It’s common knowledge that Nebraska’s economic ties to China have strengthened in recent years. A new report from the University of Nebraska-Lincoln says Nebraska’s crop producers can look forward to even more trade opportunities with the Asian giant.
Soybean and corn producers will find major demand from China for their exports in coming years, according to an analysis by Azzeddine M. Azzam, a professor of agricultural economics at UNL, and Sarah Rehkamp, a UNL graduate student studying agricultural economics.
China buys some 60 percent of the world’s soybean exports to feed its pigs and chickens. “By providing strong price support for the U.S. soybean market,” the UNL report says, “Chinese soybean imports have, and will, continue to be important to the profitability of soybean production.”
Nebraska exports around half of its soybeans each year, with Mexico and China being the two biggest importers.
Victor Bohuslavsky, executive director of the Nebraska Soybean Board, notes that “states that are west of us don’t produce soybeans, so we are the closest soybean-producing state to the Pacific Northwest and their ocean-shipping lanes to China, the Far East and the Pacific Rim.”
As for corn, the UNL report says “prospects for increased corn imports by China to feed its livestock are also high, despite the fact that China is the second-largest producer of corn in the world after the U.S.”
China’s corn production doesn’t live up to its full potential, the UNL analysis says, because China’s corn yields are modest and stagnant (half the U.S. level); large areas of China’s cropland have been converted to highway and railroad use; and China relies on corn imports for feed rather than directly increasing its imports of meat. “China is more likely to continue to import corn in order to promote its own domestic meat industry,” the UNL report says.
This circles back to soybeans. Says Bohuslavsky, the executive director of the Nebraska Soybean Board: “China grows corn well, but their climate and soil aren’t suitable for large amounts of soybean growth, so they import soybeans from Nebraska. They mix the soybean meal with corn for animal feed for their large poultry and swine operations. China has the largest swine inventory in the world.”
Although Canada and Mexico are the largest purchasers of Nebraska’s raw ag products, China is moving into the No. 3 spot. The Nebraska Department of Agriculture notes that every dollar in agricultural exports generates $1.34 in total economic activity including transportation, financing, warehousing and production.
China is a big market for many other Nebraska products as well. In 2012, Nebraska exports to China topped $488 million, and export growth to China has more than doubled since 2009. The country is one of Iowa’s largest trading partners, too, importing about $750 million in products from that state last year.
Given this background, it makes sense that Gov. Dave Heineman has focused great attention on Nebraska’s economic connections to China. Last year he led a delegation of Nebraska state officials and business leaders to China, and Nebraska has opened a permanent trade office in that country.
As the UNL analysis explains, these trade connections are quite likely to grow. So will the benefits to Nebraska’s economy.