Will Loosening China One Child Policy Empty World’s ‘Breadbasket’?

The effects of loosing the age-old China one child policy will reverberate as far as the fields and processing plants of the “bread basket of the world,” the U.S. farm belt. The United States farm belt has already been shipping a growing share of its soybeans, pork and other products to feed rising, red China.

The extent to which the loosening of the three-decade-old population-control policy will change Chinese demographics — which in turn, affects U.S. farmers and agriculture companies—is difficult for economists to forecast. China’s ruling Communist Party said in a broad blueprint for reform issued Friday that it will loosen the China one child policy by allowing couples to have two children if one parent is an only child.

The latest move will add to existing exemptions conducted by piecemeal, pertaining to rural dwellers and certain ethnic minorities, as well as couples who were both only children in their own respect.

In truth, as is typically the case in communist countries, those who are either wealthy or party officials always had options to skirt around the law. Thus, data is difficult to accurately assemble, and the impact will still depend on how the policy is implemented, and how couples choose to respond.

Yet economists say any growth in China’s population — which is expected to top off at approximately 1.4 billion in 2020 — is most likely going to add to an already sharp demand for U.S. farm goods. China will need more corn, wheat, soybeans and meal made from the oilseeds to feed chickens, hogs, cattle and dairy cows it will need to produce to feed its large population, according to Bruce A. Babcock, who is a professor of economics at Iowa State University in Ames, Iowa.

Dan Kowalski, an economist at Greenwood Village, Colorado-based CoBank, which provides loans, leases and export financing to agribusinesses said, “More children will mean more dairy products and as those children age, meat consumption will rise.” “China will not be able to meet all its corn and soybean needs so it will rely on more imports. The U.S. is a prime supplier to China and that trade will become more important as time goes on.”

The economists forecast that China will import roughly 7 million metric tons of corn and 69 million tons of soybeans in the year that started on October 1. According to the U.S. Department of Agriculture, both of those figures will represent new records.

Where are those goods being allocated?

According to the USDA data, the vast majority of corn was used to fatten animals consumed by China’s middle class, which ate about 13.5 million tons of chicken and 52.7 million tons of pork, amounts that are also USDA records. But they won’t be for long, as China will import 775,000 tons of pork in 2014, which will represent the most pork ever imported.

Unlike the Untied State, China’s gross domestic product rose 7.8 percent in the quarter that ended on September 30 from the same three months a year earlier. However, some economists are skeptical of that pace being maintained in the future.

Two citigroup economists Nathan Sheets and Robert A. Sockin, both said in an October report that China’s “deteriorating demographics,” an aging population due to the three-decade-old China one child policy, may knockoff 3.25 percentage points off China’s annual growth rate between 2012 and 2030, which is a statistically significant decline from the double-digit growth China realized in past decades.

If leftists in American are weary of the wealth gap in the U.S., they would cringe at the gap in China, which will be further exacerbated by such a drastic reduction in gross domestic product.

An older, aging population has been largely responsible for the reduction in economists’ outlook for China’s workforce, as many who are having children today will soon become less productive as they grow older, said Danny Klinefelter, a professor of agriculture economics at Texas A&M University in College Station, Texas. If China hopes to remain competitive globally, they will need to increase the size of its workforce or face declining productivity. Rising incomes in the country will also further boost food consumption, Klinefelter said.

“Any time you increase population, particularly in country that has ability to buy, then food consumption is going to go up,” he said. “Africa has lots of population growth but not the wherewithal to pay for it all. China does.”