Has China got Australia by the short and curlies?

‘When you’ve got them by the balls their hearts and minds will follow.’

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Theodore Roosevelt 1858-1919
Theodore Roosevelt.
Australia and its sophisticated agricultural industry have to decide whether they want to be a feeder of others, or be fed by others. Don’t laugh at that. Of course the world can feed Australia— it’s already started as we increasingly become more reliant others for food. We have no more people in this country than there are in a couple of  big Chinese cities and we are an attractive proposition to feed, if only for access to our resources and for what food we can produce that others can’t. I read somewhere recently that China would only have to increase its horticultural production by about 3% and it could feed Australia. Think about that and the global fresh food trade. There are Egyptian oranges for sale in my town. So how important are we to China and how important is China to Australia? You may be surprised.

I can’t find the reference to China’s ability to feed Australia with all of its vegetable and fruit needs but what I did find was an article that shows that China currently produces half of the world’s vegetables and 30% of all fruits.

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Terraced rice fields in China

That is a breathtaking statistic. The article link above explains it this way: Of 484 million tonnes of vegetables produced in 2012, only 4.4 million tonnes was exported. That’s less than one percent. Of the 220 million tonnes of fruit produced in 2012 only a mere 3 million tonnes were exported abroad. Despite these figures China remains high on the list of exporters. With fresh vegetables China’s export value is in fourth place and with fresh fruit export they are in 7th.

The question I find myself asking over and over again is whether Australia is becoming too reliant on China? Have they got us where they want us — by the short and curlies?

Kelly Shang is a doctoral researcher at Maastricht University and on The Australian Strategic Policy Institute (ASPI) website makes some interesting points. Apparently, China quite often strikes back or sanctions countries which adopt policies or ‘do things’ of which it doesn’t approve. The Head of State of Mongolia met with the Dali Llama and tariffs were increased on Mongolian exports to China. Furthermore, Empirical research (PDF) has further suggested a ‘Dalai Lama effect’: if a country’s head of State meets with the Tibetan spiritual leader, then its exports to China will be reduced by 8–17% percent in the next two years. I wonder if anyone has told Malcolm to resist doing what Steve Smith, the captain of the Australian cricket team did recently?

So how reliant is Australia on China and how reliant is China on Australia? I found the following from the ASPI, Kelly Shang article most disturbing. Follow the links and see what you think. You need to take some time:

The extent of Australia’s export dependence on China makes it potentially vulnerable to such manoeuvres. In 2015, 30.2% of Australian goods exports and 14.9% of service exports were destined for China (PDF). Such dependence is even stronger than Australia’s dependence on the United Kingdom market before the UK decided to join the European Economic Community (for example in 1960-61, 23.9 percent of Australian goods exports were destined for the UK (PDF)). Further, the major Australian exports (iron ores, education, tourism, etc.) aren’t indispensable to China and can be sourced from elsewhere.

In contrast, China’s reliance on the Australian market is insignificant: only 1.8% of Chinese exports (goods and services) were destined for Australia in 2015. Nevertheless, Australia is the second-largest host country of Chinese investment (as of 2015), and 49% of such investments were from Chinese state owned enterprises (PDF).

My conclusion from reading the above is that China can manage without Australia, but Australia, alarmingly, is getting itself into a position where it cannot manage without China. This applies to agriculture as much as it applies to the iron ore industry. The Chinese are now involved in the live shipping business of what was once Wellard. The Chinese are already heavy investors in cattle production in Australia, in the dairy industry in Tasmania and in other crop growing areas, are they now closing the loop?

Why it is never mentioned by our illustrious leaders I don’t know. I suspect they know but don’t want to be questioned about it. Forty nine per cent of Chinese investments in Australia are from Chinese State owned enterprises. Does the Foreign Investment Review Board (FIRB) consider each application as a separate entity, or do they add it to the cumulative figure for the Chinese State?

The objective for Australian agriculture should be to look for markets in other parts of the world before China calls all the tunes.

China is in this one too — via New Zealand.

China exports millions of dollars worth of vegetables to Australia via New Zealand. They are in every super market as a ‘Product of New Zealand from local and imported product.’ Sometime ago I reported they were cheeky enough to label products as ‘organic’ without, of course, going through the rigorous programme of Australian certification. Will this attack on the Australian vegetable industry stop now we have an FTA with China? In my opinion no, it will probably get worse. That’s what FTAs are for! The processed food industry continues to move offshore. Now they have another reason to move as electricity prices make running a business in Australia very difficult. What on earth are we doing to this country?

Over the years it has often been a topic that we are importing more and more processed food and consequently exports are in decline. Of course we will always be able to feed ourselves with animal protein. Beef is assured. Lamb and perhaps mutton will be available so long as our sheep numbers don’t continue to decline, if they do then lamb will be the first to go from our diet because it will be too expensive for most of us. That will put us back to where we were decades ago, to mutton. I like mutton, but for some reason that nobody has been able to explain to me it all goes for export. There is no better roast than a leg of mutton cooked slowly for four or five hours. Before cooking we used to make small cuts and insert garlic or small aromatic cloves. There is a great French roast which uses Cannelloni beans. Bring back mutton, I say.

April 22. I just found this, looks like they have some concerns in Britain about food imports.

The  world-wide wheat surplus.

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Malaria and starvation in Sub-Sahara Africa

I must admit that I get annoyed when there is a surplus of wheat in the world, prices to the farmers who grow the most wheat are below the cost of production and I see little children, poor little mites in Africa, stomachs and eyes distended, dying of starvation as their parents grieve, while we and other countries wonder what we are going to do with our surplus wheat. ‘The talk’ is now, apparently, that we have just been through the grain decade in world agriculture and now we are moving into the protein decade. Have we got forecasting all wrong again? Our sheep have almost all gone and cattle numbers are down.

The story is that grain for ethanol has not caused any mass starvation, at least not any more than there was before ethanol, we now have a world surplus of grains so prices are dreadful and there is talk all over the world, even in the most subsidised of countries like the United States, of grain growers facing up to Image result for pictures of children in sub saharadebts which they may not be able to repay as and when they fall due. Others talk of difficulty in securing finance from the banks for the next crop. Agricultural land prices around the world, maybe with the exception of Canada, are at best stable but generally falling putting increased pressure on the debt to equity ratios, the hard yardstick for many lenders. Looking at the CBOT wheat futures for December 2017 and March  2018 and using cost figures from a couple of years ago, which given the low inflation rate are probably fairly accurate, planting wheat and budgeting for an average yield of 1.8 tonnes, there is little room for error or any downward pressure on yield for the coming season. That’s a long winded way of saying the outlook is not good, at least here in Australia and according to reports also in the grain belt in America.

Global agriculture is complicated. In about 1965 I organised through ‘The Chaffblower’, the magazine of the North Notts (Nottinghamshire) Young Farmers, of which I was the editor, a programme to raise money to purchase a hammer mill and one of those wonderful Lister motors that would run on any oil, diesel, coconut, peanut, groundnut, anything except petrol (bang!). All for a village somewhere in what was then the Congo. The hammer mill was needed because of a war and starvation and the corn or maize they were receiving as aid needed to be milled in amounts greater than could be achieved by hammering it with a stick. It was the same Congo that a few years earlier, shortly after I left the Army, that had tried to persuade me through an agency in London (they said) to go to the Congo and fight in a civil war on the side of the ‘Goodies’. The rewards offered were substantial, unbelievable. We had been warned by Her Majesty, so I declined. I know that some accepted. Many died and some returned rich but damaged men. Just this morning I heard they are still fighting in the Congo, that’s fifty years of bloodshed.

Now in 2017 I have just finished watching a documentary on the drought in sub-Saharan Africa. As the cameras panned around the sick children, the bones of the wealth of their families, goats, being bleached in the sun, there was hardly a frame that didn’t have a Kalashnikov or some similar weapon in view at the same time as a doctor or a nurse was saying they had no food, no medicines and children were dying of starvation and the the youngest will go first. There is not only a famine and a drought but always a simmering conflict. So the mix is still the same guns and starvation and no doubt some fat cats in the UN in New York pleading from their condominiums for aid for their starving country.

In 1970 the population of all of Africa was ~365 million, today it is 1.238 billion, an increase of ~230% and it is increasing by about 1 person per second. The world population in 1970 was ~ 3.7 billion and today ~7.5 billion. Periodically we hear about how much more food will be needed to feed over 9 billion people by 2050 — the estimates are all over the place and time has passed so quickly since the first estimate of 50% more was made nearly a decade ago. I don’t think anyone really knows and I have yet to see or hear a politician in this country that knows or cares about what goes on in agriculture in the rest of the world. Their insularity and therefore their lack of global strategic thinking for Australian agriculture is breathtaking and frightening.

Yes, there are people still dying in Africa 50 years or so after some young farmers in Britain tried to help out during a famine — that’s the glass half empty story. The glass half full story is that the population of the world  has doubled in that time and from a humanitarian perspective most of the people in the world have been and are being fed most of the time and if world would stop fighting wars and if governments and agriculture worked together and got properly organised, all of the people could be fed all of the time.

The mostly urban population of the world do not recognise the enormous debt of gratitude they owe agriculture for having fed the majority of them most of the time over the last fifty years. That begs the question on whether we can feed 9 billion people by 2050 and I believe the answer is ‘Of course we can’. The caveat being  ‘If we can fix a couple of major problems.’

That world agriculture can feed the world isn’t a bold statement which I cannot substantiate, I have just read a report from the Food and Agriculture Organisation (FAO) and I have to insert a major caveat. The report is a couple of years old and worth reading for those who have a global view of the world. If you don’t have a global view then you had better develop one, because it is as exporters with a global view that we can demand of our politicians that we have a strong position in the world of global food trade that will in turn determine whether Australian agriculture has a place in the world of food production. And that’s enough use of the word global for now!

One flaw that I can see in the FAO report is the assumption that the Developed World, including Australia, who currently produce a great deal of the world’s food surplus will be able to meet that commitment in the future.  Farmers in the Developed World, that means Australia, will only be able to produce food to help feed the world if the producer, the farmers, can pay pay their debts as and when they fall due, make a decent living and show a return on their capital investment acceptable to the financiers. Then and only then will agriculture in Australia grow and innovate and feed the world. At present there is no financial incentive for many food producers in the developed world, including and maybe particularly in Australia, to maintain, never mind increase their production.

(N.B. I still haven’t got all my emails working the wait on Telstra is too much. Any comments please send to roger.rankin.crook#bigpond.com and I will post. RC)


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