Last week’s International Grains Council Conference in London featured thought-provoking presentations from industry leaders around the world. Among them was Feng Jilong, general manager of the Dalian Northern International Grains Logistics Company, who spoke on the long term evolution of China’s corn import demand.

“Feng Jilong was right on target,” said U.S. Grains Council Vice Chairman Ron Gray, who represented the Council at the IGC meeting. “He didn’t minimize any of the problems and concerns, but he kept returning to the fundamentals, and the long-term fundamentals are good.”

Looking past the recent upheavals in U.S. corn and distiller’s dried grains with solubles (DDGS) exports to China, Feng pointed to the fundamentals of a growing middle-class versus long-term constraints on domestic production.

Despite impressive and sustained production gains in China, corn acreage increases come directly at the expense of other crops, a process that cannot continue indefinitely. Increasing labor shortages, the small size of individual farmers’ plots and corn prices in China chronically above world market levels suggest that the pressure to increase imports will grow.

Feng acknowledged that China can choose several paths forward. Given the political sensitivity surrounding biotechnology, he speculated that an attractive strategy may be to allow increased imports for processing. By importing commodity corn and producing its own fuel ethanol and DDGS, China can reduce oil and DDGS imports, decrease environmental pollution, reduce logistical costs and give consumers in China lower costs. At the same time, this value-added strategy would tend to mitigate public concerns about the introduction of genetically modified corn into the food chain.

“The big question is whether the government in China will allow markets to allocate resources,” Gray said, “or whether politics will get in the way. But the United States is happy to export corn in all forms. The government in China will act in its own perceived best interest, and whatever their choice, U.S. farmers and exporters have the capacity and flexibility to meet China’s growing demand.”