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PRI's Environmental News Magazine

China’s Changing Market

Air Date: Week of April 9, 2004

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Within the past year, the price of food in the U.S. has risen. The demand for rice, grain, wheat and soybeans are at record highs, and supplies are running low. According to economist Lester Brown, the U.S. food industry will feel a squeeze to its resources soon, and the reason is not purely domestic. Host Steve Curwood talks with Lester Brown whose new book details why China will play a crucial role in setting U.S. food prices.

Transcript

CURWOOD: Welcome back to Living on Earth. I'm Steve Curwood.

If you don’t like the way prices have been rising at the gasoline pump these days, you may soon have another budget worry: higher food prices. In the past seven months, the price of soybeans has doubled as China has bought up 13 percent of the world’s supply to make up for a declining harvest. Rice is up by 80 percent and wheat is up as well.

Over the years grain prices can go up and down but according to former Agriculture Department official Lester Brown, these recent whopping increases may well be reflecting some fundamental changes in the forces that affect the world’s food supply.

Lester Brown is now president of the Earth Policy Institute and author of “Plan B: Rescuing a Planet Under Stress and a Civilization in Trouble.” Lester Brown, you say food is going to cost us a lot more. How come?

BROWN: Well, there are two new environmental trends that are now affecting the food prospect. One is falling water tables, and they’re falling in scores of countries around the world as a result of over-pumping. This is historically a new trend, one we’ve not had much experience with because we didn’t have the pumping capacity that we have today.

Diesel pumps, powerful electrically driven pumps, enable us to literally deplete aquifers. And that’s what’s happening. It’s happening in China, it’s happening in India, it’s happening in the United States, just to cite the big three grain producers that account for half the world grain harvest. So spreading water shortages are now beginning to – are making it more difficult for farmers to expand food production fast enough to keep up with the 70 million people being added each year.

The second new trend that’s making it difficult for them is higher temperatures, in many cases, crop-withering temperatures. Recent research by crop ecologists indicate that crop yields are much more sensitive to temperature than we had earlier realized. And so we’re seeing – last year we saw crop yields sharply reduced in India and the United States because of intense heat and the drought that often comes as a result of it. And this year it was Europe that really bore the brunt of higher temperatures.

CURWOOD: Okay, but you say that we’re going to see higher food prices as the impact of what’s going on environmentally in just this next year or two or three. Why now?

BROWN: For the last eight years world grain production has been flat. It has not increased at all. But demand has continued to rise. So for the last four years, world grain production has fallen short of consumption. So these harvest shortfalls have been covered by drawing down world grain stocks which, at the end of this year, will be at the lowest level in 30 years. We’ve only been this low once before.

CURWOOD: When was that?

BROWN: 1972, ’74, when wheat and rice prices doubled. That’s when the Soviets secretly cornered the world wheat market in 1972, and then we had a poor harvest the next year and things got pretty hairy there for a while. So, we’re now looking at very low stocks. We’re looking at each of the last two years at a crop shortfall, a grain shortfall of 90 million tons. And the big question is whether next year the world’s farmers can dig their way out of this 90 million-ton hole and feed 70 million more people.

CURWOOD: You don’t think they can?

BROWN: It’s going to be difficult. It’s going to be difficult. It’s not impossible. If we had really good weather in all the major food producing regions they could probably do it. But that rarely ever happens.

CURWOOD: So how does China figure into this?

BROWN: China is a big part of the world and part of the shortfalls are coming in China. From 1950 to 1998, China increased its grain harvest from 90 million tons to 392 million tons. It was one of the great economic success stories of the last half-century. But then, in 1998, it peaked and it’s been declining since then, partly because of water shortages. China’s grain harvests have dropped from 392 million tons in 1998 to 326 million tons in 2003. So in five years it’s dropped by more than 60 million tons. That’s more than the Canadian grain harvest, just to put it in perspective. It’s also more than the exports of Canada, Australia, and Argentina combined.

CURWOOD: Okay, so what you’re saying is that China is growing less and less grain for itself…

BROWN: And its demand is going up each year.

CURWOOD: Okay. And you’re saying this is going to raise world food prices.

BROWN: China’s been covering this shortfall, this downturn over the last four years or so, by drawing down their stocks. They had huge stocks but those stocks are now largely drawn down. They may be able to draw down one more year, at most. And then they’re going to have to come to the world market to cover this shortfall. And when they do, they’ll be wanting to import more grain than any country’s ever imported in history. And when they come to the world market, they will necessarily come to the United States because we control almost half the world’s grain exports. And this is going to create a fascinating geopolitical situation because it’s almost inevitable that we’re going to see this. That is, 1.3 billion Chinese consumers with a hundred billion dollar trade surplus with the United States competing with us for our food and driving up food prices.

CURWOOD: Now, you just came back from China. What did you see that lends credence to your view that they’re going to have a serious food problem in this next year or two?

BROWN: Well, for example, traveling by train from Beijing to the capital of Inner Mongolia, Hohhot, and then from there to Lanzhou in the upper Yellow River Valley across the northern part of China – you see sand dunes, for example. You’ll be going through a plain that’s irrigated and green, and suddenly, out of nowhere, you’ll see sand dunes 10 feet tall. And these are dunes that are forming because of a loss of vegetation in the un-irrigated area away from the river floodplains, for example.

China has enormous numbers of cattle and sheep, goats. In this country we have 97 million head of cattle. China has 127 million head. We have 8 million sheep and goats in this country. China has 280 million sheep and goats, most of them in the northern and western part of the country. They’re literally de-vegetating the country, I mean, you can see it, you see them everywhere as you travel about the country. And you see the drifting sand and the sand dunes.

You see along the railroad tracks, for example – you know how we put up snow fences to trap drifting snow to keep it off of highways? They do things like that for sand because when sand covers the tracks trains can’t get through. If it’s snow, trains are heavy enough to handle snow. But they can’t handle sand; they’ll often derail. So, it’s a serious challenge for the transportation system. To keep it functioning you have to keep the sand off the tracks.

CURWOOD: So, I’m wondering if you feel that China’s headed for a crash. That is, it has expanded -- perhaps developed itself too quickly and in an unsustainable way -- and will face great troubles in the years ahead?

BROWN: In economic terms, I mean, they get an A+ in terms of economic growth, reducing poverty, eradicating most of the hunger in the country. And China today has a food cushion. It’s not that China is on the verge of starvation; it’s that China is growing and consuming more and more food and is going to begin to need a lot of that from the outside world. And it’s the effect of that on the outside world that is of major concern to me, and to the U.S. intelligence community, as well. Because China has the purchasing capacity – the 100 billion dollar trade surplus that China has with the United States now is enough to buy the entire U.S. grain harvest twice. I mean, that’s just the surplus they have with us. So it’s not a question of can they afford to compete with us for our grain. They can, and they will.

CURWOOD: Lester Brown is author of “Plan B: Rescuing a Planet Under Stress and a Civilization in Trouble.” Thanks for taking this time with me today.

BROWN: My pleasure, Steve. Thank you.

 

 

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