Buy Grains Before China Runs Out: Expert
CNBC EMEA Head of News
China’s self-sufficiency in wheat, rice and corn could be reversed in dramatic fashion in the next few years offering investors a chance to make big returns, according to Richard Ferguson, the global head of agriculture at Renaissance Capital in London.
"China’s changing diet, which has seen meat consumption per capita increase by 21 percent in the past decade, has had a dramatic impact on demand for soybeans and corn," said Ferguson in a research note. "We believe that the interaction of the key variables defining prices - output, consumption, yields, planted areas, imports, exports and inventories – are at a major inflection point."
With demand for meat rising fast and still well short of that in for example Taiwan, Ferguson believes to meet this demand the total output of grain from the European Union and Brazil will be needed.
China had been working towards planting more soybeans on more land but Ferguson believes planted areas and yields have peaked. meaning more imports must follow.
"While we may not be alarmists, we see this structural shift in diet as being at a critical juncture which will likely have wide-ranging ramifications for soft commodity prices in the next few years," he said.
“China has become adept at feeding 20 percent of the world’s population off 10 percent of the planet’s farmland. However, the application of skills in the past two decades to ensure a stable domestic situation is going to require not only skills in the next decade but also a fair degree of luck as well," said Ferguson.