Zero Hedge got us thinking about the geopolitical implications of the agricultural supply chain and how everything is changing, rapidly. Consider:
Structurally, China is at a huge disadvantage as it accounts for 20% of the world’s population, but only 7% of arable land. Compare that with Brazil which has the reverse of those ratios. What that does for a country like China is to incentivise the adoption of technification. Let’s look at their porcine market, which represents 50% of global production and consumption. In China, to slaughter roughly 600 mn pigs per year, which is about six times the demand in the US, they have a breeding herd of about 50 mn animals. In the US, the comparable number is only about 6 mn so there is a huge productivity lag. . . .
The problem for China, and to a lesser extent India, however one defines it, is that it will need increasingly more food, processed with ever greater efficiency for the current conservative regime to be able to preserve the status quo, all else equal. And for a suddenly very food trade deficit-vulnerable China, it means that the biggest winners may be Brazil, the US and Canada. Oh and Africa. The only question is how China will adapt in a new world in which it finds itself in an odd position: a competitive trade disadvantage, especially its primary nemesis: the USA.
Though China is geographically larger than the United States, it has far less arable land per capita available: 0.08 hectares per person versus 0.53 per person here. And the arable land available in China is shrinking, mostly because of extreme desertification.So China imports food to help feed its huge and growing population. But its imports vastly outweigh its exports in agricultural products (see the chart below, courtesy Zero Hedge & FAO). And that deficit is going to grow: There will be lots more mouths to feed in the future, and as more and more Chinese enter the middle class, appetites evolve. As the Zero Hedge post notes: “high-income countries consume about 30% more calories than low income nations, but the difference in value is about eight times.” This means importing food is going to get a lot more expensive and difficult for the Chinese authorities to manage. declining) in the 21st century. And for the foreseeable future it will control the sea lanes on which China depends for its food imports.