With China's grain and soybean imports on a record pace and agricultural prices at a high level, communist propagandists are blaming multinational companies for price-gouging. When Chinese officials blame someone else for a problem, they are usually trying to divert attention from their own mistakes. Wonder what they're hiding?
On August 11, the Party's Economic Daily asked, "International grain prices are persistently high; are domestic grain prices stable?" This article cited the covid-19 pandemic, flooding, drought, supply chain disruptions, and soaring shipping costs for driving world food prices to a high level. This article called for China to increase its control of food supply chains, diversify its sources of imports, create major Chinese international grain merchants, and increase China's voice and price-setting power in global markets (all mentioned briefly in the 2021 "Number 1 Document."
A week later, Economic Daily's "Corn market 'reducing false fire' has achieved results" praised Chinese authorities for pricking a corn price bubble that resulted after the transfer of corn reserves into private hands (via 2020's auctions) led to hoarding and speculation. Yet the author also credits injection of (wheat?) reserves and imports for deflating the bubble. The author blames "international capital" for "hyping" covid-19 and weather to drive up prices and make money. And no, the author insists, flooding in Henan last month absolutely will not result in a grain shortage, nor drive up prices, really it won't. The implied purpose of the article is to head off such rumors.
The same day, "Ensure stability and security of moderate grain imports" by a rural development research institute at Wuhan University was published by the Party's Academy of Social Sciences. This article insisted China is food-secure but pointed out growing imports of soybeans and corn, and warned of risks from reliance on supplies from Brazil and the United States and potential "choke points" in the Malacca Straits, Panama and Suez Canals. The authors warn of permanently increasing corn and soybean prices due to shrinking stocks-use ratios, spread of covid-19, speculation by investors, a global flood of liquidity, and inflationary expectations. This means that China's imports are expensive, the authors warn.
The Wuhan authors advocate a "systems engineering" approach to building a global food-supply layout. This includes actively nurturing large multinational grain trading companies to expand foreign supply networks and exert more control over grain prices in foreign markets. The authors call for "flexible use" of tariffs, quotas, and technical measures to insulate China from risks in the international market. The authors call for China to gain a "voice" in public international food governance by increasing aid and technical assistance and playing a more active role in international organizations like the UN's FAO, UN Development Program, World Food Program, and creating new international food cooperation platforms.
A more confrontational August 26 article, "We need more big grain traders with price-setting power," by Economic Daily insisted that price-setting power is vital to China's food security. The author claimed that China has no voice or price-setting power, complaining that soybean prices are not determined by Chinese demand despite buying 60 percent of all soybean imports.
The Economic Daily author insists that the soybean price is "whatever the multinational grain traders say it is." Four big multinationals are able to set the price because they "monopolize" 80 percent of global grain trade, Economic Daily asserted. The main strategy is to nurture "more international big grain traders like COFCO." The author celebrates COFCO's position in the Fortune 500, which is determined entirely by size. "Other" firms mentioned are Beidahuang, a company affiliated with State farms in Heilongjiang Province, and Capital Agribusiness, a merger of companies that supplied Beijing with poultry and milk during the planned economy era.
China's solution is to divert vast sums of capital from the State-owned banks to create its own grain-trading behemoths.
Officials included the "create big multinational grain traders" plan in their "Number 1 documents" every year 2014-2019 (and added a passing mention to the 2021 document). Economic Daily reveals that the plan to create grain trading companies is also written into the 14th five-year plan. A recent document on financing rural poverty alleviation and rural revitalization issued by China's central bank and its bank regulator calls for pumping funds into Chinese companies to become big (fat?) multinational grain traders and take their place alongside the so-called ABCD grain traders.
This has been tried before. A 2008 China food security plan formulated during an earlier grain price spike authorized Beidahuang and Chongqing Grain Group to acquire huge tracts of land and build warehouses and wharfs in Brazil and Argentina to save money on imported soybeans, but both plans quickly crashed and burned. A decade ago, COFCO and other state-owned companies were handed money to build soybean crushing plants in China to dilute the share of multinationals in that industry, but complaints go on.