Explosive Growth of China's Middle Class Creates Increased - but Limited - Opportunity for U.S. Agricultural Exports

DENVER, May 1, 2013 /PRNewswire/ -- The dramatic growth of China's emerging middle class has created significant speculation about its potential as a market for U.S. agricultural exports. With 20 percent of the world's population and less than 10 percent of its arable land and water resources, China has become increasingly reliant on imports to feed its burgeoning population, despite public pronouncements of its intention to be self-sufficient in food production.

In fewer than 20 years, the Chinese middle class has grown from about 4.5 million household to approximately 141 million households. These newly empowered consumers are demanding more food, higher quality, greater variety and, specifically, more meat. Yet the question remains, will U.S. agriculture be able to take full advantage of this potentially lucrative market? Probably not, says a new report from U.S. lender, CoBank. 

According to a report from CoBank's Knowledge Exchange Division, titled "How Will China's Emerging Middle Class be Fed: Imports or Home-Grown," the United States has indeed seen significant growth in agricultural exports to China – growing from a $2 billion market just 10 years ago to a $19 billion market today. However, the report points out that growth has been highly focused in "just a few bulk commodity products," a trend that is likely to continue for the foreseeable future.

"Ongoing growth in Chinese per capita incomes will continue to translate into increased food demand," said Jonathan Coleman, chief of the Agriculture and Fisheries Division of the U.S. International Trade Commission and the report's co-author. "Despite China's efforts to boost domestic production, this will continue to translate into higher imports, creating opportunities for U.S. exporters."  In fact, recent Chinese leadership pronouncements suggest the country is shifting towards a policy of food security versus self-sufficiency.

However, Coleman and co-author Joanna Bonarriva, a lead international trade analyst at the USITC, caution that U.S. imports are likely to remain concentrated in bulk, unprocessed products such as soybeans and cotton rather than higher-value processed goods.

"U.S. exporters will continue to be challenged by trade barriers, such as the recent restrictions requiring ractopamine-free pork" said Bonarriva. "This will make it difficult for them to further penetrate the Chinese markets.  Consequently, in the final analysis, China may only partially live up to its potential as a market for U.S. agricultural exports."

The new report was issued by CoBank's Knowledge Exchange Division, an innovative knowledge-sharing practice that provides strategic insights regarding the key industries served by CoBank. Knowledge Exchange draws upon the internal expertise of CoBank, deep knowledge within the Farm Credit System and boots-on-the-ground intelligence from customers and other stakeholders to enhance the collective understanding of emerging business opportunities and risks. Using resources ranging from web-based research to outside experts and live, issue-focused forums, Knowledge Exchange synthesizes, promotes and sustains a two-way flow of critical business information to enhance CoBank's standing as a valued, trusted advisor and financial partner. 

CoBank customers can access a summary of the report through the Knowledge Exchange tab on CoBank.com.  Copies of the report may also be obtained by contacting your CoBank relationship manager or sending an email to the Knowledge Exchange Division at [email protected].

A full copy of the report is available to media upon request

About CoBank

CoBank is a $92 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture and the nation's rural economy.

Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.

For more information about CoBank, visit the bank's web site at www.cobank.com.

SOURCE CoBank

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