Sunday, May 11

Run for the barricades, the Chinese are coming

So now the Chinese Ministry of Agriculture is planning to support Chinese firms to purchase farmland outside the Chinese mainland in other countries so that those farmlands can then be used for farming and providing food security to China. Typically beggar thy neighbour approach. Remember when you are talking food security, you are talking factory farming, because that's much more efficient. I quote:

A proposal drafted by the Ministry of Agriculture would make supporting offshore land acquisition by domestic agricultural companies a central government policy. Beijing already has similar policies to boost offshore investment by state-owned banks, manufacturers and oil companies, but offshore agricultural investment has so far been limited to a few small projects.

Other countries are thinking about doing so as well.

Libya is talking with Ukraine about growing wheat in the former Soviet republic, while Saudi Arabia has said it would invest in agricultural and livestock projects abroad to ensure food security and control commodity prices.

I talked about Argentina just a few posts ago. Now refer that story to this quote:

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.

In other words, China would want to grow soybeans in Argentina and Brazil directly so that the food prices and issues of availability does not impact the Chinese consumer.

This is getting massively complicated and wars have broken out for lesser reasons. And while all this will happen, the price of soybeans and other agricultural commodities will keep on going up because inefficient country level decisions will be carried out. See here. Argentina is perfectly fine to raise export duties to raise money. Argentinean farmers are perfectly fine to reduce planting because incentives are reduced. Chinese farmers dont have enough land. China wants to increase land acreage. All this means that more people running after lesser amounts of more expensive crops. End result? the whole world loses out....

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