Sunday, May 11, 2008

China changes everything...

In an obvious good business move, China is encouraging its newly wealthy investors to buy farmland in other countries to secure a food supply.
China is losing its ability to be self-sufficient in food as its rising wealth triggers a shift away from diet staples such as rice towards meat, which requires large amounts of imported feed.

China has about 40 per cent of the world’s farmers but just 9 per cent of the world’s arable land. Some Chinese scholars argue that domestic agricultural companies must expand overseas if China is to guarantee its food security and reduce its exposure to global market fluctuations.

“China must ‘go out’ because our land resources are limited,” said Jiang Wenlai, of the China Agricultural Science Institute. “It will be a win-win solution that will benefit both parties by making the maximum use of the advantages of both sides.”

In the first quarter of this year, food prices in China rose 25 per cent from a year earlier, the highest level of farm inflation since the early 1990s, said UBS.

China is still a net exporter of agricultural commodities but is increasingly reliant on soybean imports and is about to become a net buyer of corn.

It imported up to 60 per cent of the soybean it consumed last year and the crop would be a focus of policy support for companies acquiring land overseas, along with bananas, vegetables and edible oil crops, said an official familiar with the ministry’s proposal. The ministry is already talking to Brazil about the possible acquisition of land for soybean, according to this official. [More, with free registration]
Like the the climate change, energy, health care, and other complicated issues facing nations today, it seems we in the US are constantly being surprised by the forward thinking and risk-taking of other nations. Maybe it's because we are losing our pioneering spirit, and becoming more conservative.

But it could simply be market forces doing what they do best, helping all participants to maximize their return. Regardless, it hard not to admire in some way the staggering progress China is making year by year. And to consider soberly what it means to our part of the world.

5 comments:

Anonymous said...

Its better than having a war over it, like the old days

John Phipps said...

Anon:

Amen to that.

Nate said...

Man and I thought 1031 money was dangerous.

Ol James said...

I have a question Mr. John..Could Farmers be required to, by accepting subsidies, turn CRP land and other lands into cropland for China?? Like the "Golden Rule" of business says..He who has the gold, makes the rules.

John Phipps said...

Nate/james:

I doubt we would be a target area compared to countries in Asia and especially Africa. One trend has been to bring in Chinese workers - something increasingly difficult here.