Nothing To Do With The Bakken -- But Implications Just the Same -- China's Demand for Corn

Link here.

I normally wouldn't post a story about corn, but this caught my attention; see if you see what I see. It's obvious.

Grains traded higher  [last week] after a survey of Chinese corn growers shows a need for more imports. Even with record production, growers in that country say it’s not enough to keep up with demand. A survey says corn imports to that country are expected to hit a record high, 5 million tons in the 2011, 2012 marketing season. Last season imports were just one million tons. According to the USDA, China bought 900,000 tons of U.S. corn back in October--the second largest single-day sale in U.S. history. So far this year, corn purchases are up 50%. The National Corn Growers Association says China will continue to be a major market for U.S. grains.

I don't know about you, but when a country needs to increase its imports of a staple by five-fold -- from one million tons in 2010 - 2011  marketing season to five million tons this season -- that catches my eye.

But that was not the most important note. This was the most important takeaway: the Chinese will increase imports five-fold, not because they had a lousy growing season (which always seemed to be the story with the Russians). The Chinese are increasing their imports of corn even as they themselves are producing record amounts. A lot of those American dollars that the Chinese hold will be coming back to American farmers. 

I would assume corn imports correlate with population, and I would assume there is a correlation between corn imports and energy needs: no cause and effect, just a correlation. The same folks in China who enjoy and can afford corn-fed beef, most likely enjoy and can afford automobiles.

China's growing demand for corn leads one naturally to thinking about China's growing need for oil. CNOOC's anticipated purchase of BP's $7.1 billion state in Argentine crude producer Pan American Energy LLC did not materialize. My hunch is that this will have repercussions for the entire oil industry going forward.

Coincidentally, Carpe Diem reports that corn yields have increased six times since the 1930s and are estimated to double by 2030. Other data points:

• Farmers today grow five times as much corn as they did in the 1930s – on 20 percent less land. That is 13 million acres or 20,000 square miles, twice the size of Massachusetts. The yield per acre has skyrocketed from 24 bushels in 1931 to 154 now, or a six-fold gain.
  
  
• The national average of 153 bushels produced on each acre in 2010 was nearly 20 percent larger than the average yield in 2002 – and plant breeding experts estimate yields may jump 40 percent before 2020 and, perhaps, hit a national average of 300 bushels per acre by 2030.

• America’s corn farmers are by far the most productive in the world, growing 20% more corn per acre than any other nation.