When China began importing soybeans as animal feed in the late 1990s, it ushered in one of the most dramatic agricultural transformations the world has ever seen. On the other side of the world, 30 million hectares of farms, forests, savannahs and pastures in the Southern Cone of Latin America were converted to soy plantations to provide China’s new factory farms with a cheap source of feed. And within China, low prices paid to farmers and other policies favouring large agribusinesses pushed millions of households out of meat production. Corporations and large commercial farmers made fortunes, but rural communities, both in China and the Southern Cone, paid the price.
Cheap meat for China’s growing urban population was supposed to be the payoff. But in 2008, prices for pork spiked because of a massive disease outbreak that swept through China’s pork industry, and now the country is on the verge of a more serious round of food inflation as a drought in the US causes global prices for soybeans to surge. On top of this, China’s consumers have had to contend with numerous food safety scandals and environmental disasters brought about by the shift to industrial meat production.
The problems generated at home and abroad by China’s growing dependence on imports of feed crops will get much worse if China continues to open its market to imports of maize, the other major crop used for industrial feeds. In 2012, China will import a record five million tonnes of maize, and it is on track to buy another seven million tonnes in 2013. This is only around 5% of national maize consumption, but it is still more maize than China imported during all previous 25 years combined and it is already affecting global prices.[1]
China is now the world’s largest global food market. What Chinese people eat has repercussions on everyone, because of the increasingly global reach of how and where that food is produced. If the Chinese government opens the country up to maize imports as it did with soybeans, it could unleash another global agricultural transformation on par with what occurred with soybeans. Recent developments show that this is already starting to happen.
Power plays for China’s maize supply
China’s soybean imports have generated immense profits for transnational agribusiness companies like Monsanto and John Deere, who supply Brazilian farmers with seeds, chemicals and tractors. And they have been a deep source of profit for grain traders and feed processors like Cargill and Bunge who now control China’s soybean processing industry.
The shift to factory farms and soybean imports has also enabled the rise of a new class of Chinese agribusiness corporations. State-owned COFCO and privately-held New Hope Group are now transnational agribusiness corporations in their own right.
A soybean-style boom in maize would suit all of these companies very well and they are lobbying heavily for it while they prepare the terrain.
If these corporations get their way, the Chinese government will reduce or eliminate the quotas and other measures which until now have protected domestic production of maize from cheaper imports. China’s consumption of soybeans ballooned by more than 160% between 2000 and 2011 when import barriers were removed, but the area planted with soybeans declined by 20% during those same years. Chinese farmers were simply unable to compete with imported soybeans that were RMB 300 to 600 (US$45-90) cheaper per tonne than domestic be[b]ans. Imported soybeans now account for three-quarters of the soybeans processed into cooking oil and feed in China, the products of soybean crushing.[2]
New Hope, the largest privately-owned agribusiness company in China, has gone the furthest in its overseas expansion. It owns 16 feed factories outside of China and plans to open 7 or 8 more per year. The company also plans to set up plants and farms in the Middle East, South Africa and Central Europe, backed by a fund launched in November 2011 which counts sovereign wealth fund Temasek (Singapore) and global grain traders ADM (US) and Mitsui (Japan) among its investors.
But global supplies of agricultural commodities are already tight and China is not the only country with an expanding appetite for them. China’s neighbours, especially Japan, Korea and India, are also deeply concerned about their future food security, and they are making similar moves to support their companies in securing global supplies.
Meanwhile, the food deficit ( i.e. the difference between imports and exports of food) in Africa and the Middle East is actually larger and growing faster than it is in Asia, and the wealthier countries in the region, particularly the Gulf countries, are taking aggressive actions to secure control over food production outside of their borders.
Added to this is the growing demand for agrofuels, which competes for supplies of agricultural commodities, like maize, palm oil and sugar, as well as for the land on which crops can be grown for food. Globally, ethanol accounted for 27.3 percent of maize usage in 2011.[5]
In contrast, during the same period, China protected and regulated maize as a strategic crop for food security. As consumption increased, so did local production. Between 2000-2011, the area planted with maize rose by 44% and yields by 25%.[3]
The next frontier
Beyond these tussles for control over the current centres of export production, there is a big push to open up new frontiers for the low-cost production of maize, soybeans and other agricultural commodities, along the lines of what transpired in the Southern Cone of Latin America. With strong global demand, higher commodity prices are likely here to stay, and – at least in low-cost areas of production where there are possibilities for new large-scale farming operations – industrial agriculture is now seen as a profitable enterprise that many players, from pension fund managers to grain traders, want to get involved in.
Greg Page, the CEO of US-based Cargill, the world’s largest grain trader and one of the biggest exporters of agricultural commodities to China, thinks that 20% more of the world’s land will have to be converted to agricultural commodity production to match growing global consumption. He expects much of the increase will happen in Africa, on land currently cultivated by small farmers.
“The world has spent hundreds of billions of dollars in Africa and we have nothing to show for it in terms of small producers,” argues Page. “We need their acres, but we need to do it thoughtfully.”[6]
Large swaths of the African continent are being eyed as the new Brazilian cerrado, a place where companies can take advantage of low prices for fertile land, water and labour to produce commodities for export on a large-scale. Parts of Eastern Europe, Colombia, Central Asia and Southeast Asia are targets too. The International Land Coalition calculates that since 2002, 83.2 million hectares or 1.7% of the world’s agricultural land has been acquired by foreign investors for agricultural production, with over 60% of these land deals happening in Africa.
In the process, communities are being displaced, millions of people are losing access to water, and local food systems are being destroyed to make way for exports. The opening of the next frontiers for agricultural commodity production is well under way. More maize exports to China will only add fuel to a fire that is burning out of control.
The more maize China imports, the more it will undercut its own farmers and the more it will require from overseas.
But where will these new supplies come from? The US, with its subsidised maize production, is an essential source for Chinese demand in the near term, which explains why Japan’s Marubeni paid a startling US$5.8 billion to take over US grain trader Gavilon in May 2012. But, as this year’s drought in the US has underlined, geographic diversity of supply matters. In the year before taking over Gavilon, Marubeni signed a cooperation agreement with China’s New Hope to work together in developing operations in Africa, the Middle East, Eastern Europe and South America, it bought a grain elevator in Brazil and it entered into a joint venture with China’s state grain trader Sinograin to establish feed plants and pig farms in China.
“We will expand in Latin America, maybe eastern Europe, Australia and Africa,” says Daisuke Okada, head of Marubeni’s foods division. “So if we think about future demand in China, we need to have more certainty of supply.” Okada expects increased demand for feed will quadruple China’s imports of maize to 15 million or 16 million tonnes by 2020, while its imports of soybeans will increase from 60 million to 90 million.[4]
Chinese corporations are also making moves to control the supply of agricultural commodities going to China. COFCO, China’s biggest grain trader as well as one of its largest meat and dairy companies, is exploring investments in grain and soybean production and trading logistics in Russia, Brazil and Argentina. Chongqing Grain has put aside US$6 billion to invest in grain and oilseed production and trade in Argentina, Brazil, Canada and other countries. Beidahuang, China’s largest farming company, says it has started planting soybeans on 13,000 ha in Argentina, and intends to expand further through a partnership with the country’s biggest farmland owner.
A simple solution
The world does not need to go down this path. In the face of yet another spike in prices for global agricultural commodities, China can put the brakes on industrial meat production, start supporting small scale livestock farming based on local feed resources, and ends its aggressive efforts to convert farmers into cheap labourers.
Protests in rural China seem to indicate that many smallholder farmers are fed up with being pushed off of their farms, having their land and water poisoned by industrial and agricultural pollution, and struggling to make ends meet. They are capable of producing the food necessary to feed their country, but face increasingly difficult barriers, most of which are associated with a corporate food system that is becoming evermore firmly entrenched.
Government decisions to rely on agricultural commodity imports serve the interests of agribusiness and its need for cheap sources of feed, but they are not in the interest of the majority of Chinese people, do not serve to secure their food needs and threaten the land, livelihoods and local food systems of communities across the globe.
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[1] “Marubeni bets on China with Gavilon deal,” Financial Times, 29 May 2012.
[2] For a more detailed discussion of China’s moves to allow in soybean imports, see Mindi Schneider, “Feeding China’s Pigs: Implications for the Environment, China’s Smallholder Farmers and Food Security,” IATP, May 2011: http://www.iatp.org/documents/feeding-china%E2%80%99s-pigs-implications-for-the-environment-china%E2%80%99s-smallholder-farmers-and-food
[3] Gabe Collins and Andrew Erickson, “Tilling Foreign Soil: New Farmland Ownership Laws Force Chinese Agriculture Investors to Shift Strategies in Argentina and Brazil,” China SignPost, No. 57, 28 March 2012.
[4] Ben McLannahan, “Marubeni eyes more deals to supply China,” Financial Times, 27 June 2012.
[5] US National Corn Grower’s Association’s World of Corn report 2011
[6] http://www.naplesnews.com/news/2012/apr/13/cargill-ceo-says-food-shortage-fears-unfounded/
[7] China’s National Bureau of Statistics reports that rural people’s annual consumption of pork per person dropped from 15.62 kg in 2005 to 13.37 kg in 2007.
[8] The information in this box comes primarily from Li Jian, “The Decline of Household Pig Farming in Rural Southwest China: Socioeconomic Obstacles and Policy Implications,” Culture & Agriculture Vol. 32, Issue 2, 2010.
[9]http://www.goldmanprize.org/recipient/sofia-gatica