Who Will Feed China? Who Will Feed China? Wake-up Call for a Small Wake-up Call for a Small

PlanetPlanet

Lester Brown’s Look at the Lester Brown’s Look at the Future of China and the Future of China and the

WorldWorld

Palmer Drought Severity Index

BackgroundBackground During the Great Leap Forward 30 During the Great Leap Forward 30

million people starved to death in million people starved to death in China due to a human caused famineChina due to a human caused famine

• The current leadership has said “never again”

Historical RecordHistorical Record

Densely populated Asian nations that Densely populated Asian nations that developed rapidly quickly became developed rapidly quickly became major food importersmajor food importers– Examples: Japan, S. Korea, TaiwanExamples: Japan, S. Korea, Taiwan

Brown in a nutshellBrown in a nutshell China as it develops might no longer China as it develops might no longer

produce enough food for its own produce enough food for its own consumption and as a result will place consumption and as a result will place unprecedented strains on world unprecedented strains on world markets, food supply, and even water markets, food supply, and even water supplies.supplies.

Reasons include loss of farmland to Reasons include loss of farmland to industrialization, urban areas, roads… industrialization, urban areas, roads… and richer people wanting more meat as and richer people wanting more meat as well as more people overall.well as more people overall.

Organizing PrinciplesOrganizing Principles

SupplySupply DemandDemand Historical Historical

RecordRecord

View of Chinese Agriculturehttp://www.youtube.com/watch?v=4sQsklfrNmc&feature=related

Publicity film about agriculture in China

SupplySupply

Economic Development = increased Economic Development = increased supply of consumablessupply of consumables

Sustained (not sustainable) Sustained (not sustainable) Development = ever increasing Development = ever increasing supplysupply

Simply More Stuff AvailableSimply More Stuff AvailableTechnology and Investment has assistedTechnology and Investment has assisted

Development = Changing Supply Development = Changing Supply NeedsNeeds

1979 “capitalism” increases 1979 “capitalism” increases supply – An Huisupply – An Hui

http://www.youtube.com/watch?v=EYJV8CffwuM&feature=related

Supply IncreasesSupply Increases

After 1979 in post-Maoist China After 1979 in post-Maoist China supply rapidly increasedsupply rapidly increased

Economic development ensuedEconomic development ensued

DemandDemand Economic Development = increased Economic Development = increased

demanddemand Sustained (not sustainable) Sustained (not sustainable)

Development = insatiable appetitesDevelopment = insatiable appetitesMore Stuff WantedMore Stuff Wanted

Development = Changing Demand or Development = Changing Demand or PreferencesPreferences

Classical EquilibriumClassical Equilibrium

Price Allocates Scarce ResourcesPrice Allocates Scarce Resources But what if Resources Can’t Meet But what if Resources Can’t Meet

Needs?Needs?– What if the supply is so small relative to What if the supply is so small relative to

demand and the price so high that people demand and the price so high that people starve? starve? ultimate Capitalist Solution according to a ultimate Capitalist Solution according to a

MarxianMarxian

– Brown suggests that this could happenBrown suggests that this could happenGlobally, not necessarily in ChinaGlobally, not necessarily in China

Historical RecordHistorical Record

Development Results:Development Results:– Population SpurtsPopulation Spurts– Demand climbsDemand climbs– Search for Cheaper more Efficient Search for Cheaper more Efficient

SuppliesSupplies– In East Asia this has caused massive In East Asia this has caused massive

imports of food in Japan, S. Korea, & imports of food in Japan, S. Korea, & TaiwanTaiwan

China’s Changing Demand China’s Changing Demand CalculationsCalculations

Population continues to grow Population continues to grow – Maybe only 100 Million or so moreMaybe only 100 Million or so more

Consumers moving up the Food Consumers moving up the Food ChainChain

Competition has become GlobalCompetition has become Global– think of the current Petroleum think of the current Petroleum

Markets, Markets, MarketsMarkets, Markets, Markets

China’s Changing Supply China’s Changing Supply Calculations: InputsCalculations: Inputs

Cropland could shrinkCropland could shrink– UrbanizationUrbanization– IndustrializationIndustrialization– TransportationTransportation– Environmental DamageEnvironmental Damage

Water in limited SupplyWater in limited Supply– Industrial Demand IncreasingIndustrial Demand Increasing– Past Pollution ProblemsPast Pollution Problems– Global Warming???Global Warming???

Last updated at: (Beijing Time) Friday, April 23, 2004

Farmers reclaim 'wasteland' as grain price soars

Lured by a grain price hike, Chinese farmers like Li Xihua are returning to farmlands from their work in cities.

Food ResourcesFood Resources 1818

Increase, Decrease and Stock of Cultivated Land in Increase, Decrease and Stock of Cultivated Land in China, 1988 - 1995China, 1988 - 1995

Basically China will be losing Agricultural Land over the long run

Urban Urban ConversionConversion

http://www.jstor.org/stable/pdfplus/3181377.pdf?acceptTC=true

One estimate of current arable land in China and minimum required for self-sufficient grain production

http://www.agweb.com/blog/Farmland_Forecast_148/?Year=2010&Month=10

History of other Asian NationsHistory of other Asian Nations Japan & Korea – Japan & Korea –

Past DecadesPast Decades– Growing grain Growing grain

deficitsdeficits– Shrinking Shrinking

cultivated landcultivated land– Increasing Increasing

imports of Foodimports of Food

Current Situation In Current Situation In ChinaChina

2013/142013/14

Movement from Family Farm to Movement from Family Farm to Agri- BusinessAgri- Business

Foreign Expansion

Some Chinese companies with overseas agriculture projects

Chongqing Grain Group (CGG)

US$3.4 billion for an overseas expansion that includes200,000 ha soybean farm in Brazil 200,000130,000 ha soybean farm in Argentina 130,000plans to produce oilseed rape in Canada and Australia, rice in Cambodia and palm oil in Malaysia.

Beidahuang (Heilongjiang State Company)

2 million ha of farmland in the province of Heilongjiang.awaiting approval for a project to develop 200,000 ha of rice, maize, and other crops in the Philippines 200,000Heilongjiang Province leased 426,667 ha of land in Russia. 426,667

Sanhe Hopeful Pvt. Co.

will invest US$7.5 billion in the Brazilian state of Goias to secure six million tons of soybeans per yearZTE Corp

30,000 ha of oil palm plantations on Indonesia 30,00050,000 ha for cassava production in Laos 50,00010,000 ha farm in Sudan for maize and wheat 10,000100,000 ha concession for an oil palm plantation in DR Congo 100,000

Pengxin Group

invested more than US$20 million in a 12,500 ha Bolivian soybean and maize farm 12,500negotiating to buy 200,000 ha of land in Brazil 200,00016 dairy farms in New Zealand.

Shaanxi State Farm

long-term lease on 10,000 ha of land in Cameroon 10,000

COMPARISONWashington State TOTAL

1,646,000 hectares of Agricultural Land 2011 1,369,167Source: Who wi l l feed China: Agribus iness or i ts own farmers? Decis ions in Bei jing echo around the world, www.gra in.org 04 Aug 2012

Higher Higher Ham Ham

Prices in Prices in USA???USA???

The makers of Smithfield Ham, an icon on America's culinary scene for decades, are selling the publicly traded company to China's Shuanghui International Holdings Limited for about $4.72 billion in cash. The deal also includes an exchange of debt.The purchase values Smithfield Foods at $7.1 billion — a figure that would make the purchase "the largest Chinese takeover of a U.S. company," according to Bloomberg News.

But China still lags the US in Food imports.

But China is catching-up.

Is this good or bad?

Is Lester Brown right or wrong???

The jury still seems to be out.

Brown’s Recent CommentsBrown’s Recent Comments State of the World 2006

: China, India, the U.S., Europe, and Japan by the numbers

The The United States still consumesUnited States still consumes three timesthree times as much as much grain per person as Chinagrain per person as China and five and five times as much as India, times as much as India,

If Chinese per-capita If Chinese per-capita grain consumption grain consumption were were to double to roughly European levels, China alone to double to roughly European levels, China alone would require the equivalent of nearly 40 percent would require the equivalent of nearly 40 percent of today's global grain harvest. of today's global grain harvest.

Already, China's growing imports of Already, China's growing imports of grain, grain, soybeans, and wood productssoybeans, and wood products are placing are placing great pressure on the biodiversity of South great pressure on the biodiversity of South America and Southeast Asia.America and Southeast Asia.

http://www.worldwatch.org/node/3893http://www.worldwatch.org/node/3893

So is Brown Correct?

• Global shortages will occur and prices soar.

Or is the Chinese leadership correct?

• High levels of production of Grains can be maintained in China.

• The world has nothing to fear

China Can Feed Itself.The country has sufficient land and water resources to feed its projected population of 1.48 billion by 2025.

However, various measures have to be implemented now, to ...

prevent loss of cultivated land through infrastructure expansion,

develop the transportation and flood mitigation infrastucture, and

reduce soil degradation.

Particularly important is ...

the drastic increase in water use efficiency (especially in irrigation),

the development of water resources for the North (trans-basin water diversion), and

a strict implementation of measures to reduce industrial and urban water pollution.

IAASA Argues that:

Source: http://webarchive.iiasa.ac.at/Research/SRD/ChinaFood/pres_1.htm

OLDER MATERIALSOLDER MATERIALS

So What is Happening?So What is Happening?

Chinese ViewChinese View American ViewAmerican View

No strain for China's Grain( 2003-11-21 21:38) (Xinhua) China is capable of maintaining the balance between grain supply and demand in the coming years and the country's grain security is under no imminent threat despite four consecutive years of grain production decrease. The view was raised by Han Jun, director of the Rural Economy Research Department under the State Council Development Research Center on Thursday.

Are Things Fine???

Or Is China Whistling in the Wind?

News May 25News May 25thth 2011 2011

http://english.people.com.cn/90001/90778/90860/7391066.html

China still faces challenges in grain production, although it is likely to see a rise in summer grain output this year, a senior official said Wednesday.

Prices of producer goods have continued rising, which has squeezed farmers' profit margins and dampened their enthusiasm for production, said Ma Xiaohe, deputy head of the Academy of Macroeconomic Research of the National Development and Reform Commission, China's top economic planning body, at a forum.

Labor costs have also increased recently, indicating the possibility that farmers may abandon grain production to look for other jobs to earn more money, he said.

The loss of arable land due to urbanization and the country's antiquated agricultural infrastructure also threaten grain security.

Ma said the government should increase financial support for agricultural production and take more measures, such as developing a commodity futures market, to ensure grain security.

Summer 2010Summer 2010

http://english.people.com.cn/90001/90778/90862/7109710.html

What about May 2008?What about May 2008?

http://english.people.com.cn/90001/90778/6408055.html

http://www.bloomberg.com/news/2011-02-04/china-may-have-to-boost-wheat-imports-on-drought-commodore-says.html

The Wall Street Journal Asia Business

JANUARY 21, 2011, 4:05 A.M. ET

Chinese Agriculture Imports See Sharp Rise

BEIJING -- China's grain imports made the largest gains by far among China's commodity purchases last year, signaling higher demand and flush liquidity that analysts say is likely to pave the way for more imports this year.

• Corn up 18-fold -- do to diet change and more hog raising – up to 2 mil. tons• Productivity growth slowing – more imports in future• Wheat imports up 37% to 1.2 mil tons• Soy beans 55 mil tons• Rice still small (only 350,000 tons) but growing

Global Climate ChangeGlobal Climate ChangeClimate change 'takes toll' on grain harvestBy Jin Zhu (China Daily) Updated: 2010-11-05 07:40

• Climate change will trigger a drop in China's grain harvest over the next few decades and threaten food security• Tang Huajun, deputy dean of the Chinese Academy of Agricultural Sciences (CAAS), said a 5 to 10 percent crop loss is foreseeable by 2030 if climate change continues. "The impact of climate change, coupled

with arable land loss and water shortages, will cause a bigger grain production fluctuation and pose a threat to reaching output targets," Tang told China Daily.

http://www.bbc.co.uk/news/world-asia-pacific-12609202

More and more the issue of keeping up supply is being raised.

Imports help feed hunger for grainBy Jin Zhu Updated: 2011-03-25 08:29

• Total 2010 imports 60 mil tons• No shortage expected 200 mil tons of reserves in storage• Over past 10 years 95% of demand produced locally• China will remain largely self-sufficient – Ag Minister Han Changfu

• Total world trade in Rice only about 15% of China’s output• Grain production has been growing over last 7 years up by 3% in 2010• Current production 540 mil tons goal for 2020 550 mil tons

US ViewUS View

Let’s Make a Deal???Let’s Make a Deal???

http://maps.grida.no/go/graphic/evolution_of_the_world_grain_production_comparision_with_china_and_united_states

The Chinese government’s latest efforts to boost grain production are different from the mid-1990s, when the state had more control over production and trade. In contrast, the recent official measures are modest, reflecting a changed political climate, limitations of political infrastructure, and natural

resource constraints. It is therefore unlikely that the new measures will reverse the trend of consumption outpacing production. As long as China’s total grain supplies appear to be tight, the United States will benefit in both wheat exports to China and corn exports to Asian markets.

Trends in Wheat in China

•Acreage Decreases

•Slight past Exports

ALL GRAIN SUMMARY

PRODUCTION, CONSUMPTION, STOCKS, AND TRADE

TOTAL FOREIGN COUNTRIES, USA, AND TOTAL WORLD

(MILLION METRIC TONS)

1999/00

2000/01

2001/02

2002/03

2002/03

2003/04

2003/04

WHEAT

10-Mar 8-Apr

10-Mar 8-Apr

All Foreign Countries  

Production 522.8 520.8 527.8 522.4 522.5 484.5 485.8

Consumption 549.1 547.4 552.7 570.9 570.7 556.5 556.5

Ending Stocks 183.0 182.9 181.2 152.9 154.1 110.1 113.0

USA  

Production 62.5 60.6 53.0 44.1 43.7 63.6 63.6

Imports 2.5 2.4 3.0 2.0 2.0 2.0 2.0

Consumption 35.4 36.2 32.4 30.7 30.3 32.9 32.8

Exports 29.4 28.0 26.2 23.0 23.0 32.0 32.5

Ending Stocks 25.8 23.8 21.2 13.4 13.4 14.8 14.5

World Total, Trade 112.7 103.6 110.5 108.7 109.2 101.4 101.9

• Increasing World Wheat imbalance

• US exports pretty flat

• How much more could US export???

http://www.fas.usda.gov/grain/circular/2004/04-04/hist_tbl.pdf

Corn: Until 2002/2003 a Chinese Success or at least not problem

What about 2004???

China’s retreat from large corn exports has forced its traditional customers to seek alternative suppliers. Malaysia, Indonesia, and South Korea, which together sourced 87 percent of their 13 million ton imports from China in 2002/03, are turning to the United States

http://www.fas.usda.gov/grain/circular/2004/04-04/graintoc.htm

Grain: World Markets and TradeForeign Agricultural Service Circular SeriesFG 04-04

April 2004 

Asian Corn Markets Scramble As China Retreats

• Harvested Area in Decline

• Yield Very Small Increase

• Production Decline

• Export Decline

• Feed Use Up

• Human Use Flat

What about Wheat in Recent Years???

WORLD TOTAL GRAIN, INCLUDING RICE  

All Foreign Countries 1999-00 2000-012000-01 2001-022001-02 2003-042003-04  

Production 1,539.2 1,498.7 1,548.7 1,523.3 1,522.7 1,480.9 1,485.6

Consumption 1,614.6 1,605.2 1,646.8 1,664.3 1,662.0 1,673.9 1,674.1

USA  

Production 332.0 339.7 321.4 295.6 294.0 345.6 345.6

Imports 5.6 5.6 5.8 4.9 4.9 4.8 4.8

Exports 89.1 86.0 83.5 73.5 73.5 92.1 92.7

World Total, Trade 240.3 232.5 240.6 240.8 241.4 230.1 228.9

All Grains in World Showing Imbalance with Consumption Leading Production

Existing Stocks must be drawn upon

China’s Response to the current situation

July 19, 2003

CHINA'S GROWTH NO THREAT TO WORLD

Vigilance against collateral environmental damage is crucial to sustainable growth nowadays, especially for a huge and fast-growing economy such as China's.

But jumping to the conclusion that environmental challenges alone will deflect China on its voyage to greater prosperity shows a failure to grasp the country's true situation.

US’s Response to the current situation

For wheat, China has become the bright spot in Asia for the United

States as exports to the rest of Asia continue to decline. For 2004/05, China should be a very important market for U.S. wheat, having already purchased large quantities. Reduced Chinese corn exports are providing opportunities for the United States to regain markets in Asia, as South Korea, Malaysia, and Indonesia seek non-Chinese supplies. Already U.S. sales to these destinations have far exceeded previous years’ levels. Although curtailed Chinese exports have also allowed nontraditional exporters such as Thailand and India to expand their share in the region, these exporters can only supply a small percentage of the area’s needs. Hence the United States should still have a dominating presence.

http://www.fas.usda.gov/grain/highlights/2004/03-04/ChinaGrainReport.pdf

Recent EstimatesRecent Estimates

http://www.ers.usda.gov/AmberWaves/June08/Features/ChinaFeed.htm

Worst Drought in a Millenium Creates Severe Food Shortages Regime pledges five cents per person for reliefEpoch Times Staff Created: Mar 25, 2010 Last Updated: Mar 25, 2010

Current ConditionsCurrent Conditions

2010 Map of Drought Hit Provinces

2009 Map of Drought Hit Provinces

http://www.marketskeptics.com/2010/03/worst-drought-in-millenium-creates.html

2010 Droughthttp://www.marketskeptics.com/2010/03/worst-drought-in-millenium-creates.html

Drought 2011Drought 2011

http://www.youtube.com/watch?v=8PmxrrcUH_s&feature=related

UPI reports that China bans 18 topics from media.China bans 18 topics from mediaPublished: March. 26, 2010 at 5:57 PM

BEIJING, March 26 (UPI) -- The Chinese government has notified the country's media outlets of 18 subjects banned from reporting, including corruption, yuan

revaluation and food safety.

The banned subjects include problems in Tibet and the Xinjiang Uighur autonomous region, difficulties faced by

graduating students seeking jobs, the rising price of cooking oil and reports on criticism against China from U.S. officials and other international leaders.

"Most of the subjects that people are interested in have been banned. We don't know what to report on," an official at a Chinese newspaper told The Asahi Shimbun. http://www.marketskeptics.com/2010/03/worst-drought-in-millenium-creates.html

Nogger asks Drought, What Drought?Friday, 26 March 2010Drought, What Drought?

Chinese state radio has said that the ongoing drought in the south west of the country will only have "a very limited" impact on prices of staples such as grains and rice. Indeed, they said that they'd Googled for drought to see what all the fuss was about, but unfortunately Google appeared to be temporarily offline.

http://www.marketskeptics.com/2010/03/worst-drought-in-millenium-creates.html

Hardnosed Economic AnalysisHardnosed Economic Analysis Motley Fool : Motley Fool : Will China Starve the World?Will China Starve the World?

By Tim Hanson, Motley Fool, September 22, 2008By Tim Hanson, Motley Fool, September 22, 2008 Who Can Feed China?Who Can Feed China?

By Ji Da, Epoch Weekly, Sept. 15, 2008By Ji Da, Epoch Weekly, Sept. 15, 2008

Recent TrendsRecent Trends

1998 high point in food production, 1998 high point in food production, 500 million tons – production still 500 million tons – production still below this highbelow this high

2003, for the first time in its history, 2003, for the first time in its history, China became a net importer in China became a net importer in agricultural trade agricultural trade

2007 China hampered food exports 2007 China hampered food exports by taxing them – keep especially by taxing them – keep especially food grains at homefood grains at home

So what’s happening?So what’s happening?

Is the end near? High prices and Is the end near? High prices and perhaps global food shortages?perhaps global food shortages?

Motley Fool: No Problem. In fact the Motley Fool: No Problem. In fact the good news is …there are a few good news is …there are a few stocks out there that will make sure stocks out there that will make sure we profit alongside a we profit alongside a sustainable sustainable solutionsolution. But I'll get to those in a . But I'll get to those in a minute.minute.

StatisticsStatistics

China has 40% of the world's farmers China has 40% of the world's farmers – but only 10% of the world's arable – but only 10% of the world's arable land.land.

farmers are 40% of China's labor farmers are 40% of China's labor force but only 12% of the GDP. force but only 12% of the GDP.

Farm productivity has lagged … just Farm productivity has lagged … just 1% yield growth over the past 10 1% yield growth over the past 10 years, but U.S. has increased yields years, but U.S. has increased yields by approximately 2.5% annually.by approximately 2.5% annually.

Problem is GlobalProblem is Global

China is not alone in straining global China is not alone in straining global food supplies and driving up prices.food supplies and driving up prices.

In USA -- ill-advised ethanol In USA -- ill-advised ethanol mandates, for example, have mandates, for example, have increased the price of cornincreased the price of corn

this is a truly global problem that this is a truly global problem that many actors are looking to solve. many actors are looking to solve. And that provides opportunities.And that provides opportunities.

Motley Fool: Improving TrendsMotley Fool: Improving Trends

1.1. Urbanization will mean fewer Urbanization will mean fewer farmers & larger more efficient farmers & larger more efficient plots, higher profit incentives should plots, higher profit incentives should mean larger output.mean larger output.

Motley Fool: Improving TrendsMotley Fool: Improving Trends

2. two additional catalysts that will 2. two additional catalysts that will provide investors a way to profit provide investors a way to profit from China's move toward from China's move toward sustainability: the introduction of sustainability: the introduction of genetically modified (GM) seeds to genetically modified (GM) seeds to the marketplace and the widespread the marketplace and the widespread distribution of advanced fertilizersdistribution of advanced fertilizers

Pitfalls & OpportunitiesPitfalls & Opportunities

1.1. GM seed companies must be 51% GM seed companies must be 51% Chinese owned – Western Chinese owned – Western companies balk at such dealscompanies balk at such deals

1.1. Fear loss of technical secretsFear loss of technical secrets

2.2. Need to invest in Chinese controlled firmsNeed to invest in Chinese controlled firms

2.2. FertilizersFertilizers1.1. Potash – mainly imported, especially from Potash – mainly imported, especially from

CanadaCanada

2.2. Other fertilizers could be locally producedOther fertilizers could be locally produced

Motley Fool ConclusionsMotley Fool Conclusions

Markets will solve all problemsMarkets will solve all problems Farmers will produce more in ChinaFarmers will produce more in China New technologies will increase New technologies will increase

outputsoutputsProblem

Solved with

Markets

Or are things solvedhttp://www.youtube.com/watch?v=nGTUkzLi3X8