"It seems like China is willing to accept higher soybean prices in the short-term, but the long-term plan is clear: cheap arable land in Russia’s Far East could be China’s next source of soybeans, thus bypassing US farmers."
- America's loss, Russia's gain
China and Russia recently announced a new age of diplomacy between the two countries, at a time when President Trump is targeting both with precision-guided economic warfare.
China finds itself reeling under trade disputes with the US, as the next round of tariffs on $16 billion worth of Chinese goods is expected to start on August 23.
Earlier this week, Russia offered to bail out China from the trade war with Washington. Moscow offered 1 million hectares (2.5 million acres) of arable land available to Chinese farmers to meet its large-scale demand for soybeans — and of course, prevent a massive soybean shortage that would lead to political/social upheavals across the country.
Maybe, the US trade war on China should be interpreted as a piece in a much larger chessboard: A war on Eurasia integration,or the One Belt, One Road (OBOR) initiative.
Nevertheless, some analyst and experts are skeptical about the quality of the plots available. As reported by South China Morning Post, several Chinese investment firms have shown a keen interest in solidifying an agreement with Moscow.
Dubrovskiy said that all of the 3 million hectares of farmland in Russia’s Far Eastern Federal District is now available to farmers, adding that the region could become a hotspot for dairy farming or the growing of crops, such as soybeans, wheat, and potatoes.
Inadvertently, Trump’s trade war with China could be a game-changer for Moscow, as it expects foreign investment to flood the region.
The South China Morning Post notes that residents have already acquired premium farmlands, so Chinese farmers might have to settle for inferior and low productivity lands in remote areas.
Dmitri Rylko, general director of the Russian consultancy Institute for Agricultural Market Studies, explained a majority of the fertile land in the Far East region had already been acquired, though Chinese businesses have been rushing to sign leases and other temporary agreements.
“[The] best lands are occupied and have been heavily exploited by domestic farmers, so if they want more, it will be predominately in remote and low productivity areas,” he said.
After President Trump unleashed several rounds of tariffs on China, as a part of the retaliatory measures, China then imposed 25 percent tariffs on soybeans.
China has an enormous appetite for soybeans, as it has just accepted the tariff by allowing an American vessel to dock. The move marks the first shipment of US soybeans to be accepted with a 25 percent tariff stemming from the trade war.
It seems like China is willing to accept higher soybean prices in the short-term, but the long-term plan is clear: cheap arable land in Russia’s Far East could be China’s next source of soybeans, thus bypassing US farmers.
US Trade and agriculture experts have warned that President Trump’s tariffs on China could deliver a devastating blow to rural America.
The administration has already prepared a $12 billion farm bailout to cushion farmers. However, rural America faces the risk of losing lucrative export markets into Asia that have been established for decades. It seems as this reality is now starting to be realized:
“Beijing has already significantly reduced its soybean purchases from the US, and as a result bought a record 850,000 tonnes of them from Russia between July 2017 and the end of May, according to figures from the Russian agriculture agency Rosselkhoznadzor. But that represents only a fraction of the 800 million tonnes of soybeans China has imported so far this year, according to the latest figures from its customs agency. The agriculture ministry in Beijing said earlier that it had ramped up domestic soybean production “significantly” to deal with the threat of shortages, and would make a further 1 million hectares of land available for growing the crop over the next two year,” said the South China Morning Post.
Zhang Xin, a Russian expert at East China Normal University in Shanghai, said that a smooth transition of supply from the US to Russia is unlikely, as he said the deal still had obstacles to overcome.
“In the Far East, in particular, there has been political resistance, including from residents, to Chinese companies renting land for agricultural production,” he said.
“[Their] concerns regard the large influx of Chinese workers and a dissatisfaction with Chinese farming methods … like using too many pesticides and fertilizers.”
As the quality of Russian farmland remains questionable for Chinese farmers, China’s trade dispute with the US does not seem to be waning anytime soon.
That is why China has now made a move into Russia, as a long-term hedge away from the US. The shift is likely to be a devastating blow to rural America as decades-old export markets into China shun Western products.
Source: Zero Hedge