The Great Lakes Zephyr - Wind Energy & Hydrogen Journal

Eco-Economy Update 2004-5
For Immediate Release
March 10, 2004
Copyright Earth Policy Institute 2004


CHINA'S SHRINKING GRAIN HARVEST
How Its Growing Grain Imports Will Affect World Food Prices
http://www.earth-policy.org/Updates/Update36.htm

Lester R. Brown

On February 8th, the Chinese government announced an emergency
appropriation, increasing its agricultural budget by 25 percent, or
roughly $3 billion. The additional funds primarily will be used to raise
support prices for wheat and rice, the principal food staples, and to
improve irrigation infrastructure. For the State Council to approve such
an increase outside of the normal budget-making process indicates the
government's mounting concern about food security.

After a remarkable expansion of grain output from 90 million tons in 1950
to 392 million tons in 1998, China's grain harvest has fallen in four of
the last five years--dropping to 322 million tons in 2003. For
perspective, this drop of 70 million tons exceeds the entire grain harvest
of Canada.

Production of each of the three grains that dominate China's
agriculture--wheat, rice, and corn--has dropped. But the output of wheat,
grown mostly in the water-short north, has fallen the most. With wheat
stocks falling and domestic prices climbing, Chinese wheat-buying
delegations recently have visited several grain-exporting countries.
Initial purchases of some 5 million tons in Australia, Canada, and the
United States have already sent world wheat prices climbing.

The recent price rises may be only the early tremors before the quake,
however. China's harvest shortfalls of recent years have been covered by
drawing down its once massive stocks of grain. But these will soon be
depleted, forcing the government to cover the shortfall with imports.

China's wheat harvest fell short of consumption last year by 19 million
tons. When the country's wheat stocks are depleted within the next year or
so, the entire shortfall will have to be covered from imports. In some
ways, the rice deficit is even more serious. Trying to cover a rice
shortfall of 20 million tons in a world where annual rice exports total
only 26 million tons could create chaos in the world rice economy. And
with a corn shortfall of 15 million tons and stocks already largely
depleted, China may soon have to import corn as well.

The handwriting on the wall is clear. While grain production is dropping,
demand is climbing, driven up by the addition of 11 million people per
year and by fast-rising incomes. As people in China earn more, they are
moving up the food chain, eating more grain-fed livestock products such as
pork, poultry, eggs, and, to a lesser degree, beef and milk.

The fall in China's grain harvest is due largely to a shrinkage of the
grain harvested area from 90 million hectares in 1998 to 76 million
hectares in 2003. Several trends are converging to reduce the grain area,
including the loss of irrigation water, desert expansion, the conversion
of cropland to nonfarm uses, the shift to higher-value crops, and a
decline in double-cropping due to the loss of farm labor in the more
prosperous coastal provinces.

Water tables are falling throughout the northern half of China. As
aquifers are depleted and irrigation wells go dry, farmers either revert
to low-yield dryland farming or, in the more arid regions, abandon farming
altogether. In the competition for scarce water, China's cities and
industry invariably get first claim, leaving farmers with a shrinking
share of a shrinking supply. Losing irrigation water may mean either
abandoning land or less double cropping.

China's farmers are also losing land to expanding deserts, such as the
Gobi, which is consuming an additional 4,000 square miles each year. (For
desertification photographs, see
www.earth-policy.org/Updates/update36_photos.htm.) Paying farmers in the
north and west to plant their grainland to trees to halt these advancing
deserts is further reducing the grain area.

Urban expansion, industrial construction, and highway construction are all
shrinking the land available for crops. The enthusiasm for establishing
development zones for commercial and residential building or industrial
parks in the hope of attracting investment and jobs is taking big chunks
of cropland. The Ministry of Land and Resources reports that some 6,000
development zones and industrial parks cover some 3.5 million hectares.

Cars, too, are taking a toll. Every 20 cars added to China's automobile
fleet require the paving of an estimated 0.4 hectares of land (1
acre--roughly the area of a football field) for parking lots, streets, and
highways. Thus the 2 million new cars sold in 2003 meant paving over an
area equal to 100,000 football fields.

In a country where farms average 1.6 acres (0.6 hectares), many grain
farmers are shifting to higher-value fruits and vegetables to boost
income. In each of the last 11 years, the area in fruits and vegetables
has increased, expanding by an average of 1.3 million hectares a year.

In the more prosperous coastal provinces, the migration of farm labor to
cities has made it more difficult to double-crop land. For example, the
once widespread practice of planting winter wheat and summer corn depends
on quickly harvesting the wheat when it ripens in June and immediately
preparing the seedbed to plant the corn. Many villages no longer have
enough able-bodied workers to make this quick transition--and the
double-cropped area is shrinking as a result.

Reversing the fall in grain production will not be easy even with China's
newly adopted economic incentives. Each trend that is shrinking the
grainland area has a great deal of momentum. Reversing any one of them
would take an enormous effort. Reversing all of them is inconceivable. If
the new economic incentives should coincide with unusually favorable
weather this year, a modest upturn in grain production might result, but
it will likely be only temporary.

China is the first major grain-producing country where environmental and
economic trends have combined to reverse the historical growth in grain
production. This decline in the grain harvest in a country that is home to
more than one fifth of the world's people will affect all of us.

Barring an economic collapse, China soon will be forced to turn to the
world market for massive imports of 30, 40, or 50 million tons per year.
This comes at a time when world grain stocks are at their lowest level in
30 years and when U.S. farmers are losing irrigation water to aquifer
depletion and to cities. Among other things, this means that the surplus
world grain production capacity and cheap food of the last half-century
may soon be history. Higher food prices could become a permanent part of
the economic landscape. Adjusting to these higher food prices could become
a dominant preoccupation of governments in the years ahead.

When China turns to the world market, it will necessarily turn to the
United States, which controls nearly half of world grain exports. This
presents an unprecedented geopolitical situation in which 1.3 billion
Chinese consumers who have a $120-billion trade surplus with the United
States--enough to buy the entire U.S. grain harvest twice over--will
compete with Americans for U.S. food, likely driving up food prices for
the United States and the world.

Moving grain from the United States to China on the scale that is needed
will likely involve loading two or three ships every day. The long line of
grain-laden ships that may soon stretch across the Pacific will bring
these two countries closer together economically, but managing the flow of
grain to optimize the benefits for people in both countries will not be
easy. It could become one of the major U.S. foreign policy challenges of
this new century.

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Additional data and information sources at www.earth-policy.org or contact
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