Beware of Import Risks Caused by Large Imports of Grain

The latest data released by the General Administration of Customs shows that in 2023, China imported a total of 161.964 million tons of grain, a year-on-year increase of 11.7%. This is the second time that China's grain import volume has exceeded 160 million tons, which is 25.75 billion tons less than the 1645.39 billion tons in 2021. This indicates that the resilience of China's global food supply chain has further strengthened, withstanding the pressure of increasing complexity, severity, and uncertainty in the external environment, and ensuring the stability of food imports. At the same time, it is necessary to coordinate and make good use of both domestic and international markets and resources, and be cautious of the import risks caused by the large import of grain, which will affect the security of the domestic grain industry.

Moderate imports can effectively compensate for the structural shortage of grain supply and demand in China. China is the world's largest producer and consumer of grain. Although grain production has remained above 1.3 trillion kilograms for 9 consecutive years, the demand for grain consumption has shown a rigid growth, and the supply and demand of grain have been in a tight balance for a long time. Structural contradictions are prominent, and the shortage of feed grains and oil crops is prominent. It is necessary to adjust the surplus and shortage through imports. From the perspective of grain import structure, soybeans still account for the largest proportion of imported varieties and occupy a dominant position; The proportion of imported corn and its substitutes, barley and sorghum, comes second; The proportion of wheat and rice imports is very small. Strengthening international cooperation on food security and leveraging the role of international food trade has been included in China's Food Security Law as an institutional arrangement to ensure food security.

As a major importer of grain in the world, it is crucial for China to firmly grasp the initiative in grain imports. For many years, China has continuously strengthened its voice and bargaining power in international grain trade by building a diversified pattern of grain imports. China has strengthened cooperation in grain trade with countries around the world, continuously expanding the sources of grain imports, expanding its "circle of friends", and making "rice bags" increasingly globalized. Soybeans from Brazil, the United States, and Argentina, wheat from Canada, Australia, France, Russia, and the United States, corn from Brazil, the United States, and Ukraine, and rice from Vietnam, Thailand, Myanmar, India, Pakistan, and other countries continue to flow to China. On the basis of ensuring basic self-sufficiency of grains and absolute food security, China insists on allocating food resources globally, injecting lasting momentum into world food security and free trade, and injecting vitality into the current sluggish world economy.

From the perspective of grain import amount, the cumulative import amount of grain in China in 2023 was 578.05 billion yuan, a year-on-year increase of 6.6%. The growth rate of grain import amount was lower than the growth rate of 11.7% of grain import volume. This indicates that the cost of grain imports in China has decreased in the past year, and the fundamental reason is the decline in international grain prices. "Chinese demand" can to some extent affect the flow of global grain trade, but cannot influence the trend of international grain prices. The decline in international food prices in 2023 is the result of a combination of factors such as slower than expected global economic recovery, decreased food demand, and a US dollar interest rate hike to address inflation. The United States is the world's largest exporter of grain, controlling more than half of the global grain market. It is the world's first exporter of corn, second exporter of soybeans, and second exporter of wheat. Through comprehensive use of international market management and regulation, data release, and expected guidance, it firmly controls the dominant position in global grain supply and pricing power in international grain trade, influencing the rise and fall of international grain prices, Food importing countries can only passively accept pricing. India is the world's largest exporter of rice and holds the dominant position in international rice supply. India's restrictions on rice exports have led to a surge in global rice prices, triggering a global rice crisis.

Grain imports are a double-edged sword. China's grain production is characterized by high costs and prices, and is at a disadvantage in international grain trade. In order to protect the domestic grain industry from the impact of low-priced imported grains, China has implemented import quota management on the three main grains of corn, wheat, and rice. Currently, except for imported rice prices higher than domestic rice, imported corn and wheat prices are still lower than domestic prices. The competitive advantage of imported soybeans without quota protection is more obvious. In this situation, a large amount of imported grain may have adverse effects on the domestic grain industry, which can be manifested in two situations: first, there is a strong linkage between domestic and international grain prices, and the decline in international grain prices can cause fluctuations in domestic grain prices; Secondly, in the context of increased domestic grain production and insufficient effective demand, a large import of grain will further squeeze the domestic grain market space.

Grain is a strategic resource and an important bargaining chip in the game between major powers. Against the backdrop of continuously improving the level of opening up to the outside world, China needs to comprehensively enhance the international competitiveness, pricing influence, and international control of grain. To scientifically and reasonably utilize international food resources, make good use of the management policies of grain import tariffs and quotas, grasp the scale and rhythm of grain imports, do a good job in monitoring and early warning, closely track the dynamic changes of domestic and foreign grain and oil markets, conduct in-depth analysis and judgment, and take timely measures to respond.