2022 Theme: China & “Dynamic Zero Covid” - Chinese Food Security Amid Covid-19 Lockdowns
High oil prices leading to even higher corn prices brings us to our final topic of the week:
China and food security.
As we have mentioned a few times, we often feel guilty about not covering China more frequently. It is a country (and an economy) we could and should get to nearly every week, if possible.
That doesn't happen as often as we might like but China is never very far from our thoughts. We are thrilled to make partial amends this week.
All the focus on China right now is around the brutal scenes coming out of the Shanghai lockdown but, equally significantly, there are reports of fields lying fallow as farmers are, incredibly, being kept from the spring planting season because of harsh Covid lockdowns in rural provinces.
It is hard to get an accurate picture of the situation but, if true, this could be a tremendously serious mistake.
A lack of planting in critical farming provinces like Jilin or Liaoning could be another blow for global food production.
Any sort of meaningful disruption would be another unexpected and unwelcome event that could challenge Chinese self-sufficiency in certain staple food stuffs.
Less production would require greater food imports which would raise prices globally and lead to great competition from the few remaining major producers. A lot depends on the summer in the US and Canada now.
The zombie-like adherence to the failed "zero Covid" strategy is not *just* hurting scheduled planting however. It is also causing problems with labor and exacerbating shortages of fertilizer and seeds.
This would be very terrible but it also wouldn't necessarily be a surprise.
One of the more interesting aspects of China's economy (and society) is that for a country veritably obsessed with food and with a clear memory of famine, they do not actually make much of an effort to maximize yields.
Chinese corn yields are around 40% of US yields and one of the biggest reasons for that is a lack of genetically modified seeds.
This isn't because Chinese farmers are either too poor or too unsophisticated to use them. Nothing could be farther from the truth.
These problems could have the silver lining however. The very real - and self inflicted - issues over food security could lead to the Chinese government rapidly giving approval for new seed types and also their adoption by farmers.
Over the medium term, this could give a boost to global agricultural companies as well as local seed producers and agricultural tech ventures.
There is rightly a lot of stress about high food prices, deteriorating food security and the prospect of famine around the globe. But hopefully the stress will encourage greater efficiency, greater innovation and, swiftly, more food and a more resilient food supply chain.
One can only hope and on Easter weekend, that seems like a good idea.
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