Market Morsel: Is China hoarding the world’s food?
Market Morsel
China is a very different country from Australia. In China, one political party, the Communist Party, controls everything. The party, not the people, chooses the leaders, and strict limits exist on freedom of speech and other rights.
China will make more long-term strategic decisions than many Western countries, like Australia.
The Chinese government holds vast grain stores as strategic reserves. Sinograin, a state-held company, holds these reserves. The purpose of these reserves are:
- Food security: To ensure buffers for disruptions to supply, such as drought.
- Price stability: The high reserves can be released to avoid grain prices rising rapidly and causing unrest.
- Buffer to overseas markets: The stocks can buffer China from market fluctuations felt overseas.
The Chinese government introduced a number of policies in the late 2000s, which led to large stockpiles of strategic grains in China. These policies were, in part, introduced in response to the global food crisis that occurred from 2007 to 2008.
So how much are they storing?
The first chart below shows that China really ramped up their grain storage from 2010 onwards. This chart represents how much of the world’s grain supplies are held in China.
At present, China is hoarding the following:
- Corn – 68%
- Rice – 58%
- Wheat – 53%
- Cotton – 49%
These are significant volumes being held in China and represent commodities that will most likely never be seen in the global market. We do know that, as analysts, we need to consider these stocks separately when analysing supply and demand.
The second chart below provides further details on some additional commodities of which China has large stockpiles.
