Chinflation: China Ends Food Export Subsidies On Domestic Price Rise
Posted by ChinaCoalWatcher at 17 December 2007, 10:33 AM and is filed under Food,TAXES,exports,China,Subsidies,Agriculture 
From Bloomberg:China, the world's biggest grain
consumer, will eliminate export tax rebates on a range of food
commodities as part of a series of measures to secure domestic
supplies and control rising food prices.
...China's food costs gained 18.2 percent last month, pushing inflation to the highest in 11 years. The government has sold corn, wheat and vegetable oil from state reserves and asked local authorities to boost emergency stockpiles. The decision may increase demand for U.S. corn and boost prices of the commodity in Chicago, said analysts including Chen Baomin.
``This will help the U.S. dominate the Asian market,'' said Chen, analyst at Jilin Grain Group Co., one of the country's two authorized corn exporters. ``We don't expect China to export corn next year after this decision on tax rebates.''
... China shipped 4.9 million tons of corn and 1.2 million tons of rice overseas in the first 11 months of this year, up 85 percent and 7 percent respectively, preliminary customs data show. In January to October, exports of wheat more than tripled to 1.8 million tons and shipments of soybeans rose 29 percent to 376,000 tons, according to data compiled by Bloomberg.
... "China still enjoys significant price advantages, so this may not completely eliminate all future exports of secondary products ... But in terms of major grains, there's now little hope of any Chinese exports."
...China's food costs gained 18.2 percent last month, pushing inflation to the highest in 11 years. The government has sold corn, wheat and vegetable oil from state reserves and asked local authorities to boost emergency stockpiles. The decision may increase demand for U.S. corn and boost prices of the commodity in Chicago, said analysts including Chen Baomin.
``This will help the U.S. dominate the Asian market,'' said Chen, analyst at Jilin Grain Group Co., one of the country's two authorized corn exporters. ``We don't expect China to export corn next year after this decision on tax rebates.''
... China shipped 4.9 million tons of corn and 1.2 million tons of rice overseas in the first 11 months of this year, up 85 percent and 7 percent respectively, preliminary customs data show. In January to October, exports of wheat more than tripled to 1.8 million tons and shipments of soybeans rose 29 percent to 376,000 tons, according to data compiled by Bloomberg.
... "China still enjoys significant price advantages, so this may not completely eliminate all future exports of secondary products ... But in terms of major grains, there's now little hope of any Chinese exports."
Meanwhile, wheat prices in Chicago rose to an all time high above $10/bushel! And so here comes the China-driven new global economic general equilibrium. This is the era of commodities renaissance, as the Chinese gradually get out of the agricultural export business where they are at a competitive disadvantage as their population's pent-up demand for more intensive food products (like meat) can only be met through imports.
Such a great deal of global economic change is being driven by similar phenomena as two things happen: 1. China ceases to export raw materials, grains, ore, energy, etc... and instead begins to import large quantities of these unfinished goods and exports the secondary, finished, value-added products, and 2. China's own internal domestic demand for consumption of both primary and secondary goods explodes in a way that cannot be met by internal suppliers alone.
Prediction: China's pressures on global agricultural prices drive the US to slowly pull back on it's wasteful Ethanol production goals as prices remains high enough to support putting more otherwise-fuel-destined corn on the market while maintaining farmers' profitability. There may even be a little bit of this as a motivating strategy behind the US policy as the administration looks towards a future where US-China trade eventually comes into balance.
Comments