ANALYSIS-Hungry China links Potash to rice smugglers
14:52, Monday, 30 August 2010
* China's agricultural imports are rising steadily
* Imports to help China cap inflation but push global prices
* Food-related investments, long-dated futures could shine
By Aileen Wang and Simon Rabinovitch
BEIJING, Aug 30 (Reuters) - Rice smuggling out of Vietnam, a
rush to book grain barges in the United States and BHP Billiton's
$39 billion takeover bid for fertiliser giant Potash Corp -- a
common thread runs through them all.
After decades of pursuing self-sufficiency in food
production, China is bumping into the limits of that policy and
looking abroad more than ever to satisfy its growing appetite.
Much as Chinese demand has driven oil and iron ore prices
higher over the past decade, its imports of corn, wheat and rice
could become a new force, pressuring up global inflation and
giving farmers worldwide fresh incentive to boost output.
"It is inevitable that China will import more grains," said
Yu Mengguo, a deputy general manager at Jinpeng International
Futures Co. in Beijing.
"Living standards are going up and people need to consume
more. What's worse, China has a lack of good land and water."
Scarred by memories of chronic hunger and bouts of
devastating famine, China has defied its physical constraints in
pursuit of food security over the past three decades.
The government has spent vast sums on irrigation, pest
control, grain reserves, the development of hardier crops and
bio-technology research. The investment has paid off. With 9
percent of the world's arable land, China has more or less
produced enough food for its own people, 21 percent of the
world's population.
That is now changing.
China first swung to a deficit in agricultural trade in 2004.
Even though the rise in net imports since then has been
incremental, this year has given warning that reliance on
overseas production will accelerate in the future.
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