China, Japan major market for U.S. feed grains

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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.

Zutz took part in a U.S. Feed Grains Council (USFGC) trade mission to Japan and China last year. "Everything that is being said about China is true," he says. " As the income of the Chinese increases, their appetite for meat will increase. In the short term they might be able to handle their feed-grain needs, but long term they will need to out-source their needs. The USFGC is doing a very good job in establishing a relationship within the Chinese industry to make the United States a logical supplier for their needs."

The TCK smut issue remains a priority and must be resolved in the Chinese market, says Zutz. Not only does the problem affect barley and wheat trade, but has a spill-over effect on U.S. corn as well, he says.

TCK smut is a fungal disease that is found primarily in the northwestern U.S. China has long banned imports of wheat with TCK smut with a zero tolerance policy. TCK poses no risk to human health, and many in the U.S. grain industry say China uses the issue merely as a trade barrier. The Chinese maintain that TCK is not present in China and that extraordinary steps are needed to protect the domestic wheat crop, no matter how infinitesimal the outside risk.

Following are some of Zutz’s notes from China and Japan:

CHINA

• The Chinese government is committed to expanding feed and livestock production.
• There is tremendous growth potential for U.S. feed grains (up to 25% per year).
• There is political stability in China, and a trend towards urbanization. People seem content and are coping well.
• There is little concern about the environment.
• Information exchange and education is crucial. They can learn from us and we can learn from them.
• New construction is everywhere. Construction and construction materials are of very poor quality. Hand labor is still the principal labor force but machinery is replacing the hand labor at an increasing rate.
• Guangzhou Malting Company has added two new tower malt facilities with more planned. Has progressed from being a small regional malt supplier to one of the largest malsters in the world. Must do more to service this barley user.
• State industries still prevalent. Farms are getting larger but still are very small.
• Livestock industry expanding to meet demand. Large, modern, commercial facilities being built to meet demand. Large facilities absorbing increased demand at the expense of smaller producers.
• Commercial feeds at larger facilities increasing. Logical to assume usage of feed grains will continue to expand.
• Quality of feed and meat at these new facilities is improving but not up to American standards yet.
• Disease control is maintained at newer facilities.
• State still controls all land and leases out properties.
• Joint ventures are in vogue, among different levels of Chinese government and outside investors.
• New commercial enterprises are looking for low cost supplies of feed grains. Receptive to changes in livestock feed to low cost ration.
• USFGC’s work in China is a good investment of checkoff dollars.

JAPAN

• Japan is a mature market for U.S. Feed grains, but large and reliable. Japan still needs market development efforts for the U.S. to maintain a market share.
• Japan’s protected livestock industry is going through many competitive changes as it tries to conform to freer trade imposed through GATT, now the World Trade Organization. However, domestic agriculture still heavily subsidized.
• Japanese consumers are price and quality conscious. They are willing to pay higher prices for better quality.
• Food security and food self-sufficiency are still key issues.
• The value-added market is the wave of the future in Japan. Potential growth in imports will be in the valued-added sector.
• The Japanese are a strong, proud culture steeped in tradition. They will continue to be shrewd marketers that will insist upon high quality feedgrains. They are our largest cash customer. Maintenance of this market is a must.

January 1997