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2020-04-10 12:22:38 Voices

As COVID-19 continues to wreak havoc on the global economy, reports in late March that Vietnam, the world’s third-largest rice exporter, would ban international sales were greeted with unease in the world’s largest rice market. Although officials sought to reassure the public that China’s grain reserves remain well-stocked, many consumers still panicked, and pictures of empty supermarket bins or giant hoards of rice stacked up in living rooms circulated widely online.

Since transitioning to a market economy beginning in the late 1970s, China has largely been able to leave its days of food scarcity behind. The last comparable incident — after the Fukushima nuclear reactor meltdown in 2011 — was minor and related more to fears of pollution than material scarcity. Grain, in particular, may be China’s most ample resource: According to an official document from 2019, China has managed to remain 95% self-sufficient in cereals over the last decade — a category that includes the so-called three main staples of rice, wheat, and corn. Even without accounting for the country’s tens of millions of tons in grain reserves, the total yield in 2019 would have been enough to provide every citizen 670 grams of rice or wheat daily, well in excess of official dietary guidelines.

The spring sowing season accounts for about half of China’s total planted area in a year.

In other words, there’s little logical reason for Chinese consumers to panic over shifts in Southeast Asia’s grain market. Even in 2008, when shortages caused the food trade to temporarily seize up in some parts of the world, the country was able to make it through the crisis by relying on its own resources.

Nevertheless, consumer fears are somewhat understandable. Historically, economic and social crises have sent people scrambling after grains and other essentials. And while there’s no economic basis for hoarding in response to the current export bans, China’s grain sector does face problems: The spring sowing season, which directly determines the success of the summer harvest, accounts for about half of China’s total planted area in a year. In southern and central China, it also coincided with the peak of the country’s epidemic. The Chinese government started emphasizing the importance of a successful spring planting as early as February, at a time when most of the country was still under lockdown.

The period between early March and mid-May is also when China’s food security is at its weakest, as many of the grains produced the prior year have already been consumed and the new crop has yet to reach markets. And even if China as a whole might not lack grain, inequalities exist when it comes to variety, production, and consumption across regions.

If we compare a list of China’s top grain-producing regions to a map of COVID-19 infections, a number of things stand out. First, several eastern and southern provinces key to summer grain production reported relatively high numbers of cases, including Henan, Shandong, and Anhui. If they can’t get their agricultural sectors back on track quickly, it could put the harvest in doubt, potentially leading to shortages.

There is also cause for concern in the northeastern Heilongjiang province, an agricultural powerhouse with annual grain production in excess of 70 million tons, including 13% of the country’s rice. The province has lately been hit by a “second wave” of infections imported from abroad, mostly from Russia.

The Chinese government has temporarily closed all land border crossings in the region, partly in order to ease the pressure on quarantine efforts and avoid disruption of the vital spring sowing season. But the challenge for Heilongjiang and other provinces exposed to the risk of a second wave of infection is how to kick-start spring farming while keeping epidemic prevention measures in place.

At the same time, a country’s food security is dependent not just on total grain production, but also storage structures, regional distribution networks, processing, and logistics. China's regional patterns of grain production underwent a significant change in the 21st century, as grain production shifted from the south to the north, turning the former into a net importer. Thus, aside from the direct impact of the coronavirus on local agricultural production, we also have to pay close attention to transportation holdups between grain-producing regions and markets.

At the height of the country’s COVID-19 epidemic, disruptions in logistics and labor mobility, including travel restrictions and roadblocks, severely curtailed the movement of farmworkers and produce. Traffic restrictions are being loosened, but costs continue to fluctuate. This could sever grain-producing regions from markets and nudge grain prices upward. In a sign that the authorities are aware of the risk, as early as mid-February the Ministry of Transport announced it would waive road tolls until the end of the outbreak.

A worker unloads soybeans at a grain depot in Chengdu, Sichuan province, April 9, 2020. Wang Qin/Chengdu Business Daily/People Visual

A worker unloads soybeans at a grain depot in Chengdu, Sichuan province, April 9, 2020. Wang Qin/Chengdu Business Daily/People Visual

Transaction costs pose another obstacle. Following years of market reforms, China’s grain purchasers are increasingly diverse: In addition to state-run grain depots, there are privately owned grain companies and a variety of grain-processing plants.

Together they have made the grain market more competitive. But in times of crisis, it remains relatively difficult for non-state affiliated buyers to access subsidies and preferential policies available to the industry. The COVID-19 pandemic may cause a number of market-oriented purchasers to pull back, putting the onus on state-owned grain companies to buy more. Simplifying the purchasing network could decrease market efficiency and increase trading costs by giving a few firms greater leverage in negotiations with both producers and consumers.

There is still some time before summer grains are harvested in June, but state purchasers and local agricultural officials need to start preparing now. One possible solution would be to take advantage of the temperature and seasonal differences between northern and southern China and existing equipment-sharing agreements to start shifting mechanized equipment to areas in need earlier this year.

The end of the SARS epidemic in 2003 was followed by a period of inflation, marked by a rapid rise in the price of grain. The causes for that inflationary cycle were complex, and not all related to the disease. Still, it showed how a public health emergency can weaken the agricultural market. Agricultural officials need to pay close attention to uncertainties in the supply chain. There is no need to panic or hoard grain at the moment, but there’s also no harm in being prepared for a rainy day.

Translator: Katherine Tse; editors: Cai Yineng and Kilian O’Donnell.

(Header image: An elderly woman picks out rice at a supermarket in Hong Kong, April 3, 2020. Zhang Wei/CNS/People Visual)