Food? Or No Food?

China imports of food is growing-not too bad news for China as long as the process is balanced and under control. Increasing import of food commodities from China highlights a perspective that goes beyond commercial exchange. Bigger purchases threaten stability in China and uncertainty among international traders. Latest news contributes to spread the fear of an insufficient global supply. Some Far East countries have already put a ban on export of rice. Other euro-Asians producers – Russia, Ukraine, and Kazakhstan – did or foresaw the same measure for wheat.
Pessimism leads to consider a possible “food bubble”, with immediate repercussions on international prices. The psychological peculiarity of the products makes uncertainty grow automatically. From China are noticed both increases in demand and reassuring signals. China’s net grain import surged to 43 million tons last year, i.e. 7.4% of total internal consumption. This value is no worrying in principle, but exceeds 5% which is traditionally considered as safety buffer. Recently, Beijing turned to Washington to buy wheat and to Canberra and Ottawa for corn. For this cereal, imports skyrocketed in the last seven months (56 times over the same period of 2009, according to the Ministry of Agriculture), which in addition stated that massive purchases are due to the price difference between locally produced and imported cereals.
Latest forecast see a normalization during next fall in coincidence with the new fall harvest. It is a reassuring statement that avoids inflationist expectations. Purchases from abroad are so doomed to fall. It is very likely though that China is heading toward a slow, controlled and permanent cereal deficit.
The path is marked, because both society and economic structure are changing. Less people live in the countryside, since migration to the cities is unstoppable, in pursuit of better living conditions and higher incomes. The land is now used to build residential, commercial and industrial areas in the outskirts of big urbanities, and to create the infrastructure to accommodate 14 millions new vehicles every year and many thousand miles of tracks for new high-speed trains and commercial trains.
In addition, people in the cities want to eat more proteins. Meat and milk consumption is on the rise. Husbandry is needed while ⅔ of corn must be used to feed chicken, pigs and cows. To tackle this combination of insufficient land and growing demand, a better organization of agriculture is needed, mechanization being the first step.
However land yields are now remarkably high in China by world standards, pro capita revenues are indeed still limited, mainly because property of land is extremely fragmented.
China is so slowly destined to source cereals from abroad, until economic and social consequences are tolerated. It’s a sign of maturity of the economy. It also a coherent alignment with the country’s geography and demography. It’s inevitable to buy food when you have 7% of global arable land with 22% of the world’s population combined with a declining supply of water for irrigation purposes.