How World Economies Impact Domestic Agriculture: The Asia/Pacific Region

Monday, June 23, 2014

   China, a major consumer of American agricultural goods, dominates market headlines on what is nearly an everyday basis. That’s no surprise, as there are a lot of people to feed in China. What’s more, the Chinese are enjoying rapid gains in living standards. Higher average incomes are the country is expected to become the world’s largest economy by 2020.
   China may garner the most attention in industry news, but there are several economies in the Asian/Pacific region that have major stakes in the global ag market. Japan, for example, is a consistent importer of U.S. corn surpluses. South Korea is also a notable consumer of imported coarse grains. Australia is a major wheat exporter and India is becoming a formidable source export of export competition, too.
   The area is large and the economies that make up the Asian/Pacific region are diverse. Each economy is characterized by a unique set of fundamentals that will drive them in the years ahead. Growth and development in the region will rely on a continued presence in the international agriculture economy.
   The Chinese economy is still firmly in the hands of Beijing policymakers, but initiatives to liberalize markets will continue to loosen the state’s grip. Manufacturing production remains a key driver of growth in the Chinese economy. Gains in industrial efficiency are providing much needed support to the agriculture industry, which would benefit from increased commercialization.
   China is a large importer and accounts for about 7 percent of the world’s total import demand for coarse grains. The other economies in Southeast Asia are a source of consistent demand as well. Indonesia, Malaysia, Philippines, Thailand, and Vietnam are expected to import a combined 9.22 million metric tons of coarse grains in the 2014/15 marketing year. Improving standards of living in those countries will increase the need for feed grains going forward and it looks as if the United States will be a major beneficiary of that demand.
   Australia is one of the Pacific region’s major players in agriculture. The country is on track to export 6 million metric tons of coarse grains and 18.5 million metrics tons of wheat in 2014/15. The economy enjoys an abundant endowment of natural resources and its business environment is tailored to meet the needs of a strong agriculture sector. Australian grain companies benefit from a stable financial system. Well-developed credit markets support growing export capacity. The country will continue to compete with U.S. in the international wheat trade.
   The economies that make up the Asian/Pacific region have experienced a rapid recovery from the latest financial crisis. As a whole, it will be necessary for the region to continue making efforts to liberalize financial systems and open channels for the ag trade markets. Ultimately, high growth potentials will sustain strong demand for U.S. grains in the years to come.