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| Will Bio-Fuel Threaten China's Food Security? |
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As agriculture-based bio-fuel industry is gaining momentum amid the rising oil price internationally, food security, which has always been a controversial issue in China, is attracting even more attention.
Food production potential
There are always experts saying that it is difficult for China to satisfy its domestic food demand from self-supply, hence possible food crisis in China. Their reasons are not without merit, such as land reduction from urbanisation and industrialisation, population growth and improved standard of living, water shortage, natural disasters, energy shortage, etc.
But critics have pointed out that there are many viable ways to increase China's food production and sustain its food demand, such as:
· Consolidate and re-plan the 600,000-plus rural villages around China, freeing up 100 – 200 million acres of land
· Change many single-season crops to double-season crops in Sichuan Province, central regions and eastern regions, whose incremental output may amount to the combined existing output from several provinces in western China
· Advancement in agricultural technologies and facilities may substantially increase land unit output, for example, vegetable output from one acre of greenhouse can now amount to the output from several acres of natural land in some provinces
· Land utilisation and productivity in northern regions and north-eastern regions shall improve as water saving technologies are gaining acceptance and several large scale water infrastructure projects (such as the South-North Water Transfer Project) are being constructed
· As the economy continues to develop, there are huge prospects for artificial islands around China's coastal regions and river deltas
· Enhancement in existing crop varieties and fertiliser technologies may increase crop output by 20% or more
· China has passed its peak birth period. The country's population has increased by 800 million in the past 60 years, while annual grain output has increased from 113 million tons to 502 million tons, without seeing any major food security crisis. It is expected that China's population will increase by a maximum of 180 million in the next 30 years, and food output growth shouldn't be less than that in the past 30 or 60 years.
· China's ability to cope with natural disasters today is better than that from 30 years ago
What could go wrong
Therefore, from a production capability (or potential) point of view, China should be able to fulfil its domestic food demand without causing significant food crisis. On the other hand, not implementing the wrong agricultural policies is also imperative to China's food security. |
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1. To ensure 1.4 billion population's food security in China, the food production and operating system cannot be fully privatised. China should further improve its commercial grain production bases and associated production plans and procurement rules. Apart from government grain reserves, private or collective farm reserve systems should also be established.
2. Protective prices for grain procurement should ensure reasonable comparable returns for farmers. Although the government is lifting its procurement prices annually, the increases have been far below the price increases in international markets. This may not only reduce farmers' incentives to produce grains, but also their ability to reinvest the proceeds for production expansion.
3. Farm land reduction from urbanisation and industrialisation could be inevitable. But if there are incentive policies in place, such as land ownership clarification, reasonable valuation, tax and subsidy incentives and transparent processes, farmers may be motivated to improve yields from existing farm lands or develop new farm lands.
4. Irrigation and agricultural technology services should not be fully marketised. Most small and family farms will not be able to afford the prices of commercial irrigation and agricultural technology services, therefore a fully marketised structure may endanger the survival of small and family farms. Such services should be provided by government-backed organisations and cooperative farming organisations.
5. The US will substantially develop its bio-fuel industry in the near future, but China cannot follow suit. Due to its limited resources, China's land should only be used to feed human, instead of cars.
6. Some said that the agricultural industry could become competitive only when it has scale operations, therefore the Chinese agricultural industry should take the corporatization route for agricultural modernisation. Although there may be substantial cost savings from a concentrated agricultural industry, the downside is also obvious. There could be large scale land acquisition by agricultural corporations, undermining not only the foundation of existing food production systems, but also the foundation of food distribution and pricing systems. In order to maintain food safety and survivability of hundreds of millions of farmers, China should improve its support for individual farmers and farming co-operations, instead of using scale economics to "consolidate" small farmers.
7. Food is not ordinary commodities, so the food security of 1.4 billion people cannot become reliant on the international market. The long term policy of "food self-sufficiency" cannot be altered, otherwise it may cause volatile food supplies and occasional food crisis.
8. Due to the emergence of new agricultural concepts such as organic foods, green foods and pollution-free foods, international agricultural product safety standards have become harsher and harsher. But such ever-increasing standards are not economically achievable by many developing countries such as China. China should not passively accept those new standards set by developed countries. But rather it should participate in the standard setting process along with other developing countries, so that those international food safety standards can be fair, just and reasonable.
9. China should prevent foreign capital controlling its agricultural product processing industries. China's soybean industry is already in the hands of four multinational players, which have now controlled China's soybean and edible oil pricing and industry safety.
On the other hand, the boom in bio-fuels may have certain positive impacts on China's agricultural industry. Firstly, the competition for food output may improve the agriculture industry's comparative return via higher prices, which could provide incentives to farmers for further output expansion. Secondly, it will become easier for farmers to sell their output due to the extra demand sources, reducing the previous dilemma of "higher output, lower prices" and operating losses in government grain reserves.
It is no doubt that food prices will be on a long term upward trend, so the agriculture industry of China may see higher returns from now on. It is unclear what structural changes will take place in China's agriculture industry, but the pursuit of higher output will certainly become the industry's primary objective again.
Produced by www.chinabizintel.com; Source: www.chinairn.com
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