U.S.-China Pact Significant for Kansas Ag

October 2000

The move is particularly good news for states like Kansas, which produce a variety of exporable commodities, Kansas State University agricultural economists said.  In 1998, Kansas exported agricultural products worth $2.8 billion - making it sixth among all 50 states. The much anticipated move, coupled with China's accession into the World Trade Organization, means the U.S. will have greater access to a country where demand for wheat, meat, feed grains, and other goods and services is growing as the economy improves - and trade barriers are coming down.  "Typically, as economic growth occurs, as is happening in China, consumption patterns change," said K-State Research and extension agriculture and public policy specialist Andrew Barkley.  "As incomes rise, consumers often shift their pufchases to meats.  Not only does the demand for meats increase, but the demand for grains also rises due to greater demand for feed required to produce meat products."

He cited Japan, noting that after World War II, that country's standard of living improved and food consumption patterns changed.  Japan is now the largest importer of U.S. beef and pork.  "If China follows Japan's increase in standard of living and accompanying changes in food consumption patterns, the demand for products from the U.S. is likely to expand.  Kansas agricultlural producers are expected to gain significantly since the demand for agricultural commodities produced in Kansas, like beef, food and feed grains, is likely to increase in the  next few decades," Barkley said.  "The recent debate over China from an economic standpoint, was a no - brainer - period.  We're going to ignore one-fourth of the world's people?"  said Kansas State University agricultural economist Barry Flinchbaugh.

Flinchbaugh, who is K-State Research and Extension's state leader in agricultural policy, also serves as chairperson of the Commission on 21st Century Production Agriculture.  The commission was established to evaluate the last farm bill and to recommend to Congress what federal agricultural policies should be in place after it expires in 2002.

At over 1.2 billion people, China's population dwarfs that of other countries.  In contrast, 1998 figures put the U.S. poplulation at 275 million, Japan at 126 million, and Mexico at 96 million.  "What this means is, that if the Chinese population increases its consumption of a commodity by even a small amount per person, the aggregate increase in consumption could be enormous, given the immense population,"  Barkley said.

Meat consumption is growing 5 percent annually in China, according to the USDA.  While it's still below other Asian markets, it is expected to keep rising.  That's typical of a country's shift out of grain diets and into meat, as economic development begins to take place, Barkley said.

China has agreed to reform its grain sector to meet its WTO commitments.  As that happens, its own domestic grain production will likely decline and greater meat demand will mean increased imports of meat as well as animal feed inputs such as corn.  "The Chinese meat diet has become dominated by pork, which has tripled from 11.8 kilograms [per capita] per year in 1980 to 31.5 kilograms in 1998," Barkley said.

But several factors are slowing growth in China's pork output and brightening prospects for U.S. pork sales.  Eighty-five percent of China's hogs are produced on small family farms using traditional technology, which makes expansion difficult.  Also, China's high population density hampers gains in commercial hog feeding efficiency because of competition for arable land.  Beef, wheat and feed grain producers are also likely to benefit as China's per capita income increases and with the greater access to China's consumers, Barkely said.

"Per capita beef consumption in China is likely to grow significantly as per capita incomes increase."  

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