The Emerging Power Of China

Every market analyst agrees that the next few decades will belong to China. The world’s most populous country with more than 1.4 billion people and the current No. 2 economic force behind only the U.S. is projected to surpass America as the world’s largest economy by 2029.

Speaking at the annual Mid America CropLife Association meeting in Broomfield, CO, Todd Goll, vice president with ABN AMRO Clearing Chicago, pointed out to attendees just how strong an economic force China will become in the coming decades. “By 2020, there will be 500 million households in China, with 229 million of these falling into what can be called the middle class,” said Goll. “That will be up 49 million households since the start of the 21st century.”

Put into a more individualistic perspective, Chinese consumers born in 1960 are expected to spend just over $16,000 in their lifetime. But for Chinese consumers born in 2009, this figure skyrockets to more than $632,000.

As this Chinese middle class grows, said Goll, their appetite for more protein will increase. Right now, he adds, the per capita consumption of such products as beef, chicken and polk in China pale in comparison with those in neighboring entities such as Taiwan and Hong Kong. “But this will change,” he added.

In the meantime, China remains the world’s largest consumer of wheat. However, much of the country’s recent agricultural growth as occurred in the world’s largest cash crops, namely, corn and soybeans. “China is beginning to grow more of these crops itself, planting 84 million acres of corn in 2012, at the expense of wheat,” said Goll. “But the country still has to import much of what it needs from countries in South America and the U.S.”

In the near term, this will mean quite a bit of crop export business for countries such as Brazil, Argentina and America, he says. In fact, in 2013, a good portion of the U.S.’ projected soybean harvest of more than 75 million acres will end up in Chinese hands.

“Based upon the best estimates from the USDA, approximately 30% of the U.S. soybean crop this year will go to feed demand in China,” he said.

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