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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • China: Farmers Going Extinct 5 comments
    Mar 30, 2012 1:02 PM | about stocks: RJA

    In China, those working in primary industries like agriculture accounted for 40 percent of total labor force at the end of year 2010, in comparison with 70 percent in year 1978 (Chart 1).

    Chart 1: Chinese employment by industry

    Since 1990 the percentage of farmers in China has been declining over time, resulting in a shortage in food supply.

    The same declining trend in farmers was also visible for the U.S. (Chart 2). Agriculture employment accounted for 40% in 1900 and dropped to 2% in year 2000.

    Chart 2: U.S. farm population and rural population as share of population

    Today, China's agriculture employment stands at 40% and will likely continue to drop due to industrialization. China will follow this similar path as the U.S. did from year 1900 up till today.

    The amount of farmers in China is declining, but production is still increasing at a fast pace due to industrialization (Chart 3).

    Chart 3: Agricultural Production in China

    From year 2000 though, China is facing a water shortage due to depletion of aquifers and this poses a big problem for agricultural production growth. Since then on, for example, China became a net importer of grain.

    Meanwhile, the Chinese population is expected to grow 0,5 % per annum. For India the growth rate is 1% per annum. If production doesn't keep up with population growth, food prices will inevitably spike upwards.

    Chart 4: Population Growth

    As oil is becoming scarce (higher oil prices), we finally started to see the first real panic in one of the advanced economies like the United Kingdom. People are waiting in lines to get their gasoline. As I already pointed out in this article, food prices always go up in tandem with oil prices.

    Therefore, it's of the utmost importance to anticipate this future trend in food inflation by buying agricultural commodities like Rogers Agriculture ETN (RJA), farmland Adecoagro (AGRO) or fertilizer stocks (POT).

    => UK Petrol Crisis
    Stocks: RJA
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Comments (5)
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  • Ben Gee
    , contributor
    Comments (14660) | Send Message
    China's arable land per capita is less than 1/2 the world average and is a little more than 1/10 of N. America. Are you shock that China is a net food importer?
    3 Apr 2012, 01:33 PM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » I am shocked, didn't know that. I heard that Russia is a very good candidate to do well on farming in the future.
    3 Apr 2012, 01:39 PM Reply Like
  • Ben Gee
    , contributor
    Comments (14660) | Send Message
    Russia will manage to feed itself now that they stopped trying to compete with the US militarily, or did they?
    3 Apr 2012, 02:02 PM Reply Like
  • GreenWorld BVI
    , contributor
    Comments (236) | Send Message
    Nice post Katchum. We actually wrote a couple of articles in the last few months on farmland: http://seekingalpha.co... and http://seekingalpha.co.... The second article is specifically on the issue of decreasing arable land in China and China's becoming an increasingly large food importer.
    23 Apr 2012, 10:09 PM Reply Like
  • Ben Gee
    , contributor
    Comments (14660) | Send Message
    Even today, there are more farmers in China than there are people in N America.
    3 Apr 2012, 04:13 PM Reply Like
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