China wants food first, not fuel

Disturbingly, this is the second time in seven months that the Chinese leadership has had to resort to the country’s strategic reserves to stave off politically dangerous increases in food prices. In December, Beijing ordered the auctioning of some of the state wheat reserves to halt the rise in crops prices and prevent panic among the public.

Current hikes in both grain and pork prices are blamed on the same culprit – the ethanol industry, whose explosive growth has been gobbling up a growing share of China’s corn (maize) harvest traditionally preserved for food and animal feed.
Having promoted the production of the environmentally friendly gasoline additive for years, Chinese economic planners now fear the sector has grown too much and too quickly, presenting them with an uncomfortable dilemma of choosing between the country’s green agenda and its national food security.

Leadership fears were clearly manifested late last month when Premier Wen Jiabao visited a meat market in Xian, central China, to check the prices of pork. He called on local officials to pay pig breeders to increase production and tried to reassure the public that the situation was under control. As of mid-May, prices of pork were up by 43% compared with the same period last year, said the Agriculture Ministry.

Soaring pork prices have been partly blamed on outbreaks of contagious pig disease, which swept 22 Chinese provinces, killing 18,000 pigs in the first five months of the year and disrupting the pig industry. About a million pigs died from the disease last year.

Yet the root of the problem, according to officials, is not the disease. “The main reason is the big price increases of animal feed that began last June,” Jia Youling, director of the Veterinary Bureau affiliated with the ministry, said at a press briefing this week.

Pig feed, which is made mostly of corn, simply followed increases in corn prices. Prices of the commodity have risen by up to 30% since the latter half of last year, according to the ministry.

What is more, producers have ignored a government limit on converting about 3 million tonnes of corn into ethanol a year and used up to 16 million tonnes of the crop in 2006, the ministry said in April.

China has been encouraging the production of biofuel such as ethanol and bio-diesel from renewable resources to satisfy the country’s voracious appetite for energy and reduce its growing dependence on imported petroleum.

Asia Times