“The crops have completely failed,” Bao told CNN Business in an interview on the social media app WeChat, adding that his family has already lost about 200,000 yuan ($ 28,000) worth of products. “The rice was almost ripe and ready for the harvest before the flood. But now everything is gone.”
Surgend floods burst the shores of Poyang Lake in Jiangxi province last month, destroying thousands of acres of farmland in what is known as the “land of fish and rice.” The broader Yangtze River basin – which includes Poyang Lake and stretches more than 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 downpour destroy crops they were about to collect, but the extent of the flooding made it impossible to save anything from this year.
“The country is still under water,” Bao said. “That means we will not have a harvest all year round.”
The flooding that affirmed Bao’s farm and 13 million acres of arable land – about the size of West Virginia – is the worst that China has experienced in years. China’s Ministry of Emergency Management estimates the direct economic cost of the disaster at $ 21 billion in destroyed agricultural land, roads and other property. Some 55 million people, including farmers like Bao, have been affected.
The disaster is bad news for the world second largest economy, already in a fragile state due to the coronavirus pandemic. Beijing has so far been able to secure food supplies by importing large quantities of products from other countries, and by freeing up tens of millions of tonnes of strategic reserves.
But analysts warn that such measures could only be so useful. Tense relations between China and much of the Western world, and the coronavirus pandemic, could make much food more difficult in the future. The flooding in China could meanwhile soon subside: Heavy rainfall is expected by much of this month, and Chinese officials have warned that the flooding could creep further north, threatening the country’s wheat and corn.
“The flood is already one of the worst since 1998, and may decrease in the coming weeks,” Nomura analysts said in a note late last month.
Food safety
It is not entirely clear how much of China’s food ban could be in jeopardy, as the government has not released specifications on current production status.
If the flood is contained at the end of August, the growth of agricultural GDP in July-September could fall by almost a percentage point quarter, according to analysts at Nomura – equivalent to more than $ 1.7 billion in lost agricultural output. That amount is based on losses recorded in mid-July in seven southern provinces that were particularly hard hit.
Analysts at Chinese brokerage firm Shenwan Hongyuan, meanwhile, recently estimated that China could lose 11.2 million tons of food compared to last year, seeing how much cropland was damaged by mid-July. That would be equivalent to 5% of the rice China produces.
The damage might have been even worse. Nomura’s analysis was based on data on flooded crop fields released by the Chinese government in July. Since then, the amount of crops damaged has roughly doubled, according to China’s Emergency Response Ministry. Compensation released by analysts also does not cover the potential loss of wheat, corn or other crops, which could be threatened if the flooding would spread.
Already, analysts have pointed out that corn costs have gone. The price of maize in China was 20% higher last month compared to a year ago, according to Chinese data provider SCI – the highest level in five years.
“I came here primarily to monitor the crops,” Xi said in a video posted by state broadcaster CCTV. “There have been quite a few disasters this year. I’m worried about how crops are growing here in the Northeast.”
Xi has good reason to visit the area. Northeast China produces more than 40% of the country’s soybeans and a third of its corn – both of which are important for the food supply chain because 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 as conditions worsen in the coming weeks.
China’s response keeps the price of rice stable
Beijing has responded to the crisis by trying to stabilize food prices and increase supply – including by tapping into strategic food reserves.
Tens of millions of tons of rice, corn and soybeans have been released into the market in recent months by China Grain Reserves Corp. and the National Center for Grain Trade, the two agencies that manage and sell state grain reserves.
So far this year, the agencies have released more than 60 million tons of rice, about 50 million tons of corn, and more than 760,000 tons of soybeans, and have now released all the volume throughout 2019.
Thanks to the release of those reserves, rice prices have remained stable. Last week, the average price of a tonne of rice nationwide was 4,036 yuan ($ 580) per tonne, roughly what it was a month ago, according to data from SCI.
China is also increasing imports – especially from the United States. Beijing is committed to buying billions of dollars worth of American goods as part of a ceasefire in the January trade war.
In the first six months of the year, China imported nearly 61 million tons of grain, up 21% from a year earlier, according to the most widely available Chinese customs data. Maine imports jumped 18% from a year ago, while soybean and wheat purchases also increased. The United States, Brazil, Ukraine and France were among the largest exporters.
Some analysts, however, predict that China should not rely too much on imports from abroad.
The trade relationship between Beijing and Washington, for example, could create uncertainty for the food supply chain in China if US authorities have to cut these imports or impose heavy taxes, according to analysts at Chinese research firm Tianfeng Securities. The United States exported more than 9 million tons of soybeans, roughly 100,000 tons of wheat, and nearly 65,000 tons of corn to China in the first half of 2020, making it a top trading partner, according to the most widely available Chinese customs data.
The Covid-19 pandemic has also caused some countries to stop exporting food, Tianfeng Securities analysts added in a recent research note, creating more risks to food security in China.
The analysts suggested a number of options for China to increase food production, including easing restrictions on the production of genetically modified crops. But they also acknowledged that at least in the short term, the country might have to import so much before its trade relations could deteriorate.
“China needs to put something away for a clean day,” they said.
As far as farmers like Bao are concerned, China has raised some money for flight assistance. As of mid-July, about 1.8 billion yuan ($ 258 million) was allocated to help relocate people affected by the floods and rebuilt devastated homes, among other measures, according to the China Ministry of Finance. The local government in Jiangxi province, where Bao lives, has also allocated 280 million yuan ($ 40 million) for flood relief.
But that’s a drop in the bucket compared to the $ 21 billion worth of economic damage the flood has already caused.
“Yes, the government has subsidies, but it can not really help much,” Bao said. His father has already left home to look for other jobs now that there is no hope for another growing season this year. “Spreading it for every person, there’s not much left.”
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