After extremely low precipitation in recent months in China's Heilongjiang province, snow has begun to fall in the region, alleviating concerns about the risk of a prolonged drought in the country's northeast. The lack of rainfall had had little effect on the vast farmland in the province, particularly since most of the grain producers in the province will not begin seeding until later in the season. But the unusually persistent drought raised questions about the long-term drought situation in the region, threatening agricultural production in Heilongjiang, which is China's largest grain producer.
Heilongjiang plays a unique and increasingly central role in China's agriculture sector. While China's traditional grain-producing regions rely primarily on small, family-owned farm plots, Heilongjiang represents an experiment in centralized, modern industrial agriculture. Building an integrated national grain market with Heilongjiang at the center provides China with a buffer grain supply to help stabilize food prices. However, as China's population and consumption levels rise, that buffer is becoming increasingly integral to Beijing's efforts to meet basic food demand. Given the new importance of Heilongjiang's agricultural sector, China can be expected to work assiduously to protect the province.
Harnessing Heilongjiang's Agricultural Capacity
Heilongjiang was not traditionally an agricultural or population center. Located in the country's far northeast, the province is too cold most of the year to support heavy cultivation without intensive, modern irrigation methods and industrial farming machinery. It was only after 2006, when Beijing launched the Northeast Revitalization Plan as a sister policy to Jiang Zemin's "Go West" initiative, that Heilongjiang emerged as a key element in the national grain sector.
Between 2007 and 2010, the province's yearly grain output rose from 34.5 million metric tons to 55.7 million metric tons. Heilongjiang now provides 26.5 percent of China's spring wheat, more than 30 percent of its domestic soybeans and nearly 12 percent of its corn. Moreover, as of 2011, more than 90 percent of its grain was sold on the market, with most of it going either to other provinces or directly into the national grain reserve system. Officials from the Ministry of Agriculture estimate that Heilongjiang provides 25 percent of China's commercially sold grain, equivalent to the grain consumption of 240 million people. It is now the country's largest domestic producer of spring wheat and soy and the third-largest source of corn. Altogether, Heilongjiang accounts for 10 percent of all staple grain output in China.
Unique among China's major agricultural heartlands, Heilongjiang consumes very little of what it produces. Traditional breadbaskets such as southeastern China, the Sichuan Basin and the North China Plain are also the country's major population centers. Historically, this meant that food did not need to travel far to reach its ultimate destination. The lack of a need to link disparate producer and consumer regions gradually encouraged the development of highly decentralized and localized food systems. Even today, the agriculture sector in these traditional grain regions consists primarily of very small farm plots owned and operated by a single family.
Contrast this with Heilongjiang, which is China's sixth-largest province by landmass but only contains 2.9 percent of the country's population. Its large, state-owned farms represent a divergence from traditional agriculture methods, and its low population means that almost all its grain flows into national markets, not onto local farmers' plates.
Beijing's Heilongjiang initiative rests on two pillars, the first of which is the state-owned Heilongjiang Beidahuang Nongken Group, China's largest farming company. Founded in 1998, Beidahuang owns and operates what is called the Heilongjiang Reclamation Region, a 2.9 million-hectare stretch of land comprising 104 farms. The company also owns 30 holding companies and six joint-stock companies and has been a major driver behind Beijing's recent efforts to purchase farmland assets abroad, especially in Latin America. With 558 agricultural machinery cooperatives in operation throughout Heilongjiang, Beidahuang has turned the province into a highly centralized, modern and efficient supplement to the North China Plain.
However, industrialization of the province's agriculture would be of little use without the second element: an extensive road system linking Heilongjiang with China's national grain reserve and distribution centers. Starting in 2006, the central government announced it would invest 100 billion yuan ($12.5 billion) into constructing 2,000 kilometers (1,243 miles) of expressways and 3,000 kilometers of highways linking Heilongjiang to the rest of China along with 90,000 kilometers of provincial roads to strengthen connections between farmland and urban centers such as Heilongjiang's capital, Harbin. This emerging road network allows grain from Heilongjiang to quickly travel across the country, as shown in the aftermath of the 2008 Wenchuan Earthquake in Sichuan province, when 2.4 million metric tons of grain was shipped directly from Harbin to disaster areas.
Food Supply Buffer and Potential Destabilizer
China currently stores the equivalent of 40 percent of one year's grain output. (Total output in 2011 reached 571 million metric tons.) This is far above the global average of a 17-18 percent reserve rate. China's reserves include 100 million metric tons of wheat (roughly equal to annual production), sizable stores of rice and around 13 million metric tons of corn. In recent years, under state-owned company Sinograin, this reserve system has taken on responsibility for the grains' storage, transport and distribution.
Following a 2007 report from the National Development and Reform Commission titled "Modern Grain Logistics for 2006-2015," Sinograin aimed to expand beyond its role as "the national grain reserve" and become "the grain market's merchant." Currently it is working to establish six trans-provincial logistics systems linking northeast China with the North China Plain, the middle and lower sections of the Yangtze River and the Beijing-Tianjin urban conglomerate. At a time when water depletion and desertification pose ever more persistent threats to grain output in areas such as the North China Plain, Beijing sees surplus grain from Heilongjiang as a safety measure to help it maintain its benchmark of 95 percent food self-sufficiency and relative control over food prices.
As Beijing's response to the 2011 North China Plain drought illustrated, the grain reserve system can provide an effective emergency buffer to help control prices. Heilongjiang acts as a buffer supplier of staple crops in the event of disaster or shortage in other provinces, working as a stabilizing mechanism for grain prices (though taking advantage of that mechanism required establishing an integrated grain reserve system and distribution network). The government similarly probably could release stored grain in the case of an extended drought in Heilongjiang this year.
However, converting the province into this buffer also introduced a systemic risk to the grain market. Water depletion, desertification and other environmental problems compounded by growing population and explosive urbanization will make it increasingly difficult for China to meet basic grain demand, let alone maintain its grain stores. While Beijing can always purchase grain from international markets in case of a true emergency, this runs counter to its fundamental food security strategy to maintain 95 percent self-sufficiency.
This makes the possibility of drought in northeast China all the more unnerving for Beijing, especially if that drought leads to forest fires that damage substantial tracts of farmland. With inflation already on the rise, a sudden drop in output from Heilongjiang could send food prices up even further and increase China's dependence on the international food market. If drought in Heilongjiang persists and intensifies, its effects could be felt throughout the national grain logistics systems built by Sinograin.
Recognizing this possibility, Beijing has in recent years begun purchasing farmland throughout Latin America, Australia and East Africa. These farms, like Heilongjiang, would come under direct control of Chinese state-owned farming companies with very little of their output left to the foreign country itself. However, these land buys have begun to raise international alarms, meaning this may not prove a viable alternative to areas like Heilongjiang.
Population growth, rapid urbanization and environmental degradation will continue to challenge China's traditional grain centers' ability to meet demand, so Beijing increasingly will depend on Heilongjiang to make up the difference. As that dependence grows, and as Heilongjiang's linkages to the national grain market multiply, the consequences of drought there will become far more widespread. Whereas the worst effects of natural disaster in traditional grain-producing regions would be felt locally, drought in Heilongjiang would have consequences in the national grain market.
With China entering a period of prolonged economic slowdown and potentially chronic social unrest, and with pressure for political reform mounting as China's leadership transition nears, Beijing cannot easily afford another shock to its food sector. Given the close relationship between food security and political stability throughout Chinese history, the Communist Party will work to find ways to mitigate the effects of prolonged drought in its new nationalized heartland.