How China will feed itself by throwing record food consumption spotlight

(Bloomberg) – China has long been obsessed with finding ways to ensure it has enough food for its population, and for good reason.

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With nearly one-fifth of the world’s population, limited agricultural land and the growing challenge of climate change, President Xi Jinping’s government has called on farmers to maximize yields and reduce consumer wastage. This has created huge reserves to address the deficit and create new seeds to increase output.

Nevertheless, the country still buys about 60% of all soybeans traded internationally and ranks as the largest importer of corn and barley. It has recently emerged as one of the largest wheat buyers in the world. This increases global crop costs and, potentially, the global food crisis is of great concern to governments, especially in terms of how local prices work. Here are some of the food security challenges that China is facing:

Soybean, edible oil

China’s consumption of local soybeans is about the same as the entire US crop, and the country has to import about 85% of its demand. Beans are crushed in edible oil for cooking and other food use and as food for the world’s largest hog population. Global soybean prices have doubled in the last two years due to dry weather in South America and shortage of oil-carrying seeds. If there is no bumper crop in the US this year, they could go even higher.

“Soybeans carry the biggest inflation risk,” said Jim Huang, head of China-US Commodity Data Analytics. Rising prices for crude oil and freight products, as well as a weakening yuan, are exacerbating the situation, he said via email.

China is the second largest importer of palm oil after India and a major buyer of sunflower oil. Global cooking oil prices have risen to record highs due to drought, labor shortages and Russia’s war in Ukraine. The latest leg-up comes after Indonesia, a top exporter, banned shipments of palm oil.

The government is putting a lot of pressure on soybean production to increase the crop by 19% in 2022-23. But the output is so low compared to the cost, it will not have much effect on imports.

Corn

For a long time, China has not bought too much corn abroad, but in recent years that country has begun to change as it emerges as the world’s largest importer, driven by the need to replenish inventories and feed the rapidly growing hog population. The increase in purchases, mostly from the United States, has encouraged its geopolitical rival, China, to increase its focus on self-sufficiency as a national security goal.

In contrast to soybeans, however, where the country was highly dependent on foreign supplies, corn imports accounted for only 10% of domestic consumption in 2020-21, and this percentage is set to shrink to about 6% by 2022-23. , According to data from the US Department of Agriculture.

China bought quite a bit of corn from Ukraine, the Black Sea nation supplied about 30% of shipments last year, making it its second largest supplier. But Russia’s aggression has cut off that trade, and is one of the possible reasons behind the expected drop in imports next year.

Wheat

The world’s wheat supply is under threat as everything from war to drought, floods and heatwaves reduce production. Global wheat prices rose to record highs in March after Russia invaded Ukraine and are 80% more expensive than a year ago, pushing global food costs to an all-time high.

Like corn, the country’s dependence on imports is reduced by about 7% of spending in 2021-22. This still makes it one of the top buyers in the world, along with Indonesia, Egypt and Turkey. Concerns have been raised about production in China and at one point a top official said the country could face the worst crop conditions in history since last year’s record-breaking floods. Authorities are also investigating whether any illegal destruction of the crop took place after the video of the loss or harvest of immature wheat went viral on social media.

What next?

China has huge reserves of wheat, rice and maize, and according to USDA estimates, the country holds at least half, if not more, of the global inventory for these products. Iris Pang, chief economist at ING Bank in Greater China, said the government would release stocks if needed to address food inflation or shortages. Fertilizer consumption is a concern and could push up food inflation, but “not in a worrying situation,” he added.

In the long run, Beijing has called for strong measures to stabilize production with two priorities: protection of new seeds and arable land. It seeks to develop genetically modified seeds to increase yields and stop using farmland for construction or turning into a golf course.

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