BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/44
Harvests overall have increased substantially in recent years. China produced 621 million tons of grain in 2015, compared to 546 million tons in 2010. The larger harvests reflect increased land area under cultivation and adoption of more efficient farming practices (e.g. new cultivar varieties, acquisition of modern farm equipment, wide use of irrigation systems and targeted fertiliser use).
China’s obsession with staple crop production reflects the national self-sufficiency policy. In practice, soy beans are only staple China has to import in large quantities. The rapid growth in harvest size and the state subsidy arrangements have led to massive inventories in the state’s grain stores. For example, China’s maize (corn) reserves now represent about half of all global reserves. The government this year has tried to auction off maize stored from previous years, abandoned its generous system of price guarantees and reportedly ceased to buy maize harvested this autumn. The price of maize in China, which still exceeds world prices, is now falling and expected to decline further. Many foreign producers worry that Chinese maize will flood onto the global market and depress the world price.
Domestic meat production is down from last year, while meat imports from abroad are increasing. China will apparently become the world’s largest pork importer (it has long been by far the world’s largest pork producer and consumer).