China entering global agriculture market

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[World News] In a press meeting following the National People’s Congress, Premier Li Keqiang said that agricultural product prices in China, and especially grain prices, were much higher than in the rest of the world. Therefore, in order to render China more agriculturally competitive, it was necessary to upscale production.

“The average price for corn, wheat and rice is [per ton] 600 yen (about R80,00) more than the international price, mainly because our labour productivity is still quite low. To address this issue we will introduce a new type of urbanisation and agricultural modernisation,” Keqiang said.

The strategy included increasing the income of more rural people by migrating them into urban areas, and, to enhance agricultural labour productivity and profitability, the development of scaled farming.

According to Ernst Janovsky, head of Absa AgriBusiness, China’s decision to implement economies of scale in the agriculture sector, might, temporarily, negatively affect some South African farming industries.

Twenty years ago, China implemented economies of scale in apple production, and flooded the market, which resulted in the bankruptcy of many South African apple farmers. Since then, however, China started juicing and adding value to apples, and so hardly impacts the international market today.

Janovsky added that this type of social engineering would take a long time to succeed.

“China would have to create incentives for farmers to move from their farms to the cities, which won’t happen overnight. [Additionally], China has, over the years, become a net importer of food, so most of the food [it] produces will most probably be used to reduce [its] dependence on imported food,” Janovsky said.

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