Over the past 10 years, economic development in China has been nothing less than remarkable. A short study of the demographics, population and growth rates in the country reveals the almost impossible challenges faced by the Chinese government in managing the food supply, natural resources and environmental issues. This growth is not without its problems. As an example, the total U.S. trade deficit is currently averaging $704 billion dollars annually of which China represents almost $256 billion. To top it off, exchange rate fluctuations have undervalued China’s currency, making Chinese goods cheaper in America, and U.S. goods more expensive in China.

Given this environment, it would be easy to conclude that the U.S. rice industry would not be able to sell rice to China. Fortunately for U.S. rice farmers and millers, that type of negative thinking stops at the door of the U. S. Rice Producers Association (USRPA).

USRPA’s Chinese market study
Using a grant awarded to the U.S. Rice Producers Association through the U. S. Department of Agriculture – Foreign Agriculture Service’s Emerging Markets Program, substantial market research was performed in Guangdong province to assess the market potential for packaged long-grain milled rice in South China. The study, which was conducted with the help of the U.S. Agricultural Trade Office in Guangzhou, yielded nothing less than astounding results.

The trade figures show that Americans buy Chinese goods on a daily basis. Vast amounts of wealth are being transferred to the people of China, which in turn is increasing the disposable income for the expanding Chinese middle class – now estimated to number 300 million. While rice is as analogous to China as wine is to France, the quality of the Chinese rice is inconsistent. What this means, and what the study results show, is that there is an opportunity for high quality U.S. rice to enter the Chinese market.

The study was conducted by going directly to the people where they shop. After discussions with key contacts, and through the support of the U.S. Agricultural Trade Office, rice-tasting and survey booths were set up at supermarkets in Guangzhou and Shenzhen, Guangdong Province, to find out what consumers want and will support.

Two different market settings were used, one a major upscale supermarket and the other a warehouse store similar to Sam’s Club or Costco. Plain cooked white rice was served to consumers, and they were surveyed concerning their taste reaction and normal rice buying habits. The survey showed the Chinese will pay more for imported U.S. rice as long as the quality is high. They also indicated interest in nutrition, food security, appearance and taste. Cost is not the only deciding factor in making a purchasing decision.

Favorable transportation rates for U.S. exporters
A secondary issue in the trade of rice to China is freight cost. This raises the question, “How could U.S. rice compete when it becomes even MORE expensive after shipping it half way round the world?” Like many problems, the answer lies within the question. Remember all of the Chinese goods traveling across the Pacific to American consumers? Those containers typically go back empty to be reloaded. Since freight companies do not make any revenue when they are not hauling cargo, it is in their best interests as well to see that they are loaded on the return trip. This translates into very favorable transportation rates for U.S. exporters.

The next step in the process is to ensure that the necessary phytosanitary regulations be adopted by both the U.S. and Chinese governments. Since the main demand is for prepackaged milled rice, the main argument presented by the U.S. Rice Producers Association is that rice milled in the United States is no different from that milled in China. Through the tireless and diligent efforts of the USDA’s Animal and Plant Health Inspection Service, much has already been done to achieve these goals.

Since the U.S. rice industry exports over 50 percent of our total production, developing and expanding foreign markets is critical to the profitability and survival of our industry. Currently, the primary export markets are Mexico and Central America, but we must be continually in search of potential buyers. To do this, we must begin to think like a marketer and realize that sometimes quality and not price can be the final arbiter.

Greg Yielding serves as a special foreign projects coordinator for USRPA. For more about USRPA, visit www.usriceproducers.com.