Where Did China's Population Go, And What Does It Mean For China's Historically Strong Export Demand?

Estimating the reality of China’s population, demand and other economic figures seems to be a growing challenge for economists across the globe. This week, China threw out a bit of a surprise, acknowledging the country’s population is declining. Officials in China say the population now sits at 1.4 billion.

While analysts say China is at least acknowledging the population problem, some estimates point to China's population dwindling from 1 billion by 2050 to 494 million by 2100.The issue is China's one-child policy, a practice which ended in 2016.

Just last week, China’s government said nearly 60,000 people have died after contracting COVID-19 since abandoning its zero-COVID policy on Dec. 7, 2022.

Is the population decline acknowledgement going far enough? And does it have a direct correlation in the drop in Chinese demand for U.S. agricultural products? It’s a question economists could debate for years. 

“The demand from China certainly is a problem,” says John Payne of  hEDGEpoint Global Markets. “I don't know if demographics in China are correct. The reports we get out of there you have to take with a grain of salt. So, this week, to see them finally admit to that, you just wonder if that's baked in the cake or not.”

As reported on AgWeb, every day, China must feed 20% of the global population. With so many people, it makes China a demand powerhouse, and today, China is not only the world’s biggest consumer of agriculture goods, but according to AgWeb, it is the biggest in history. And China’s lack of demand from the U.S. this marketing year is what's alarming to Jim McCormick of AgMarket.net today.

“Right now, the biggest demand concern is China,” says McCormick of AgMarket.net. “I mean, there's a lot of trade anticipating China will eventually come to our market and start buying corn. But the reality is they haven't. They've been buying a lot of corn from Brazil, at this point in time.”

Read More: Future Shock: U.S. Agriculture Sleeping on China’s Historic Population Crash

McCormick thinks if China remains largely absent from buying goods like corn and soybeans, he’s concerned about what it will mean for commodity prices this year.

“It is a very legit concern, and we need to keep an eye on is ethanol demand,” says McCormick. “USDA didn't make a lot of adjustments there. But the reality is there's a real fear we're going to go into a recession, that's not going to be good for demand for ethanol. And that'll trickle down to the price of corn, as well.”

Payne says the other thing to watch is China’s hog population and what that will mean for corn demand.

“This week, we got the word that China is going to aggressively cut their sow population,” he says. "They're going to liquidate some of their herd here to make up for some meat supply losses they've had during COVID-19. And how that affects corn demand is a pretty good question. They're not going to be building their herds, so corn and soybean meal demand, specifically, I think, are probably a little high here [at these prices], but again, I think that's a story for Brazil right now.

Longer-term, Payne is watching how China shifts its policies, and how that could alter demand.

“China is setting the stage to kind of operate much like the North African nations did in the wheat markets where they were buying from the U.S. forever. We had some regime change, some macro-economic changes, and then all of a sudden, they're now buying from Russia,” says Payne. “And now they're a big Russian client. That same thing could happen here, where a lot of corn demand that the U.S. has been selling to South Korea, Japan, and China goes down to South America.”

Payne points out the U.S. currently has a strong domestic industry for corn use, but he agrees with McCormick, ethanol demand will be the line item to watch in the U.S.

"Thankfully, we have a lot of industry here, and they can use corn. But on the margins, specifically with ethanol, we're going to see oil prices really rallying, and I think you're going to have the ability for corn to shed demand at these prices,” says Payne.

Read More:

Future Shock: U.S. Agriculture Sleeping on China’s Historic Population Crash