Typhoon floods China’s northeastern crops in latest blow to global grain supplies

08 Aug 2023 --- Recent events are testing the resilience of international cereal markets that help feed an increasingly food insecure planet. While heavy rains are common amid typhoon season in China, some places like the city of Shangzhi are being battered by unusually intense rains leading to more doubt over vital grains.

The affected provinces of Jilin and Heilongjiang are part of the breadbasket Northeastern region of China, which produces over 40% of the country’s corn, according to the country’s Ministry of Agriculture and Rural Affairs. The affected area is also China’s top producer of soybeans and rice.

It is unclear at this point how much rice has been lost and the Chinese Ministry of Agriculture and Rural Affairs says there is “great uncertainty” on the short-term impact. Nevertheless, the lost rice can’t be replaced with rice coming from India, as the country implemented a non-Basmati white rice export ban in July.

In May, China’s top wheat-producing region was devastated by heavy rains. 

Nonetheless, according to a July US Department of Agriculture report, “total wheat production in China will be comparable in quantity to the previous year due to higher area planted and harvest completion in June.”

Grain silos destroyed
Putting more pressure on grain supplies, some grain has been lost to explosions in the last few weeks. 

Meanwhile, an explosion in Turkey yesterday (Aug 7) near grain silos injured ten people, according to the Turkish Grain Board. The explosion occurred due to wheat dust compression during the transfer of wheat from a ship to the silo.

India implemented a non-Basmati white rice export ban in July.Similarly, over 100,000 metric tons of grain have been destroyed in the last weeks due to explosions near silos in the Russia-Ukraine war. Moreover, the ending of the Black Sea Grain Initiative generated international condemnation and unanimous calls from everyone but Russia for its reinstatement.

In Poland, farmers continue to complain about the effects of cheap Ukraine grain driving them out of business, which might lead to an extension of the currently in place ban on Ukraine grain. 

Cereal prices mostly resist pressures
The UN FAO has revealed that cereal prices decreased in July (0.5%) as grains resisted inflationary pressures.

Grain prices are 14.5% lower than a year ago and the decline stems, according to FAO, from a fall in international coarse grain prices (down 4.8%).

“International maize prices continued their downward trend due to increased seasonal supplies from ongoing harvests in Argentina and Brazil and potentially higher-than-initially-anticipated production in the US, where conditions slightly improved and the planted area was revised upwards,” says FAO.

However, wheat prices ticked up, for the first time in nine months, by 1.6% after the end of the Black Sea Grain Initiative.

“Continued dry conditions in Canada and the US also added pressure on prices,” added the FAO.

Moreover, rice prices increased to their highest level since September 2011, “driven mostly by price increases in the Indica market segment,” due to India’s export ban and “seasonally tighter supplies and Asian purchases.”

Poland-Ukraine tensions rise
The European Commission (EC) reassured in July that it can expand alternative road routes for Ukraine’s grain exports and absorb the blow of the collapse of the Black Sea Grain Initiative sea routes.

The EC temporarily restricted importing four types of crops from Ukraine, arriving in Bulgaria, Hungary, Poland and Romania, which will expire on September 15. Grain prices are 14.5% lower than a year ago, according to FAO.

The measure aims to prevent the influx of cheap foodstuffs from Ukraine, which has been using trains to transport its products to the EU market. The EC said the restriction was necessary to ease the logistical problems caused by the train shipments and safeguard some EU farmers’ interests.

These countries have complained that the Ukrainian food imports have made their domestic production uncompetitive. In April, Hungary, Poland and Slovakia banned, unilaterally, Ukrainian grain imports without the EC’s approval. 

Polish farmers are asking to extend the ban after September 15. This comes amid rising diplomatic tensions between Poland and Ukraine. The office of Polish President, Andrzej Duda, highlighted the importance they put in “defending the interests of the Polish farmer.” 

Meanwhile, Denys Shmyhal, Prime Minister of Ukraine, highlighted: “Poland intends to continue blocking the export of UA grain to the EU. This is an unfriendly and populist move that will severely impact global food security and Ukraine’s economy. We urge our partners and the EC to ensure unimpeded export of all Ukrainian agriculture products to the EU.” 

“This is an act of solidarity not only with Ukraine but with the world, which relies on our grain,” adds Shmyhal.

Mateusz Morwiecki, Prime Minister of Poland underscored that Poland “will not open this border. If the EC does not extend the ban, we will do it ourselves.”

Polish farmers argue that they can’t compete with wheat farmed without following any of the costly standards of the EU.

By Marc Cervera