PRC is once again the world's largest wheat importer
The PRC's feed security problem—the need to provide for its ever-expanding livestock herd—will not be solved by disrupting rural livelihoods.
Ag production is now designated a pillar of national security. In the last few years, Beijing has pulled out all stops to strengthen the ag sector, ag infrastructure and home-grown innovation.
Current policy favours strict control of land use and more subsidies for strategic grains. Tariff rate quotas are retained to shore up domestic production in the face of high-quality, cheaper imports. This framework has maintained the state’s capacity to deliver enough staple grains—of whatever quality—and avoid global volatility.
But the strategy is cracking. Domestic producers are compelled to grow yet more grain; some is of such poor quality no one will buy it, and it ends up in reserves. Farmers who were 'moderately well-off' growing cash crops can no longer make a decent living.
Meanwhile, large amounts of competitively-priced feed grain are pouring into PRC markets from overseas.
harvesting more, buying more
‘Bumper’ harvests celebrated nearly every year sit awkwardly beside these record imports.
PRC wheat imports surged by over 50 percent y-o-y from January to September 2023, reaching over 10 million tonnes, reports GAC (General Administration of Customs). Although this only accounts for some 7 percent of PRC average wheat output (138 million tonnes in 2023), it shakes the understanding that wheat, as one of the top two edible staples, should be 100 percent locally 'secure'. Q1-3 imports were more than the total import volume for 2022, which was just under 10 million tonnes. Imports for 2023 are expected to hit 12 million tonnes.
This is the first time imports have hit 10 million tonnes since WTO accession in 2001. The PRC has once again become the world's largest wheat importer.
Since 2020 (post-African swine fever), the demand for feed grains for the ever-growing livestock herd is insatiable, and supply is becoming tighter. This includes not just wheat but soybeans, corn and broken rice.
note: Imports under tariff rate quotas (TRQs) attract a tariff of 1 percent; out-of-quota tariffs are 65 percent. Retaliatory tariffs are still in place: US corn attracts an additional 25 percent tariff; soybeans, usually a 2 percent tariff, currently attract a 27 percent levy.
climate isn't helping
Ideals of the 'people holding rice bowls in their own hands' are now beside the point. Growing demand for feed grain aside, the rise in extreme weather is threatening the PRC food security drive.
Take the early arrival of the El Niño climate pattern, for example. The World Meteorological Organisation warned 4 July 2023 that El Niño conditions were forming in the tropical Pacific for the first time in seven years. This threatens to create the world’s warmest year on record in 2024, breaking the previous record set in 2016. Familiar climate challenges will ravage China: floods in the south and drought in the north.
Fears of food insecurity ramped up in May 2023 when a deluge of rain wiped out much of the wheat harvest in Henan, a major producing province. Heavy rains battered northern China in late July, disrupting critical crops in the northeastern granary.
PRC rice yields have fallen over 10 percent since the early 2000s. Extreme rainfall will result in further loss, estimates Zhou Feng 周丰 Peking University College of Urban and Environmental Sciences.
...and then there's the stockpile
Under pressure from Beijing, localities are going all-out to boost the planting of rice, wheat, corn and soybean, mainly by expanding grain acreage—even at the expense of cash crops. MARA (Ministry of Agriculture and Rural Affairs) is mistaken, advises ag policy veteran Huang Jikun 黄季焜 Peking University China Agricultural Policy Research Centre: the PRC currently holds a vast rice and wheat stockpile, enough for a year’s consumption. Given the surplus, prices of staples remain low. Policies to subsidise soybean farmers neglected to stipulate the use of high-yield and high-oil varieties, resulting in spikes in both imports and domestic stockpiles.
soy: hype and failure
Believed to boost both grains, MARA has promoted corn-soybean intercropping since 2021. It is, however, an outdated, labour-intensive and not easily mechanised technique long abandoned by farmers. Again, mindlessly urging higher acreage without progress in R&D and planning only results in wasted labour and income loss.
Beijing fails to take into account the characteristics and uses of domestic soybeans. With an oil content of about 15 percent, they are suitable for unprocessed foodstuffs. An oil content of around 20 percent—found in imported GM (genetically-modified) soybeans—is preferred for soybean oil. Even though the 2022 measures increased domestic output, downstream plants would not buy and crush it without subsidies. Beans rejected by processors ended up in local warehouses.
who will farm in the new era?
Besides devoting more arable to grain, the state envisages larger farming units run by ‘new ag operators’, namely farmer cooperatives and well-resourced ag firms with enough land to mechanise production. Urging, if not forcing, small farmers to transfer their land usage rights to new entities. This, however, will not increase yield, argues Huang Jikun. High yields come from moderate family farms that maximise production of every mu rather than broad-acre commercial operations. Moreover, Huang's field research shows many generously subsidised farmer cooperatives have failed.
China's ag employment is estimated to decrease from 24 percent (2020) to some 4 percent by 2050, predicts Huang. Even then, around 32 million farmers will own, on average, only four ha of farmland. Smallholder farmers will always be a vulnerable group who deserve a people-centred policy, not a top-down food security recipe prioritising grain acreage.
Huang Jikun is not alone in faulting central ‘one size fits all’ policy assumptions. Reporting research into 45 villages in nine provinces, Zhou Feizhou 周飞舟 Peking University sociology professor, traces challenges faced in developing rural industry to failure to consider 'human factors' and the needs of local communities, where trust above all is essential.
Huang Jikun 黄季焜 | Peking University China Agricultural Policy Research Centre
PRC grain production has, in recent decades, growing at an average rate of over 2 percent p.a., over twice population growth. This enabled the re-purposing of limited arable land, diversifying into cash crops, livestock and aquatic products. The ratio planted to grain fell from 80 to 70 percent—with no loss of supply. Farmers' incomes, says Huang, rose significantly. The current approach of restricting them to grain farming is at loggerheads with another prime goal: common prosperity. Households with less than 0.67 ha of farmland are ingrained at 85+ percent, varying less than one percentage point in a decade. High-value ag is, for these smallholders, almost the sole profitable model. Growers of cash crops face not only routine market risks but also policy uncertainties.
With scores of advisory reports adopted by the State Council, Huang is a mover and shaker of agricultural reform, guiding grain market liberalisation, R&D investment and biotech development. Much of his prolific output, authored in international collaboration, is available in English. A noted champion for GMO commercialisation, Huang stresses its net environmental advantage and food safety bonus. He has served as a policy consultant for the World Bank, FAO, ADB, OECD, IFAD and many centres of the Consultative Group for International Agricultural Research.
Zhou Feng 周丰 | Peking University College of Urban and Environmental Sciences
Zhou and his team monitor rain damage to crop yields, but drought and heat remain the team's mainstream research. Using 1999—2012 data from 114 stations in the China Meteorological Administration's observation network, they found extreme precipitation causing nearly 8 percent loss of rice yield; the reduction in rice output nationwide totals 16 million tonnes p.a., comparable with that of Anhui Province, sixth largest rice producer nationally in 2021. Such precipitation impacts crucial growth stages of rice, hence yields, explains Zhou. Most at risk are ‘heading’ and flowering stages, flowing through to fruit-setting. The grain-filling stage is another hostage to extreme rainfall, resulting in more shrivelled grains.
Boya Distinguished Professor at Peking University and recipient of the National Science Fund for Distinguished Young Scholars, Zhou uses a multi-scale approach. He explores agricultural ecosystems under climate change with networked observations, controlled experiments, and model simulations.
Sinograin | 中储粮
Sinograin, the largest state-owned grain stockpiler, on 7 November 2023, purchased 600,000 tonnes of US soybeans, totalling ten cargoes. The sale was the world's top soy importer's largest single-day purchase since late July. The largest ag product deal since the decline in overseas sales of US soybeans through 2023 brought US producers 'a glimmer of hope'. It was the latest in a series of Sinograin deals that, report industry insiders, has signed 20-25 cargoes so far. PRC soybean imports will arguably stay high in Q4 2023, with annual volume reaching a historic high of around 105 million tonnes, an increase of 15 percent y-o-y.
The top PRC grain reserver, Sinograin’s business is primarily domestic. But to bridge supply gaps in several key crops, not least soybeans, the firm is exploring strategic coordination of reserves and imports, stockpiling cheaper imported grain while rotating old domestic reserves out.