CHINA: China’s Growth, Measured in Feed

A worker loading a bag of cement onto a truck at a plant in Xian, China. Nelson Ching/Bloomberg News

January 28, 2010

By ROBERT CYRAN and ANTONY CURRIE

Reuters

China needs fertilizer more than steel. If its industrialization follows the course of other nations, per capita demand for infrastructure like concrete and steel will peak long before meat consumption does.

This may explain why mergers and acquisitions activity in the agriculture sector has become so hot. For example, Vale, based in Brazil, just agreed to buy Bunge’s Brazilian fertilizer assets for $3.8 billion.

In the typical path of development, demand shoots up for everything, but industrial goods in particular benefit. Highways, power plants and ports are built, and require construction materials. As a result, companies build steel and cement plants to meet demand, and assembling these factories calls for a lot of their own product. China’s per capita production of cement and steel is already at levels higher than those of most industrialized countries.

Yet the revolution of the stomach moves at a slower pace. While steel production per capita in the United States peaked in the 1950s, demand for meat has grown consistently. Americans now eat 276 pounds of meat a year, an increase of 60 percent since the 1950s. Other developed countries show similar patterns.

China is eating more protein, but has far to go to catch up with the developed world. Per capita consumption of meat is less than 100 pounds, and this figure may be inflated. Raising more animals will require copious feed; one full steer requires around 3,000 pounds of feed. Growing this grain will increase demand for fertilizer substantially. China is already the biggest consumer of potash (a quarter of all global production) and the top producer of phosphate — and it imposed restrictive tariffs on exports in 2008.

While these trends appear abstract, they affect corporate behavior. The economic crisis sent commodity prices into a tailspin. While steel insiders cautiously slammed the brakes on merger activity, fertilizer companies went hog wild. Among the deals, brawls broke out among the fertilizer groups CF Industries, Terra Industries and Agrium.

While industry valuations are in line with the market — CF Industries trades at 14 times estimated earnings, for example — they deserve a premium. Phosphate and potash markets, in particular, have high barriers to entry, so it makes sense to buy rivals rather than build new facilities. As long as China’s taste for meat increases, fertilizer companies should continue to eat one another up.

For more independent financial commentary and analysis, visit www.breakingviews.com.

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Water shortages hit south China

Water shortages hit south China

Source: Xinhua
2009-10-19

SEVERE drought over the past months has stunted rice crops, threatened reservoirs and left hundreds of thousands of people short of drinking water in southern Chinese provinces.

In the southern Guangdong Province, where rain in the first 10 months fell by 14 percent compared with averages in past years, more than 55,000 hectares of cropland are affected and 50,000 people are facing difficulties in getting drinking water because of the drought.

Water level in Guangdong's dams continued to drop. According to Guangdong Provincial Flooding and Drought Relief Headquarters, water levels in Guangdong's 32 key reservoirs have reported a year-on-year decrease of 2.34 billion cubic meters.

The drought is continuing to take a toll on agricultural production in the province.

"I've never seen such a severe drought in my life," said a 73-year-old farmer in Zhoutian Township, Shaoguan City. "A great deal of crops have been damaged."

There have also been concerns of further crop damage as drought harms plants' ability to weather the winter.

In Nan'ao Island of Shantou City, home to more than 70,000 people, drought has left residents struggling to bathe and do the laundry.

More than 70,000 people in Zhangzhou City in the southeastern Fujian Province are also short of drinking water.

Hydraulic experts attribute the water shortage to the lingering drought as well as a shortage of reservoirs, where construction has lagged behind China's industrialization and urbanization.

In the central Hunan Province, low water levels in Dongting Lake, China's second largest fresh water lake, have forced local fishermen out of work.

"October used to be a 'golden season' for fishing in the lake," said fisherman Gong Jianmin. "But now we can't go out to fish since the low water period has come early this year because of the drought."

In eastern Jiangxi Province, most cities have recorded a 66 percent drop in rainfall.

Underground rice paddies in Otemachi

http://search.japantimes.co.jp/cgi-bin/ek20091015wh.html

Thursday, Oct. 15, 2009

SO, WHAT THE HECK IS THAT?
Underground rice paddies in Otemachi

By ALICE GORDENKER

Dear Alice,

Please settle a bet. I met this guy in a bar who swore up and down that there are secret subterranean rice paddies all over Tokyo, part of a hush-hush government program to feed the national body in the event of nuclear war. In fact, he insisted a paddy was planted deep underground wherever it was we were drinking that night. Otemachi, I think. Can you check out what the heck he was talking about? I've got ¥5,000 riding on this.

Jake D., Tokyo

Dear Jake,

Please allow me to share a bit of wisdom I learned long ago, the hard way: Never believe everything you hear, especially from men in bars. So to be honest, I was just a wee bit tempted to give your letter a pass. But having done this column for almost five years, I've come to trust my readers' instincts for a good story. At worst, I'd waste a few hours. At best, we'd win a Pulitzer.

Like a lot of outlandish stories, there was a whole load of chaff in your friend's tale. But there was also a grain of truth. There is, or rather was, rice growing deep beneath Tokyo's financial district. But it wasn't a secret government project and it would never have fed the national body.

Until April, there was a small plot of rice sequestered away in a former bank vault in the second-floor basement of the Otemachi Nomura Building, a decidedly upscale downtown office building. Calling the planting a paddy would be a stretch, since the whole space, including walkways, was only about 50 sq. meters. And the plants were being cultivated in commercial growing medium rather than proper mud.

Yield wasn't anything to write home about either. In its very best 12-month period, even with three plantings compared to the usual single harvest, the subterranean space produced just 60 kg of rice, which is not quite enough to fill the rice bowl of one average Japanese consumer for a year. The cost, meanwhile, including rent and artificial lighting, was astronomical compared to conventional outdoor paddies. So, what the heck was the point?

Jobs! And not just any jobs, but jobs in agriculture, according to Pasona Group, the organization behind the plot. Pasona, a staffing services company, set up the tiny indoor farm in 2005 to bring agriculture closer to city people and draw attention to their new employment programs in the agricultural sector. Called Pasona O2 (pronounced "oh-tsoo"), the underground installation featured hydroponic plantings of fruits, vegetables and flowers, too.

But the rice got the most attention, according to Pasona spokesman Satoshi Fujimaki, because it was such a surprising idea. "There had been indoor rice plantings before for research purposes, but this was the first time rice had been grown without natural lighting in a setting that was open to the public."

The farm-in-an-office building was so successful in attracting visitors, and the press, that the company is now constructing a larger version in a building somewhere near Tokyo Station. I pressed for a location, but that, it seems, is a secret.

"There are some real challenges facing Japanese agriculture," Fujimaki told me in a recent interview. "A growing percentage of farmland lies fallow because there is no one to work it. Sixty percent of Japanese farmers are over the age of 65, and rural areas are desperate to attract young people willing to farm.

"Meanwhile," he continued, "there are a growing number of skilled urban workers who see business opportunities in agriculture." A perfect fit, I conjectured. "Not so," he countered: "There are significant barriers to entering agriculture. It's really difficult to acquire farmland in Japan, and few people who would like to start farming have the savings to tide them over until they have a harvest to sell."

But Pasona has made a business out of bridging that kind of disconnect between labor supply and demand. "Our company got its start in 1976 by linking mothers who wanted to re-enter the workforce, on a part-time basis, with companies who needed workers but were hesitant to hire full-time, salaried employees during the economic uncertainties of the oil crisis," Fujimaki explained. "This was a new kind of employment at the time. Now we are doing the same sort of thing with agriculture, creating an infrastructure that will make it easier for skilled workers to switch into jobs in agriculture."

Programs now in place include internships, educational seminars and even a model farm on Awajishima in Hyogo Prefecture, where six new farmers draw a salary as they learn the business.

Getting back to what your bar-fly friend was saying, I found out that the Japanese government does, in fact, have a plan to protect the food supply from international uncertainties. But it's hardly a secret — I found it on YouTube, of all places. The Ministry of Agriculture Forestry and Fisheries (MAFF) is so concerned about Japan's dependence on imported food that it commissioned a four-minute animated video titled "Ensuring the Future of Food" and put it up, with English subtitles, on YouTube. With more than 110,000 hits when I watched it just now, it's been a surprising success, at least by the standards of the ministry's "maffchannel," which otherwise consists mostly of press conference footage.

The video states that Japan's shokuryo jikyuritsu (rate of self-sufficiency in food production) has fallen to 40 percent, the lowest of any major developed country. To reverse that decline, it suggests, serious problems in Japanese agriculture must be addressed, including the aging of the farming population.

So growing rice in subterranean vaults could, in fact, help boost Japan's self-sufficiency in food production and feed the national body. Who won the bet? It's a tough call.

Watch this space for an announcement on the reopening of Pasona's O2 Room, probably early next year. Puzzled by something you've seen? Send a description, or better yet a photo, to whattheheckjt@yahoo.co.jp or A&E Dept., The Japan Times, 5-4, Shibaura 4-chome, Minato-ku, Tokyo 108-8071.