The previous
Note #4 (deliberately) cast much doubt on the numbers we use in forecasting key grain market factors, and the methods by which we build such models. Some readers are probably asking, "What are we supposed to do? As risk managers and investors, we have to have at least an
opinion on these factors."
Precisely!
Dictionary definition of "Opinion": A belief or judgment that rests on grounds insufficient to produce complete certainty.
My own opinion is that "the rise of China" is a massive one-time, political-economic episode. All such episodes, in past history, have beginnings, middles, and ends. The same will be true of China. The steady growth of annual China's imports of soybeans will at some point decline. The question for those wanting the "best opinion" (the most market competitive) is "when we will see the decline, and by how much?"
Take a skeptical look at the chart below. The projected annual rates of population urbanization in China, with actuals peaking at 22 million people, are forecasts made by the United Nations Population Division--based on the continuation of past demographic trends, with little change in politics and economics in the future. But maybe the rate of urbanization has already started to decline faster than the UN forecast! What about the photos we see of "empty cities," with zillions of unoccupied high-rise apartment buildings?
Secondly, what about the USDA meat usage data for 2015 and 2016, which both show a definite decline already? How can soybean meal demand go up (and thus imports of soybeans) if meat use is softening? Experts in the Department urge us "not to trust the meat data too much, they are not as good as the rest of the crop supply-demand and trade numbers." But we know that the retail price of pork in China, for instance, is at all time highs--why doesn't pork production respond? Can't the China Communist Party control this kind of thing?
What I plan to do in the next few Notes on China is to display more charts on year-by-year changes in meat and vegetable oil use in China, and to compare the China numbers with other world regions. I think this will strengthen our "opinion" on how fast the decline may already be occurring.
What I plan to do at the August 18 seminar is not only to pull all this detail together but to present a very long term perspective on all the important "grain trade episodes," going back to Rome! I think you'll want to see this. China's cultural tendency over the long term, with regard to its hegemony, is to build Great Walls and Grand Canals to stay "food independent." Is this still a potential option?
I'll also be covering biofuel demand. The EPA's Technical Assessment Report (TAR) on CAFE standards for the next ten years came out this week--we'll get a brief on this out later today.
Early bird registration is here. View the agenda here. 
