may face ¿ nancial problems if
their investment was based on
unrealistic assumptions about
continued rapid growth in Chi-
nese consumption, he said.
“You could be devas-
tated by even a softening in
demand,” he said.
stry spo
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Inside: Indu
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Shellfish farm
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25.9 25.5
Source: USDA FAS
Alan Kenaga/Capital Press