The Coming Global War on Chinese Farmers

Table #113, The Hard Rock Cafe, Tokyo
Nachos on earth, Grilled Salmon to all good men
Embarrassingly light-headed after two Kirin Ichibans
1334 hrs local

Eastern European fruit farmers are the most recently aggrieved parties in China’s rise. Seems Polish farmers have filed a complaint with the EU claiming they are being undercut in the European market for strawberries and other cash crops by Chinese food producers who are getting tax subsidies and benefit from cheap land and labor.

Regardless of the merits of this particular case (which the Wall Street Journal article implies is not supported by the commercial realities), this is simply na early skirmish in a global war on China’s rise as an agricultural exporter – not of rice even cotton, but of cash crops. Many farmers in Eastern Europe and other developing regions retreated to cash crops when they were chased out of commodities by more efficient competition from places like the Ukraine, Argentina, Australia, Canada, and the US. Now China has realized that the landholding structure in China – and the surfeit of farmhands – makes the production and export of cash crops ranging from roses to berries to broccoli the perfect strategy.

High Tech + High Touch = Hasta La Vista Polish Berry Farmers?

China already has more folks on the farm than any of these other countries, and a government determined to keep as many people in the agricultural sector as possible. More people at less cost to take care of crops for whom tender loving care adds value seems to be the best use of this vast labor resource.

Now, let’s add to this mix growing investments by food producers in innovations like climate-controlled hothouses, drip irrigation, and other technical innovations coming from the U.S. and Israel, and China becomes the only agricultural products exporter that can combine the power of BOTH high tech and high touch in agriculture.

At that point, China stops cranking out strawberries that are simply cheaper, it also cranks out better fresh strawberries, regardless of season, that can be grown organically.

Don’t think that’s a big deal? Ask the guys at Unilever, Group Danone, and other major European food processors desperate to find suppliers to help them service the exploding organic food market. Don’t think for a minute they aren’t watching this with extreme interest.

In other words, adding a little tech to cash crop agriculture will turn China from a low-cost producer of cash crops to a high-value producer of said exports in the matter of a very few years.

This does not necessarily mean the end of Polish berry farmers – or of farmers who compete against the Chinese. What it does mean is that, like their comrades in industry, they’re going to have to rethink how they do business, what they grow, and how they market it.

It’s Not Just the Berries, Guys

The EU, for it’s part, is still dangerously in denial about what the future holds. Per John Miller’s excellent Journal article:

“The Eu thinks it has much to gain by striking the right trade balance. ‘Agriculture will be an area of tremendous growth’ says EU trade commissioner Peter Mandelson. China can sell bulk products in the EU, serving EU consumers money, he says, while the EU can cash in on China’s growing middle classes by selling niche products such as wine and cheese.”

I hate to burst Commissioner Mandelson’s bubble, especially since his messages appear so expertly crafted to mollify agitated EU members without pissing off European food companies who increasingly depend on China. Unfortunately, his view of the world is unrealistic, and he is doing his producers of bordeaux, champagne, brie, and Parma ham a serious injustice.

There are Chinese producers in all of these sectors who are making incredibly rapid advances in production quality and marketing prowess. A small number of Chinese wineries have reached quality levels not too different than where Australia was two decades ago, and there are producers of gourmet cheese and other foods that are at least keeping up with the increasingly sophisticated Chinese palates, if not surpassing them.

If Mr. Mandelson really cares about the producers of these products in Europe, he’ll be telling them right bloody now that they need to haul themselves to China to begin building a taste not just for their products, but for their brands as well, and finding ways to beat the Chinese producers to the punch. After all, if the Chinese can produce high quality wines in the hills of Shaanxi and Gansu, one would think there are a few divisions of LVMH who could start doing the same thing under their own labels.

This won’t happen if the Nabobs of Brussels continue to purvey their palliative phrases designed to calm concerned cultivators.

European agriculture has a future if it rises to the Chinese challenge in their boardrooms and fields, not in the courts and legislative floors of the EU.

Oh, and by the way – to my friends in the U.S. and Australia – this applies to you guys, too.

And to all a good night.