General

The No. 1 central document in 2023 focuses on agriculture again, and proposes to build a powerful agricultural country based on the national and agricultural conditions. As one of the important measures to stabilize the production and supply of grain and important agricultural products, leveraging the role of international trade in agricultural products and deepening the implementation of the diversified strategy of agricultural product imports has been included in the document, once again highlighting the necessity and effectiveness of international trade in meeting the huge and diverse needs of China's market. Despite the supply chain disruption caused by geopolitical conflicts in the global agricultural market in 2022, which seriously affected the stability of the international trade system for agricultural products, China's willingness to create value for all parties through cooperation has not changed. In the face of potential food crisis challenges, all parties around the world need to respond in a cooperative manner more than ever before.

On February 8th, the heads of the World Trade Organization (WTO), the Food and Agriculture Organization of the United Nations, the International Monetary Fund, the World Bank, and the United Nations World Food Programme issued a joint statement calling on all parties to urgently respond to the unprecedented food and nutrition security crisis. Data shows that at least 349 million people in 79 countries worldwide have experienced severe food insecurity or malnutrition, and the incidence rate is constantly increasing. After decades of efforts by all parties, the financial market contraction caused by supply chain interruption, climate change, COVID-19 epidemic and rising interest rates, combined with the Ukrainian crisis, has caused an unprecedented impact on the global food system. The World Food Programme predicts that global food supply will fall to a three-year low from 2022 to 2023. The Food and Agriculture Organization and the Food Programme define 24 countries as severely hungry, of which 16 are in Africa.

In fact, based on the ratio of grain prices to fertilizer prices, the estimated fertilizer affordability has reached its lowest level since the global food crisis of 2007-2008. That is to say, although grain prices have risen to historical highs, agricultural materials such as fertilizers have become more expensive, resulting in a decrease in the profits from grain cultivation. In response to the rising prices of food, fuel, and fertilizers, countries have spent over $710 billion to provide security for 1 billion people. However, due to differences in financial resources, low-income countries do not have sufficient capacity to pay, making the issue of international food supply inequality even more prominent.

To this end, global trade needs and should play a more important role. International organizations have put forward several suggestions for the global trading system, including avoiding export restrictions, supporting trade facilitation measures, supporting trade financing initiatives in a transparent and non discriminatory manner, and complying with the commitments made by all parties at the 12th Ministerial Conference of the World Trade Organization (MC12). In fact, according to WTO monitoring, despite the widespread lifting of export bans on wheat and rice in cases of food supply shortages, new export restrictions and bans (such as vegetable export bans) have increased. From a global perspective, the importance of food trade is reflected in the possibility that all parties can use it to ensure basic food needs in situations where their own resources and climate are relatively limited, or when they are affected by natural disasters. Of course, during the COVID-19 epidemic, some countries also withheld transit epidemic prevention materials to meet their own needs. The international trade of food, a commodity with significant security significance, is naturally not that simple.

For China, firmly stabilizing its job not only means meeting people's basic food needs, but also has important significance in social development, job creation, and industrial cooperation. With the continuous development of technology, agricultural issues have become increasingly closely related to science and technology. With the support of technology, some multinational grain merchants can expand their markets at low costs, completely changing the original agricultural production mode. Climate change has exacerbated the impact on global agriculture and made unconventional inventories more common. As the world's largest grain producing country, China's food security is not only a necessary condition for its own development and survival, but also has a huge impact on the global food supply and demand relationship. In order to achieve stable development and reduce the impact of spillovers, China not only needs to continuously demand production from land, but also needs to actively consider the impact of possible external environmental changes on food supply, and achieve a reasonable match between food demand and supply in time and space.

In recent years, the total amount of grain imported by China has continued to expand. Taking rice as an example, customs data shows that in 2022, China imported a total of 16 countries or regions, with a total import value of 2.62 billion US dollars. Among them, India (780 million US dollars), Pakistan (460 million US dollars), Vietnam (440 million US dollars), Thailand (420 million US dollars), Myanmar (310 million US dollars), and Cambodia (180 million US dollars) have significant imports. The complementary nature of relative proximity and agricultural product structure has formed a grain trade relationship. Looking back at the past few years, it can be found that between 2019 and 2021, China imported rice worth 1.25 billion US dollars, 1.46 billion US dollars, and 2.19 billion US dollars, respectively. The rice import volume in 2022 has reached 2.1 times of that before the COVID-19 (2019). After the epidemic, India temporarily suspended the export of rice and other agricultural products, which not only had an impact on neighboring countries in South and Southeast Asia, but also could affect the market situation of Chinese rice imports. Therefore, the diversification of agricultural product imports has direct practical significance.

It should be noted that although agricultural production benefits from greater market demand created by international trade, it is also negatively affected by global market risks, requiring more responsible and effective cooperation from all parties in the supply chain. Although different crops have relatively suitable environmental requirements, whether they can be grown and sold has a huge impact on agricultural production. In 2022, China's rice imports mainly came from Asia, but Japan's rice also found a market in China, and Italy, France, Germany, and the United States also exported rice to China. If we can enhance the connection between supply and demand information and use mutual recognition to promote the development of international trade in agricultural materials such as fertilizers, the risks of agricultural product production may be better controlled.

As the international institutions mentioned above are concerned, the impact of finance on agricultural trade is becoming increasingly undeniable, gradually expanding from financial aspects such as agricultural futures to practical aspects. As an industry that requires sustained investment for a long period of time to obtain returns, agricultural production is more dependent on the external environment, and most agricultural practitioners have weaker risk bearing capacity. During the upward period of interest rates, agricultural practitioners face greater pressure to repay their principal and interest, and the debt burden is likely to force them to terminate the agricultural production cycle in advance, which may have a more serious impact.