Does the U.S. Midwest Have a Cost Advantage Over China in Producing Corn, Soybeans, and Hogs?

Cheng Fang, Jacinto F. Fabiosa
August 2002  [02-MRP 4]

China's accession to the World Trade Organization, a significant event for U.S. agricultural trade, has been viewed as benefitting U.S. farmers, especially midwestern farmers. This research compares the productivity and cost of production (COP) of China and the United States in producing corn, soybeans, and hogs. The results show that the U.S. Midwest (defined in this study as the Heartland region as classified by the U.S. Department of Agriculture's Economic Research Service) has a substantial advantage in land and labor productivities in producing corn and soybeans, especially compared to China's South and West producing regions. However, China's Northeast region, a major corn- and soybean-producing area, has a very competitive COP over the U.S. Midwest. In hog production, the U.S. Midwest has a cost advantage over China in feed cost and labor productivity (there is little difference in fine feed usage), but this advantage is more than offset by the lower cost of feeder pigs and low capital replacement cost in China. Land policy in both the United States and China is a key determinant of COP. In addition, labor productivity and related policies in China are driving forces for China's competitive position.

Keywords: agricultural trade, competitiveness, corn, cost of production, exchange rate, hogs, land policy, productivity, soybeans, U.S. Midwest versus China.

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