“It’s all gone. Floods in China ruin farmers, risk hitting food prices

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“The harvest has completely failed,” Bao told CNN Business in an interview on social media app WeChat, adding that his family had already lost around 200,000 yuan ($ 28,000) in produce. “The rice was almost ripe and ready to harvest before the floods. But now it’s all gone. ”

Flooding floods hit the shores of Lake Poyang in Jiangxi province last month, destroying thousands of acres of farmland in what is called the “land of fish and rice”. The wider Yangtze River basin – which includes Lake Poyang and stretches over 3,900 miles from Shanghai in the east to the Tibetan border in the west – accounts for 70% of the country’s rice production.

For farmers like Bao and his father, the damage has been devastating. Not only did the rains ruin the crops they were about to harvest, but the extent of the flooding made it impossible to recover anything from this year.

“The earth is still underwater,” Bao said. “This means that we are not going to have a crop for the whole year. “The floods that devastated Bao’s farm and an additional 13 million acres of cropland – roughly the size of West Virginia is the worst China has seen in years. Chinese emergency management ministry puts direct economic cost of disaster at $ 21 billion in destroyed farmland, roads and other property. Some 55 million people, including farmers like Bao, have been affected.

The disaster is bad news for the world second economy, which is already in a fragile state due to the coronavirus pandemic. Beijing has so far succeeded in securing its food supplies by importing large quantities of produce from other countries and freeing tens of millions of tonnes of strategic reserves.

But analysts warn that such measures can only be useful for so long. The strained relationship between China and much of the western world, and the coronavirus pandemic, could make importing a lot of food more delicate in the future. Flooding in China, meanwhile, could soon worsen: Heavy rains are expected for much of this month, and Chinese officials have warned that the flooding could spread further north, threatening wheat crops and corn of the country.

“The flooding is already among the worst since 1998 and could get worse in the weeks to come,” Nomura analysts said in a note late last month.

This aerial photo taken on July 6 shows flooded farmland in Shimen County, central China's Hunan Province.  The country has been hit by the worst floods it has seen in years.

Food safety

It is not clear exactly how much of China’s food supply could be at risk, as the government has not released details on the current state of production.

If flooding is contained by the end of August, agricultural GDP growth could fall by almost a percentage point in July-September quarter, according to analysts at Nomura – equivalent to more than $ 1.7 billion in lost agricultural production. This amount is based on the losses recorded in mid-July in seven southern provinces which were particularly affected.

Analysts at Chinese brokerage firm Shenwan Hongyuan, meanwhile, recently estimated that China could lose 11.2 million tonnes of food from last year, given the area of ​​cropland damaged in the mid-July. It would be equivalent to 5% of the rice produced by China.

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The damage could be even worse, however. Nomura’s analysis was based on data from flooded fields that the Chinese government released in July. Since then, the area of ​​damaged cropland has nearly doubled, according to China’s emergency response ministry. The damage estimates released by analysts also do not include the potential loss of wheat, corn or other crops, which could be at risk if the floods spread.

Already, analysts point out that corn costs increased. The price of corn in China was 20% higher last month compared to a year ago, according to Chinese data provider SCI – the highest level in five years.

Maize is being used as feed for Chinese pig herds, which are repopulating as the country brings the African swine fever outbreak under control last year. Even before the floods started, the corn supply was tightening, mainly due to fears that a pest called the fall armyworm could spread across China, according to the US Department of Agriculture, which keeps records. statistics on world agricultural production.

Meanwhile, soybean prices have also jumped. In the first half of 2020, domestic soybean prices rose about 30% from the end of last year, according to data from China’s Ministry of Agriculture and Rural Affairs. Analysts at Baocheng Futures, a Chinese futures brokerage firm, attributed increase mainly to concerns about the extreme weather conditions in soybean growing areas and the uncertainty surrounding the US-China trade relationship.

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It is clear that the authorities are troubled. Chinese President Xi Jinping recently surprised farmers in northeastern Jilin Province with a televised visit.

“I came here mainly to check the crops,” Xi said in a video posted by the public broadcaster CCTV. “There are quite a few disasters this year. I’m worried about the way the crops grow here in the northeast. ”

Xi has good reasons to visit the region. Northeast China produces more than 40% of the country’s soybeans and a third of its corn – both essential to the food supply chain, as they are fed to livestock and poultry. China uses more soybeans than any other country in the world, and it is only behind the United States in corn consumption. And although the region has so far been spared major flooding, that could change if conditions worsen in the coming weeks.

Xi reiterated food security as a major issue to ensure economic security during his visit. And Vice Premier Hu Chunhua, who is in charge of the country’s agricultural affairs, last week urged local senior officials to take responsibility for safeguarding food security and ensuring that production does not decline.

Farm workers pull weeds from rice fields in Taizhou, Jiangsu province, China on July 8.

China’s response keeps rice price stable

Beijing responded to the crisis by attempting to stabilize food prices and stimulate supply – notably by tapping strategic food reserves.

Tens of millions of tonnes of rice, corn and soybeans have been brought to market in recent months by the China Grain Reserves Corp and the National Grain Trade Center, the two agencies that manage and sell state grain reserves. .

So far this year, the agencies have released over 60 million tonnes of rice, around 50 million tonnes of corn, and over 760,000 tonnes of soybeans, already exceeding volumes released throughout 2019.

Thanks to the release of these reserves, rice prices have remained stable. Last week, the average price of a ton of rice nationwide was 4,036 yuan ($ 580) per ton, roughly what it was a month ago, according to data from SCI.

China is also increasing its imports – especially from the United States. Beijing has pledged to buy billions of dollars worth of US goods as part of a trade war truce agreed to in January.

In the first six months of the year, China imported nearly 61 million tonnes of grain, up 21 percent from the previous year, according to the latest available Chinese customs data. Corn imports jumped 18% from last year, while soybean and wheat purchases also increased. The United States, Brazil, Ukraine and France were among the largest exporters.

Some analysts, however, warn that China shouldn’t rely too much on foreign imports.

Beijing’s trade relationship with Washington, for example, could create uncertainty for China’s food supply chain if U.S. authorities cut or heavily tax these imports, analysts at Chinese research firm Tianfeng Securities say. The United States exported more than 9 million tonnes of soybeans, around 100,000 tonnes of wheat and nearly 65,000 tonnes of corn to China in the first half of 2020, making it a major trading partner, according to the latest data Chinese customs available.

The Covid-19 pandemic has also prompted some countries to suspend their food exports, Tianfeng Securities analysts added in a recent research note, creating more food security risks in China.

Analysts have suggested a few options for China to increase food production, including easing restrictions on the production of genetically modified crops. But they also recognized that at least in the short term, the country may need to import as much as possible before its trade relationship deteriorates.

“China needs to put something away for a rainy day,” they said.

As for farmers like Bao, China has put money aside for flood relief. As of mid-July, some 1.8 billion yuan ($ 258 million) had been allocated to help relocate those affected by the floods and rebuild ruined houses, among other measures, according to China’s finance ministry. . The local government of Jiangxi Province, where Bao lives, also allocated 280 million yuan ($ 40 million) for flood relief.

But that’s a drop in the bucket compared to the $ 21 billion in economic damage the floods have already inflicted.

“Yes, the government has grants, but that can’t really help,” Bao said. Her father has already left home to look for other jobs now that there is no hope for another crop year this year. “By dividing things up for each person, there isn’t much left. “

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