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ANALYSIS: Storing strategically sensitive food reserves can lead to embarrassment

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You would not want to be the woman in charge of a corn warehouse in Zhaodong, China.

 

The anonymous woman appeared last weekend in a clip posted on China’s Weibo microblogging site. In the Qinggang Rongchang Modern Agriculture Development Corporation warehouse, rented by Sinograin Zhaodong, she points to the moulding corn, which is contaminated with a fair amount of debris.

 

She seems pretty disgusted with the state-owned grains’ reserves company Sinograin. Sinograin was hot on the case, sending a team the next day to investigate conditons of the stockpiled corn. Sinograin pledged to "deal seriously with the people responsible."

 

Piles of food

 

The corn concerned may be part of a 16m tonne batch bought by Sinograin in 2016. Four years is a very long time to keep corn in storage, particularly if conditions are damp.

 

Perhaps coincidentally, on Tuesday this week China booked its biggest single-day purchase of US corn. It agreed to take 1.762m tonnes of corn for shipment in the 2020-21 marketing year which starts 1 September. That purchase beat the previous one-day US corn sale to China, 1.45m tonnes sold in December 1994.

 

Different this time

 

The Covid-19 pandemic has invoked comparisons with the global financial shock of 2008, but there are salient differences. Not least concerning this year’s demand slump for various agricommodities.

 

The steadily building surge in international prices for a wide range of commodities pre-dated the 2008 financial crash by five years.

 

Around the time of that crash, 33 countries banned exports of various food items. In the wake of Covid-19 just 19 countries have curbed food exports.

 

Despite most agricommodity trade being unaffected by Covid-19, the UN says in its latest report on food security that it is ’alarmed’ at the prospect of a continuation of recent trends, which it claims will see almost 10% of the global population facing hunger by 2030.

 

With grain in our hands

 

Mao Zedong, still an iconic figure in China, once said: "with grain in our hands there is no panic in our hearts." Chinese hearts hope there is no longer any need to panic. China has seen too many famines; the last (1959-61) resulted in as many as 50m dead. This year China will eat around 700bn kilos of different foodstuffs; sustaining that will be many tonnes of imported meat, corn, soybeans and so on.

 

China has long proclaimed it seeks to achieve self-suffiency in food. What does that mean? It cannot produce enough calories for its own needs - the country is home to 20% of the world’s population but only 10% of arable land and some 5% of water resources.

 

It therefore walks a tightrope - building up food stores, buying from other countries when the price is right (as now, amid depressed international demand), and locking them away in state-run reserves, then releasing them to damp down inflationary pressures. China’s political leadership is acutely aware that a bout of inflation fuelled the Tiananmen Square protests in 1989.

 

Last year’s "Food Security in China" proudly announced that the country’s "total effective warehouse capacity" in 2018 "grew by 31.9% over 1996." One Zhaodong warehouse may be less effective than first thought.

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