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Friday, March 18, 2016, 15:14

Making food security a top priority

By KARL WILSON in Sydney
Making food security a top priority
A farmer harvests rice in the village of Gangzhong in China’s eastern Zhejiang province. China has managed to grow itself out of grain shortages b ut it is facing fresh challenges, including rural workers moving to better paying jobs in cities. (AFP)

As China begins its 13th Five Year Plan (2016-20) one of the key components will be agriculture and food security.

For decades, agriculture has occupied the minds of successive leaders as the country moves from its agricultural base to an economy driven by innovation and technology.

China today produces a quarter of the world’s food and manages to feed a fifth of the world’s population on just 10 percent of the planet’s agricultural land. But the question for China is: What now?

After several years of good harvests, China has managed to grow itself out of grain shortages but structural problems still remain.

The new Five Year Plan aims to address some of the challenges that agriculture faces such as mechanization, supply chains, food processing and farming models.

Some of these issues will be addressed at the upcoming Boao Forum for Asia in a panel discussion on the future of agriculture. The forum will be held at Boao, in South China’s Hainan province, from March 22 to 25.

As it stands, China still relies on small family holdings to produce much of its food. This traditional model faces fresh challenges as more and more rural workers move to better paying jobs in the cities.

One of the questions that will be put to the forum is: Will the Chinese family-based farming model continue to work, or should the government allow land acquisitions (with the right to use land, not the ownership) and give way to big-farm agriculture as in the United States? Or should it adopt the models used in Japan and South Korea which are more reliant on technology and smaller landholdings?

Doug Ferguson, partner-in-charge of KPMG’s Asia and international markets group, said China is “essentially self-sufficient in rice, grain, pork and, to a certain extent, seafood”.

“It does, however, need to import beef, dairy products and branded food products such as powdered milk,” he told China Daily Asia Weekly.

Ferguson said safety issues in some domestic processed foods have left consumers seeking imported products.

“That is why Chinese investors are looking at Australia’s agricultural sector, especially dairy.

“They are buying into dairy for premium safety products — products that are processed and packaged in Australia and exported from Australia.”

Speaking on the sidelines of the fourth session of China’s 12th National People’s Congress in Beijing earlier this month, Minister of Agriculture Han Changfu highlighted that food security is still a major priority for the country.

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“In the modernization process, agriculture is lagging compared with other sectors, such as urbanization, industrialization and information technology,” the minister said.

“We need to restructure and upgrade the business models and production systems which focus on technology, and extend the production chain of agriculture.”

China aims to promote supply-side reform, Han added, as some products are excessive while others are in short supply.

“The purpose of reform is to increase the quality and efficiency of supply, ensure stable production, and reduce pressure on the environment.”

He said food security has now become a major issue for the government and pledged the authorities will “spare no efforts to solve problems, no matter how minor they are”.

“We will keep maintaining a tough stance on both production and the supervision procedures, in a bid to ensure that people consume quality-assured food. We should not only eat well but also safe,” he said.

Han said the government will continue to crack down on illegal food additives as well as substandard pesticide residues.

China’s demand for food will still remain high as the population increases with the ending of the one-child policy. According to Chinese media reports, grain output reached over 620 million tons in 2015. The figure has increased over 12 consecutive years.

Of that amount, however, about one-fifth was imported, according to a report by China Radio International (CRI).

“Grain from foreign countries is indeed cheaper than ours, much cheaper,” Han told CRI in an interview. He said the scale of China’s agriculture is small and the cost is high.

“So we don’t have any advantage in grain prices. For that reason, we’ve imported a large amount of grain.”

He added that China will not seek a consecutive increase in grain output during the next five years, but authorities will consolidate and improve grain output capacity.

Wei Longbao, deputy dean of the China Academy for Rural Development at Zhejiang University, said that since 2003 the government has been offering subsidies and buying agricultural products at protective prices to encourage farmers to grow more grain.

“That policy has played a key role in increasing China’s agricultural production for 11 successive years,” he said in a recent commentary.

“But things have changed in the global agricultural market. As prices of agricultural products overseas have remained low for quite a long time, prices in the domestic market have been falling too.

“Even though the government still buys grains at protective prices, which are higher than market prices, enterprises that need farm products have been eyeing overseas markets to fulfill their requirements.”

Wei said the government needs to adjust its policies to ensure food security. One way of doing this is for Chinese agricultural enterprises to go global.

“Some Chinese agricultural enterprises have the technology and funds to operate farms overseas, and the government should encourage them to do so, for the time has come for China to coordinate global resources to ensure its food security,” he said.

One country which has figured high on China’s priority list when it comes to agriculture is Australia, said KPMG’s Ferguson.

Australian supply

In February, the Australian Treasurer Scott Morrison gave his approval for Chinese billionaire Lu Xianfeng’s Moon Lake Investments to buy Van Diemen’s Land Company (VDL) — Australia’s largest dairy farm — for A$280 million ($210 million).

The company comprises more than 25 dairy farms and covers 17,800 hectares.

But some of the nation’s top business and political leaders have warned the purchase could weaken the local market, with the farm’s supply instead used to meet the huge demand for baby formula in China.

In recent months, Australian supermarket shelves have been stripped of baby formula, dubbed “white gold” in China, as millions of tins have been shipped there at a much higher price. Milk is an essential ingredient of formula.

Morrison has defended the sale, saying it met the “national interest” test.

“Moon Lake has advised that it intends to continue to supply the milk produced at VDL under the same contractual terms that are currently in place,” he said in a statement.

“This provides assurance that there will not be an impact on the supply of milk and milk products in Australia.”

Hans Hendrischke, professor of Chinese business and management at the University of Sydney Business School, echoed the view that food quality and safety have become major issues in China.

“China does have a problem with food processing and the government is addressing the issue,” he said. “But the issue is complex and the food-processing industry is competitive and fragmented.”

The sector has lost the public trust, he added.

“Chinese investors are looking for a supply chain people will be happy with. Australia is one such country.

“They are buying big farms, not small holdings. They are looking at food processing and extending supply chains.”
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