From farm to fork

Supplies of key foodstuffs keep flowing, despite the virus crisis


Farmers harvest wheat in Henan province

A couple of weeks of self-isolation has been too much to ask of some Covid-19 quarantiners, who have been denounced for selfish behaviour in flouting the stay-at-home rules.

But that’s a much briefer period than for the thousands of pigs flown into China over the first few months of the year, who have gone through as much as 11 weeks of quarantine. Reuters reports that the animals spend 30 days under observation by a designated vet before shipment. On arriving in China there are 45 more days in seclusion to ensure they are disease-free.

That hasn’t stopped freighters stocked with breeding sows from landing in China in recent weeks, with more than 150 planes full of pigs expected in total this year.

The plan is to replenish a national herd that has been ravaged by African swine fever, a virus that has dropped suddenly out of media focus. Pork prices raced to new highs earlier this year on shortages of supply, although they were off their peaks by the end of March after the government handed out cash incentives to boost hog production and released another 20,000 tonnes of meat from its central reserves.

Supplies of other food staples have been stable through the Covid-19 crisis, China’s state media says, drawing comparisons with some of the supermarket shopping frenzies that emptied shelves in other countries.

There were a few problems when the coronavirus first took hold, including shortages of flour, because quarantined families were churning out homemade noodles, dumplings and other traditional foods.

But shortages in other foodstuffs have been more about disruption to distribution networks rather than the foods themselves being in short supply.

One problem is that ports overseas have seen their operations disrupted by screening procedures to prevent the spread of the coronavirus, which has compounded other challenges for traders, such as delays in securing financing or clearing shipments.

Fewer outbound sailings by Chinese shipping lines over the last two months have also had a ricochet effect in creating a shortage of containers at other points in the supply chain, especially refrigerated units.

Attempts by governments to stockpile food supplies for their own populations have also been a factor in countries such as Vietnam, which has introduced curbs on rice exports, and Russia, which is putting quotas on exports of some grains until the end of June.

Yet policymakers in China are at pains to point out that harvests of corn, wheat, soybeans and rice have been excellent and that the country’s reserves are more than sufficient to meet domestic demand for the foreseeable future.

The Chinese imported 2.5 million tonnes of rice in 2019, which was less than a fiftieth of their annual rice consumption. Farmers also sold 2.7 million tonnes of the same staple to customers overseas.

China wasn’t quite self-sufficient in wheat, importing 3.5 million tonnes last year. Yet the inflows accounted for just 2.8% of total consumption, hardly a dependence on foreign imports.

The state media has been reinforcing that message with editorials on how the country’s ‘rice bowl’ is holding firm through the crisis. Grain reserves are stocked up to high levels, with enough rice and wheat to meet domestic demand for at least a year, Xinhua adds.

That’s not to say that food prices won’t move around more unpredictably than normal or that some agricultural commodities aren’t going to be more affected.

The most obvious candidate is soybeans, where China imports about 85% of its annual consumption. Imports were up for the first two months of the year, despite reports of bottlenecks at ports in producer markets, including new measures to protect workers from the virus in Argentina.

Brazil had a much better month, buoyed by all-time highs for the soybean harvest. Shipments to China – by far the biggest customer – rose more than 40% year-on-year.

But Beijing-based specialist Cofeed still offers a word of warning that cargoes from Brazil could fall in volume in April because it has been taking longer to load shipments due to quarantine measures. Some ports are also operating with reduced workforces.

Margins at the main crushers in Shandong – a processing centre for soybeans – were climbing in March as inventories of imported beans thinned out. In part that reflects new interest from customers as confidence improves in the economic outlook. “Just a month ago, our plants in southern China were begging clients to come and buy the products, as demand was flat with the coronavirus outbreak at its peak,” an insider at one of the larger crushers told Reuters. “But now our positions have completely reversed. We have a shortage of goods and clients are lining up, begging to get meal from us.”

If there is a supply-demand crunch American farmers will be hoping to benefit after the Chinese made commitments on buying US soybeans as part of the ‘phase one’ trade deal with Washington in January. The deal included a promise to boost purchases of US agricultural imports by more than half.

Chinese buyers did start purchasing more American soy soon afterwards, although not in huge quantities because currency fluctuations have made Brazilian shipments much more attractive in price. However, despite the coronavirus disruption, the Trump administration is bound to pressure Beijing to meet its obligations in the second half of the year, when China’s soybean importers typically turn more towards shipments of US beans.

About 80% of US exports are shipped between the months of September and February, which is when the Americans will be expecting to see a significant pick up in purchases.

Trump indicated on Monday that US farmers are already benefiting from the January deal. “As of April 1 it seems like China is buying. So we’ll let you know how that’s going, but they’re buying anywhere from $40 billion to $50 billion worth of our agricultural products that would have a huge impact on our farmers,” he told a press briefing.

In the meantime, higher margins for China’s soybean crushers are likely to pass through into higher prices for domestically produced pork, because soymeal is a key component of animal feed. Perhaps that will trigger more arrivals of breeding sows from overseas as hoggeries try to trade their way back into profit. Some provinces have also been offering import subsidies of Rmb2,000 ($282) per animal in a bid to boost the herd – as much as half of the local pig population has been wiped out by African swine fever.

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