From Exporter to Importer, China’s Grain Market Challenge
Fifteen years ago China used to be one of the world’s major grain exporting countries. Rice, corn and wheat were sold annually to numerous countries, including several African nations', Korea and the Philippines annually. Nowadays, this has changed dramatically.
Though 90% self-sufficient in grain in 2012, clearly, China has opened her doors and become a net importer. The following table illustrates the volume of Chinese exports compared with imports for 2013.
Traders monitor changes to Chinese crop production on a daily basis, including plantation area, weather, and government policy because any one of these factors can affect demand.
Quotas Impact Efficiency
Grain imports and exports are primarily aimed at adjusting to grain surpluses and shortages. They also ensure that the balance between supply and demand is maintained. Traders can benefit from the new market emerging in China, however, because it is still a controlled market, they are also exposed to risk. For example, food grain (rice, corn, wheat) imports are subject to quotas issued by the government. Competition for quotas is tough and they are awarded to both private traders and the government’s own import agency. This more piecemeal approach to awarding quotas means traders need to find flexible shipment solutions to improve cost-efficiency. Zero Tolerance to Unapproved GMO.
Zero Tolerance to Unapproved GMO
In addition to this, traders need to consider and plan for strict quarantine and GMO regulations. It is widely understood that China applies zero tolerance to unapproved GMO events. For example, if even one kernel of corn is found to contain an unapproved GMO event (i.e. MIR162) the whole shipment will be rejected. Furthermore, there is usually a time gap between the US and China when approving a new GMO event. Thus the trading risk is huge.
Recent cases are typical examples of how traders are affected. About 900 kmt of US corn was rejected by the Chinese government due to the presence of MIR 162 which is a GMO event not yet approved by China. Some of the corn has been discharged and has been sitting in the port warehouse for month, the condition of the corn is deteriorating daily. Shippers are now faced with charting a vessel to remove the grain from China.
To minimise this type of risk, SGS is offering a fast and first class lab analysis to tell clients if their cargo meets the requirements of destination countries. Our GMO Identity Preservation (IP) program can minimise contamination risk throughout the supply chain. Further peace of mind can also be achieved with the non rejection guarantee scheme.
To help customers make better trading decisions, our market research services provide accurate and first hand crop information through a strong ‘in field’ network. At SGS, we are also able to tailor make individual schemes to fit the specific requirements of our customers.
Read our Agri Trade Highlights (PDF 1.21 MB)
Subscribe to our Agri Trade Highlights newsletter
For more information, please contact:
Regional Business Development Manager
SGS-CSTC Standards Technical Services (Shanghai) Co., Ltd.
3rd Building No. 889, Yishan Road, Xuhui District
t: +86 21 6140 2666 ext. 2502
f: +86 21 6495 6236
SGS is the world’s leading inspection, verification, testing and certification company. SGS is recognized as the global benchmark for quality and integrity. With more than 80,000 employees, SGS operates a network of over 1,650 offices and laboratories around the world.