U.S. crop prices soar as China fuels demand ( 2003-11-13 15:35) (Agencies)
China's soaring demand for U.S. crops is fueling a big price rally that is
sending a jolt through the American farm economy, Thursday's Wall Street Journal
reported.
The size of China's appetite is far from clear, in part because Beijing makes
it hard for outsiders to accurately gauge its grain supplies. But the U.S.
Agriculture Department sharpened the picture somewhat yesterday by significantly
increasing its one-month-old forecasts of the amounts of soybeans and cotton
China will import over the next year from the U.S. and other countries.
Likewise, the USDA said a smaller corn harvest in China this year is expected
to cut its exports by 44% next year, perhaps creating opportunities for U.S.
corn exporters to do business in Asian markets dominated by China in recent
years, such as South Korea.
Heavy rains and flooding across China's northern plains in recent months
caused extensive damage to farm fields. Some provinces might have lost close to
half of their cotton, for example.
The calamity follows several years of stagnant yields. The combination of
production problems and China's rising population has significantly reduced the
size of crop reserves maintained by the Chinese government. While the reserves
are widely believed to be adequate by the standards of most developed countries,
grain prices inside China have climbed so sharply in recent weeks that officials
there are warning the public against panicking.
The USDA expects China to import a record 808 million bushels of soybeans
over the next year, up 55 million bushels from its October estimate and more
than double the amount China imported from all sources during the 2002 marketing
year. If the forecast is accurate, China will import more than half of the
soybeans it uses for such things as feeding livestock and making cooking oil.
U.S. soybean prices have jumped in recent months in part due to a buying
binge by China, which has purchased at least 219 million bushels of U.S.
soybeans since Sept. 1, a record pace for China for this time of the year and
far more than traders had expected. The price farmers in central Illinois are
paid for their soybeans has jumped 28% since Sept. 1, adding to their incomes.
