China Second String

RICHARD E. HICKS

OCEAN SPRINGS, MISSISSIPPI

I jokingly describe the struggle between the dominant players in the world rice trade. While I do not truly believe it is a concerted effort or an obvious battle, but it is significant, as the pile of rice will continue to grow as these nations knowingly increase production to capture a larger share of the worldwide rice trade. We have highlighted many efforts in the past where wealthier countries are funding many traditional markets especially in Africa. This effort is to aid in the increase in their domestic production. In my view, this is counter intuitive or even worse counterproductive. While it may sound trendy and compassionate amongst the Davos elites. This action is the equivalent of shooting yourself in the foot.

As these poorer countries produce more product domestically you will simply shrink the cold hard cash market even more as export and will crater. These efforts are nothing new or inventive as we have seen our Peace Corp send legions of do-gooders worldwide for nearly seventy years. These saviors of the world are not teaching aerospace engineering. They are helping the subsistence farmer in those countries increase production.

Last month we outlined the new top dog in the worldwide rice production Kentucky derby, good old India. As I stated then I wanted to cover the top five world rice producers. This edition will highlight the former and longtime champion China. As difficult as it was for me to believe India has taken over the top spot. I have thought about this for some time and it may not have been that big of a surprise. China and India have been rivals for some time in many areas. They, have on several occasions fought border wars over a strip of worthless rock where the biggest casualty is frostbite. While I feel China has had a certain edge for some time due to the fact they manufacture nearly all of our junk. India, I believe, has an edge that could in the long run give it even more of an advantage in the Ag production sector. India has more of a market-based economy. This is, always is going to be an important component in economic growth. This factor alone over time impede China as central planning is a far inferior economic plan.

China being toppled from the top spot actually was a surprise to me. I must add, however, I am not a big China watcher. They seem to like their ever increasing image as a super power unstoppable in nearly every economic sector. They already are the second largest corn producer, right behind the good old USA. So getting knocked out of first place most likely sent someone to the gulag.

China has been having a difficult time the past few years. I believe their effort to eliminate a certain percentage of the worldwide population by letting a snake bite, a bat thereby starting the covid virus. Probably was not as crafty an idea as they originally thought. China’s leadership in several sectors has been on the decline. Their dominance in the apparel sector has declined. Their EV vehicles are for the most part being sold at a loss. Consumer spending appears anemic hovering near Covid levels. I realize I have embarked on a rather circumlocutory rant about the problems China is having but all these factors contribute economically to the balance sheet.

Let us look at the major rice producing areas in China.

1)             South China, this area by definition has a more tropical type climate. This allows the region to enjoy the advantage of double cropping. This is an obvious advantage.

2)             Yangtze basin another very productive region containing both double and single crop areas.

3)             Terraced highlands, this area is generally depicted in unique photos showing the fields climbing up step steep hillsides. A region known to have been growing rice for over 2000 years.

4)             Several other regions in the north of China are acclimatized to a cooler season these areas produce nutrient rich varieties generally used in specialty products.

5)             As with most countries there are many smaller regions that produce product as well. These regions as a whole kept China in the top spot for years. As a matter of interest, China has been raising rice for an estimated 10,000+ years. It is thought to be the first domesticated crop in the world.

China has the biggest rice yields in Asia at 6.5 metric tons per hectare. the two most common varieties are Indica and Japonica. There are three species of wild rice in China. It is believed the AG ministry is working on hybrid varieties that will hypothetically help increase the pile of rice. Rice growing is still a labor-intensive endeavor. With many steps in the process done by hand. Mechanical means are also employed and I feel over time many regions that are suitable for this will increase the use of this method. That will take time.

On a positive note reports indicate rice yields are thought to be plateauing. The usual suspects are cited climate change, increasing use of fertilizers, pesticides, etc. A quick look at the past few years it appears to me they are peaking at or about 208 million metric tons. as a speculation I cannot see their production increasing substantially given the above factors they certainly have the technology to improve yields but will they be capable of implementing significant changes in their ag production system. I would say these radical changes would be difficult if not impossible in a centrally planned economic model. I feel the empirical evidence indicates the plateau may just be that a level that could remain the norm and not the exception A final if not comical fact is they are apparently attempting to grow rice at their space station. In conclusion/ China will always be a top contender in rice production. It is a staple to them and it will likely remain so forever. So luckily they really are their own best customer. As another indication of the domestic importance, they ranked sixth in exports behind the lowly US so it is very much a staple to them. As far as that rice in space thing, good luck with that.  ∆

RICHARD HICKS IS THE MANAGING DIRECTOR OF THE R.E. HICKS GROUP LLC AN NFA REGISTERED INDEPENDENT IB.

I can be reached at 618-301-2244, 618-363-0252 sat phone 1-254-219-7336.

Note: Past Performance Is Not Indicative Of Future Results.