China's unhealthy obsession with grain yields

Mark Godfrey says Beijing should direct its subsidies away from wasteful grain production, towards sharpening its edge in agriculture

PUBLISHED : Monday, 31 August, 2015, 2:29pm
UPDATED : Monday, 31 August, 2015, 2:30pm

Much has been made in recent months of China's mountains of moulding grain. This is down to an outmoded state system of prioritising continuous increases in grain yields - a system which has done much to increase the quantity of Chinese grain output at the expense of quality.

A consecutive annual increase in yields has become a mantra and a raison d'être of Beijing's agricultural policy, but it belongs more to a Soviet-style planned production than to the modern, efficient agricultural system which China says it wants. To increase volumes, China has handed out huge subsidies to grain and oil seed producers while guaranteeing minimum prices to farmers. Subsidies have helped pay for the massive input of fertilisers which have gone some way to making China a leading producer of grain in global league tables. But China has maxed out many of the productivity gains, with much of the nation's soil damaged by chemicals.

China now needs to reduce subsidies and focus instead on its natural competitiveness. A leading exporter of many fruit and vegetables, it's also the world's biggest exporter of farmed seafood. It got to a position of dominance because growing garlic and apples, and farming tilapia or shrimp, require a great deal of manpower.

China has maxed out many of the productivity gains, with much of the nation's soil damaged by chemicals

Yet, rather than funding training and productivity of profitable commodities like fruit, vegetables and seafood - where it can maintain a leading global market share - China continues to pour funds into maintaining artificially high grain yields.

China would be better placed to invest in increasing grain yields in friendly developing countries where land is cheaper. Attempts to acquire or rent vast swathes of Kazakhstan steppe for grain production met with local opposition because it wasn't presented as an effort to help local authorities improve productivity of the local agricultural sector. Vast potential remains in numerous developing countries in Africa and Latin America.

At present, China risks repeating the mistakes of the European Union, which had subsidised its farmers to produce vast quantities of beef and butter, which had to be sold off cheaply - indeed, some of it was dumped on developing countries. China is unlikely to be shipping its stocks overseas, but there is nonetheless a lesson to be learnt. Today, EU farm subsidies are less linked to volume and more to sustainability and farmers' stewardship of the environment.

However well intended they were, Chinese grain quotas, goals and subsidies belong to another era. As a global producer and consumer of grains and other agricultural commodities, China need not be afraid of relying on the market and seeking supply in countries where it can share its considerable agricultural expertise.

Mark Godfrey writes mainly about the seafood trade in China for US-based