[SCMP Column] Vulnerable Choke Points

July 22, 2017

In 2000, China imported 10m tonnes of soya beans. Today imports have risen to 80m tonnes – about 40 per cent of the world’s soya trade – and by 2025 it is expected to be 106m. In the process, soya has overtaken maize, wheat and rice as the world’s most traded food commodity. From the farm cooperatives of Iowa and North Dakota, to the smallholders in Sorriso in Brazil, wealth has been built on China’s burgeoning appetite for the nondescript green bean.

But the very success the world’s food exporters in meeting the need being created by a rising middle class of Chinese meat eaters is creating a wholly new challenge: rising worldwide reliance on food trade has created deep dependence on the road, rail and sea routes used to get farm products like soya to places like China.

As the share of the world’s population with insufficient food supply has fallen from 52 per cent in 1965 to 3 per cent in 2005, most gains have come not through improved food production at home and self-sufficiency, but through increased trade; nearly 1 billion people worldwide now rely on international trade to meet their food needs.

This has created crucial “chokepoints” across the world – a total of 14 in all – where if anything goes wrong, millions will go hungry, and even starve.

In a fascinating new study from Chatham House in London* which perhaps for the first time examines in detail the vulnerabilities of the world’s food supply chains, the most alarming message is not that these 14 chokepoints exist, but that the danger of something going wrong is extremely high – and rising by the year. They are “likely vectors and potential epicentres of systemic disruption”, the report claims.

Mercifully, the world’s two most crucial chokepoints are not an immediate source of stress – the Panama Canal and the Malacca Straits. But the sheer fact of our extreme reliance on this narrow channels to move so much of the world’s food means each is coming close to capacity – the Malacca Straits alone carried 108m tonnes last year. This in part explains Chinese efforts to build a second channel linking the Atlantic and the Pacific through Nicaragua, and its funding of the Kra Canal linking the South China Sea with the Indian Ocean across Thailand.

But the next most crucial group of maritime chokepoints are a source of much more heartburn – all linked with political turbulence across the Islamic world. Three chokepoints concentrate on linking the Indian Ocean to the Mediterranean – the Suez Canal, Bab-al Mandab, and the Straits of Hormuz – and one links the bread basket economies around the Black Sea to the Mediterranean through the Turkish Straits.

Beyond the maritime chokepoints, the Chatham House team is just as concerned about inland and coastal chokepoints – the most important of which sit in the southern US, the “cerrado” region in the south of Brazil and around the Black Sea. Apparently, these three account for 53 per cent of global exports of wheat, rice, maize and soybeans.

Inland waterways converging on the Mississippi carry about 60 per cent of US exports of the four crops (which account for 13 per cent of worldwide exports) to the sea, primarily to the Gulf Coast ports like Baton Rouge and New Orleans: “US inland waterways are old, congested, vulnerable to drought and flood, and likely to start failing in the near future,” the study says. If Donald Trump truly intends to make America great again, he perhaps might start here.

In Brazil, four ports on the southeastern coastline are responsible for nearly a quarter of global soybean exports. These ports in turn depend on a dilapidated road network that links them to the huge farms in the country’s interior. Why am I not surprised to learn that China is the majority investor in a US$20bn bilateral infrastructure fund with the Brazilian government, focused on improving roads?

Around 60 per cent of Russian and Ukrainian wheat exports (12 percent of the global total, and growing fast) depend on rail to reach the Black Sea, then go onward through the Turkish Straits past Istanbul and into the Mediterranean. Not only did I not previously realize the huge importance of this region for global wheat production; I did not know that the countries of North Africa and the Middle East are “the most food import-dependent region in the world”, and reliant entirely on supplies delivered through the Turkish Straits. This chokepoint might not worry us in Asia very much, but to many of the world’s most food insecure its smooth operation is crucial.

The vulnerabilities focused on these chokepoints are only likely to increase, the report’s authors say. Even if we succeed in improving food productivity, rising demand from a growing – and more prosperous – world population is likely far to exceed any such productivity improvements. Add in vulnerabilities linked to climate change and the prognosis is grim: “Food trade chokepoints will pose a material and growing risk to systemic stability and to human security, chiefly in the world’s most food-insecure and politically volatile regions.”

While China is a key driver of increasing stress on the global food supply system, it is ironically not among the most vulnerable – not just because it has worked hard to diversify its food supply sources, but because it stands alone in investing serious money in improving the food supply chains on which it so heavily depends.

Suddenly the logic behind the “One Belt One Road” initiative becomes crystal clear. Whether it is high speed freight services through Central Asia to Europe, a US$60bn rail link from Brazil to Peru, rail and road links through Pakistan to Gwadar, or a grain trans-shipment terminal in Mykolaiv on the Black Sea, food and energy security seem the principle focus.

International commentators claiming that China’s US$20bn investment this year in overseas ports is an expression of military muscle and expansionism miss the point. Investment in ports like Djibuti and Gwadar – along with the other 42 ports worldwide that Chinese companies have invested in – is much more to do with securing stable food (and energy) supplies than anything more sinister.

In the most literal sense, China is putting its money where its mouth is – and if the Chatham House team is right, more’s the pity that others are not following its lead.
* “Chokepionts and Vulnerabilities in Global Food Trade”, Chatham House, June 2017
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view. Opinions expressed are entirely his own. 
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