Food Inflation in China Is an Environmental, Not Economic, Problem

This is why I’m not particularly concerned about food inflation in China:

All the soybeans in Iowa won’t be enough to meet the anticipated surge in China’s imports over the next four years as the nation feeds a record pig herd and drives bean prices to an all-time high.

China, which doubled meat consumption in the past two decades, may boost international soybean purchases 33 percent to 66.9 million metric tons by 2014, a 16.6 million-ton increase that is more than Iowa, the largest U.S. grower, produced last year, government data show. U.S. farmers are cutting back on planting, meaning prices will rise 21 percent to $16.80 a bushel by Dec. 31, a Bloomberg survey of 20 analysts shows.

Almost half the world’s pork comes from China, which has 689 million pigs and will be responsible for all of this year’s increase in global supply, the U.S. Department of Agriculture estimates. That’s adding to China’s dependence on raw-material imports from Brazil to Australia to the U.S., making it vulnerable to inflation that Premier Wen Jiabao has pledged to combat without derailing economic growth.

Simply speaking, if food inflation was a significant problem, people wouldn’t be increasing their meat consumption. Rather, the combination of food price inflation with the upgrading of consumption is an indication that inflation is an effect of increased wage demands, not a cause. Though of course temporary weather shocks are the much larger issue. 

The real issue here is environmental. China’s agricultural industries are heavily polluting, and the more meat they produce the worse the situation will be. The Chinese consumer can afford more expensive food, but it’s possible that even at the current quickly growing prices, the price of pork buns isn’t accounting for the full cost of production.