Pork and Grains

The cost of Thai rice, the world benchmark, more than doubled in price in 2008. The price of pork also more than doubled. Many Chinese prefer to be paid with bags of rice than cash, a common practice historically. Arable land has given way to growing urbanization which has left millions of unemployed migrant workers with no farm to return to. China now imports more than 75 percent of its soya beans for domestic consumption. The most populous nation in the world has the most severe imbalance between population and land. As the population grows, grain production and the supply of pork are dropping.

Pork is a mandatory common staple in China. Sixty five percent of the meat Chinese eat is pork. The Chinese are hooked on pork the way Americans are on oil. Pork has been a mainstay of the Chinese diet for millennia. Beijing maintains vast warehouses where it stockpiles of frozen carcasses, which operate much like America’s strategic oil reserve. The government releases stocks onto the market during natural disasters crisis points in the hog cycle, and whenever it needs a political boost. China’s hunger for meat will have global financial ramifications, just like America’s hunger for oil has.

China’s leaders are well aware of this and would rather deploy their foreign exchange reserves to buy any food or commodity the country is short of on the global market ─ especially as commodity prices bottom-out. Especially, after the Food and Agriculture Organization of the United Nations said in 2008 food prices will stay high well into the teens of the century. China will then have to spend more on food subsidies to keep prices down and its citizens properly fed. In 2008, China had stockpiled between 150 million and 200 million tones of grain as well to keep prices down. China can afford to feed its people. Can America?