KANSAS CITY, MISSOURI, US – For all the saber rattling between the United States and China in recent years, the two superpowers desperately need each other when it comes to grain and other agricultural products.
Despite its boldly stated goal of becoming self-sufficient in grain, China will never be able to feed its 1.4 billion people (20% of the global population) with only 7% to 9% of the world’s arable land, a percentage that continues to shrink due to urbanization. It will continue to depend on grains and oilseeds imports from the United States and other countries as well as expanding its overseas investments in farmland and other agricultural assets.
The United States is in a much better position from a grain self-sufficiency standpoint, but its ag economy is highly dependent on exports to China, particularly soybeans. A USDA study found that during the US-China trade war (mid-2018 through 2019), Chinese tariffs reduced US ag exports by $25.7 billion, with soybean exports accounting for 71% of the decline.
The complex, intertwined nature of politics and agriculture involving China and the United States is perhaps best exemplified in the controversial 2021 purchase of North Dakota farmland by Fufeng Group of Shandong, China, for the building of a new wet corn mill. The proposed deal, which would infuse millions of dollars into the Grand Forks, North Dakota, economy, has met with resistance from some state and national politicians who say the project is a major security concern given its proximity (12 miles) to a US Air Force base. As a result, some US lawmakers are calling for policies that range from increased scrutiny of agriculture deals to outright bans of purchases by some countries.
With the project in limbo pending a review by the Committee of Foreign Investment in the United States, the debate about whether to allow its bitter adversary to buy US cropland, build grain and food processing facilities and purchase controlling interests in US agribusiness companies has increased in intensity. While talk of outright bans of land purchases (China accounts for only 1% of foreign purchases of US farmland) or asset investment are alarmist and an overreaction, any country would have legitimate concerns about allowing a foreign entity, particularly one as adversarial to US interests as China, to build a mill essentially in the backyard of a military installation. If China is determined to build a plant in the United States, it should be able to find land in a less sensitive location.
Since the turn of the century, China has made foreign agricultural investment a top priority, having made major acquisitions in Africa, Asia, Australia, South America and the United States. Signs point to more investment as Chinese leaders encourage it as a core component of the One Belt, One Road initiative that seeks to build connectivity across six main economic corridors. Going forward, the United States will have to weigh the financial benefits of Chinese agricultural investment against its own national security interests. China, meanwhile, must carefully guard against taking actions that could lead to a grain embargo by the United States, putting its food security at risk. As different as the countries are culturally and politically, they will remain bound together to a certain extent by grain and other agricultural products.
Arvin Donley is editor of World Grain.