Why China’s Economy Doesn’t Want American Corn Anymore | WSJ U.S. vs. China

China imported over $5 billion of U.S. corn last year, even though it's the world's second-largest producer of the crop. The world's top producer is the U.S., and most of the corn these countries are producing isn't even eaten by people. About 75% of China's corn and 40% of the U.S.'s is used for animal feed. Livestock get fatter when they're fed corn, and China's growing middle class is eating more and more meat. China now needs about 250 million metric tons of corn per year. So much corn that it has to import millions of tons from other countries. And now, China has begun working to cut its reliance on foreign corn, particularly from the U.S. Any country that's trying to maintain livestock, be it cows, pigs, what have you, they need to have corn. But China's farms lag far behind the U.S., which is a major concern for its food security. Here's why growing its own grains has been such a struggle for China and how it's been trying to wean itself off U.S. corn, which could leave a significant gap in America's export market. U.S. farmers are much more successful at growing corn than their counterparts in China. The U.S. Department of Agriculture estimates that China's cornfields yielded less than three tons per acre last year, versus nearly five in the U.S. It's widely believed from the folks that I talk to that the U.S. has the superior soil, the superior farming techniques. The U.S. has significantly more arable land than China, and the arable land that China does have is decreasing due to urbanization. China's soil is also heavily polluted. A 2014 report found nearly one-fifth of the country's arable land was contaminated with heavy metals. China is currently conducting a national soil survey to see the extent of the issue. A second key advantage for U.S. farmers is their growing practices. To try and grow more, Chinese farmers use massive amounts of fertilizer, more than four times the global average. Many Chinese farmers are using fertilizer inefficiently and polluting the larger ecosystem in the process. A third issue for Chinese farmers, their seeds are about 20 years behind U.S. technology. Many in China are suspicious of genetically modified crops, but the government has worked to overcome that skepticism. Even in its recent push to embrace genetically modified corn, China only allowed a tiny fraction of its cornfields to be planted with genetically modified seeds, according to reports. So China has turned to the U.S. for corn. While it's banned domestic farmers from growing genetically modified corn due to public opposition, China has still imported genetically modified corn to feed animals. But as tensions have escalated between the two countries, China has put more effort into finding alternative trade partners to get the resource, adding competition to the market. They're in the process of setting up kind of their own trade network that can support their population and their economy and do so in a way where they're free of, you know, free of U.S. influence, free of Western influence in general. Namely, this means turning to Brazil, which is right behind the U.S. and China when it comes to corn production. For China, they're in the process of seeking out other countries that can handle their demand, and which is why Brazil is a key partner that they're developing a stronger partnership with. It's because Brazil is able to grow as a corn-producing country, and they, you know, see that growth as supportive for their demand going forward. For a long time, Brazil was known for having a volatile corn supply, but the country's now producing far more corn than ever before, increasing how many acres are planted and growing a second crop of corn after farmers harvest soybeans. It hasn't had to do everything on its own. Foreign businesses have been investing in Brazil's agriculture for decades. Chinese companies have spent billions to get involved in the growing Latin American market, and everything from seeds to processing and transportation. Things have shifted even further since the war in Ukraine. For years, China was getting lots of its corn there. Ukraine is one of the world's largest corn producers, but its corn production has fallen significantly in the past few years. The war has made it harder for farmers to get financing for corn seeds and fertilizer, and some farmland has been unusable due to occupation or mines. So China has doubled down on its relationship with Brazil. Last year, China signed an agreement to allow significantly more corn imports from the country. The result? Brazil may surpass the U.S. in corn exports this year. Brazil is receiving increased market share of exports that used to be in the U.S.'s domain. There's competitions for prices. Who has the most competitive prices? And Brazil often wins that. Because Brazil still has lots of room to expand its corn-growing acreage, it could soon surpass the U.S. in corn production. There's a lot of room to grow, and that's what they're doing. They're aggressively growing. This could pose significant competition for the U.S., especially in light of other circumstances facing the country's corn market. The U.S. is currently facing a trade dispute with its second-biggest corn customer, Mexico, which plans to ban genetically modified corn by the end of 2023. The country says this is to preserve heirloom varieties of corn that grow domestically, but it's a big deal since more than 90% of U.S.-grown corn is genetically modified. Export markets are always a top concern if China is no longer purchasing or exports in general are to drop off, then the price that farmers are gonna receive at the grain elevators for their crop have the potential to sink for farmers that are already operating on really thin margins. That's very difficult, and a lot of times when this kind of thing happens, there's some farmers that simply cannot overcome that. U.S. farmers could potentially sell more corn to ethanol plants that could use it to make fuel, but losing the export market could significantly lower prices. They wouldn't be able to cover the amount of volume that China and exports in general take up from U.S. producers. They wouldn't be able to cover that just through ethanol alone. Ultimately, China aims to grow all the basic grains it needs, whether that's corn, wheat, rice, or soybeans. But corn is just one crop where China's crop production falls short. The country also relies on foreign soybeans. It imported over $16 billion worth from the U.S. last year. Soybeans and corn often grow on the same land, but corn is more productive. China's average soybean yield per acre is less than one-third that of corn and is about 40% less than the United States' average soybean yield for the same plot. Some Chinese researchers have been urging farmers to adopt new planting methods that could allow them to grow both soy and corn, but they worry farmers prefer to just stick with what they're already doing. Experts believe China could grow self-sufficient in corn production by the end of the decade through a combination of better planting practices, using cornbread to maximize growth, and improving the soil quality. But that would require embracing new technology and farmer education. They would have to grow significantly more in order to be self-sufficient the way that the U.S. is, and they would have a long way to go to do that. For the foreseeable future, China will probably need to keep importing large amounts of corn if it wants to keep using it in animal feed. But soon, that may no longer mean buying from the U.S. China is in the position where they don't have enough to feed their people, which is why they import from outside. And they've been reliant on us as the primary corn producer in the world, even if they really don't want to do business with us. That's why they're building trade agreements that you can essentially go around the U.S. The U.S. doesn't really have an alternative to China in terms of the buying power that they have. Farmers have seen what can happen when China stops buying U.S. agricultural goods. When China sharply reduced orders for products like corn and soybeans in 2018, farms hit record levels of debt, despite the U.S. government responding with billions in aid. If China stops buying U.S. corn again and moves its business to countries like Brazil, farmers would need to find a replacement. But having to replace a $5 billion export market could be a major problem for farmers who are already getting by on thin margins.