China growing hungry

China is running out of arable land where to farm basic food like grains and cereals or where to grow its cattle. So it’s going abroad to acquire millions of hectares of land from other countries. Beijing just agreed what it could be its largest agricultural project to date. In the foreseeable future, China could use three million hectares of Ukrainian soil to harvest cereals and build pig farms. Ukraine’s main agricultural enterprise, KSG Agro, would farm the produce and subsequently sell it to China at unbeatable prices. The agreement will last for 50 years, with an initial exploitation of only one hundred thousand hectares.

For years China has strengthened its landlord role through the enforcement of its Food Security Program. In Argentina, for instance, Beijing has 234.000 hectares of land where it grows soybeans, corn and cotton. And in 2012 Chinese investors bought Australia’s largest cotton factory. Other African countries have also signed agricultural agreements with China.

According to the International Food Policy Research Institute, China is the third largest importer of food in the world. During the last decade imports grew a 21% a year. The Communist Party doesn’t have many alternatives left. Miraculous growth has made Chinese wealthier. They want to eat better and therefore are willing to invest a greater part of their salaries in providing more diverse diets. Also, urbanization and the building of large industrial areas left China with insufficient hectares of arable land, dangerous levels of environmental and soil pollution as well as low agricultural productivity. These are too grim prospects for a Communist Party that dreams in being 95% self-sufficient in food.

Pork meat supply is a plain example of the authorities’ headache. For starters, pork meat is one of the main ingredients of Chinese cuisine. Its demand has grown since 1992 till becoming the world’s biggest consumer and producer of pork meat. According to the Earth Policy Institute, Chinese eat more than a quarter of the total pork meat produced in the planet. This equals to a 71 million tones a year. It’s a quasi-sacred food with the power to worry the Communist Party each time that prices rocket, during public holidays when demand rises, or when production levels go down. The government even keeps strategic pork meat reserves in order to be able to control what’s been already labelled as Pork-flation.

The country’s main meat producers do also feel the pressure. The out-dated management structure and technologies of their factories fail to fit the increasing demand. Something that may also result in dangerous epidemics among livestock; and ultimately pose a threat to the public health. A few months ago, more than 16.000 dead pigs were found floating on Shanghai’s’ main river. An epidemic killed them and overburdened farmers decided to secretly get rid of them by throwing the corpses to the river.

Experts point out that Chinese companies know they do not have the same level of competitiveness than their North American counterparts. And so they see the acquisition of foreign factories as the opportunity to learn about new technologies and develop better systems that meet International health standards. With this goal in mind, the largest producer of pork meat in China, Shuanghui, bought the American Smithfield for 4.7 billion dollars. It is the largest acquisition of an American company by a Chinese company and Shuanghui has already said that it doesn’t have any plans to change, neither the management structure or the production line so far.

China is desperately seeking a way to reconcile opposite goals such the growth of its cities and the development of a more sustainable agricultural model.

Kevin Chen, researcher at the International Food Policy Research Institute, reckons China’s food security program would only be effective if concrete measures are tackled within the country. Including the investment in sustainable and climate-smart agricultural R&D; support long-term demand driven mutual learning; and food safety through safety regulations and monitoring system.


About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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