China Is Massively Boosting Stockpiles of Rice, Iron Ore, Precious Metals, Dry Milk; The U.S. Has No Remaining Grain Reserves
January 10, 2013
If there were ever a sign that something is amiss, this may very well be it.
United Nations agricultural experts are reporting confusion, after figures show that China imported 2.6 million tons of rice in 2012, substantially more than a four-fold increase over the 575,000 tons imported in 2011.
The confusion stems from the fact that there is no obvious reason for vastly increased imports, since there has been no rice shortage in China. The speculation is that Chinese importers are taking advantage of low international prices, but all that means is that China’s own vast supplies of domestically grown rice are being stockpiled.
Why would China suddenly be stockpiling millions of tons of rice for no apparent reason?
Perhaps it’s related to China’s aggressive military buildup and war preparations in the Pacific and in central Asia.If a 400% year-over-year increase in rice stockpiles isn’t enough to convince you the Chinese are preparing for a significant near-term event, consider that in Australia the country’s two major baby formula distributors have reported they are unable to keep up with demand for their dry milk formula products. Grocery stores throughout the countryhave been left empty of the essential infant staple as a result of bulk exports by the Chinese.
A surge in sales of one of Australia’s most popular brands of infant formula has led to an unusual sight for this wealthy nation: barren shelves in the baby aisle and even rationing of baby food in some leading retail outlets.We’d be more apt to believe the Chinese were panic-buying baby formula had the Chinese milk scandal occurred recently. The problem is that it happened four years ago. Are we to believe the Chinese are just now realizing their baby food may be tainted?
In addition to the apparent build-up in food stocks, the Chinese are further diversifying their cash assets (denominated in US Dollars) into physical goods. In fact, in just a single month in 2012, the Chinese imported and stockpiled more gold than the entirety of the gold stored in the vaults of the European Central Bank (and did we mention they did this in one month?).
Their precious metals stockpiles have grown so quickly in recent years that Chinese official holdings remain a complete mystery to Western governments and it’s rumored that the People’s Republic may now be the second largest gold hoarding nation in the world, behind the United States.
We won’t know for sure until the official disclosure which will come when China is ready and not a moment earlier, but at the current run-rate of accumulation which is just shy of 1,000 tons per year, it is certainly within the realm of possibilities that China is now the second largest holder of gold in the world, surpassing Germany’s 3,395 tons and second only to the US.But the Chinese aren’t just buying precious metals. They’re rapidly acquiring industrial metals as well.
Spot iron prices are up to an almost 15-month high at $153.90 per tonne. The rally in prices, which started in December 2012, is mainly due to China’s rebuilding of its stockpiles as the Asian giant gears to boost its economy, which in turn, could improve steel demand.The official explanation, that China is preparing stockpiles in anticipation of an economic recovery, is quite amusing considering that just 8 months ago Reuters reported that China had an oversupply, so much so that their storage facilities had run out of room to store all the inventory!
When metals warehouses in top consumer China are so full that workers start stockpiling iron ore in granaries and copper in car parks, you know the global economy could be in trouble.
At Qingdao Port, home to one of China’s largest iron ore terminals, hundreds of mounds of iron ore, each as tall as a three-storey building, spill over into an area signposted “grains storage” and almost to the street.
Further south, some bonded warehouses in Shanghai are using carparks to store swollen copper stockpiles – another unusual phenomenon that bodes ill for global metal prices and raises questions about China’s ability to sustain its economic growth as the rest of the world falters.Now, why would China be stockpiling even more iron (and setting 15 month price highs in the process) if they had massive amounts of excess inventory just last year?
Something tells us this has nothing to do with an economic recovery, or even economic theory in terms of popular mainstream analysis.
Why does China need four times as much rice year-over-year? Why purchase more iron when you already have a huge surplus? Why buy gold when, as Federal Reserve Chairmen Ben Bernanke suggests, it is not real money? Why build massive cities capable of housing a million or more people, and then keep them empty?
It doesn’t add up. None of it makes any sense.
Unless the Chinese know something we haven’t been made privy to.
Is it possible, in a world where hundreds of trillions of dollars are owed, where the United States indirectly controls most of the globe’s oil reserves, and where super powers have built tens of thousands of nuclear weapons and spent hundreds of billions on weapons of war (real ones, not those pesky semi-automatic assault rifles), that the Chinese expect things to take a turn for the worse in the near future?
The Chinese are buying physical assets – and not just representations of those assets in the form of paper receipts – but the actual physical commodities. And they are storing them in-country. Perhaps they’ve determined that U.S. and European debt are a losing proposition and it’s only a matter of time before the financial, economic and monetary systems of the West undergo a complete collapse.
At best, what these signs indicate is that the People’s Republic of China is expecting the value of currencies ( they have trillions in Western currency reserves) will deteriorate with respect to physical commodities. They are stocking up ahead of the carnage and buying what they can before their savings are hyper-inflated away.
At worst, they may very well be getting ready for what geopolitical analyst Joel Skousen warned of in his documentary Strategic Relocation, where he argued that some time in the next decade the Chinese and Russians may team up against the United States in a thermo-nuclear showdown.
Hard to believe? Maybe.
But consider that China is taking measures now, in addition to their stockpiling, that suggest we are already in the opening salvos of World War III. They have already taken steps to map our entire national grid – that includes water, power, refining, commerce and transportation infrastructure. They’re directly involved in hacking government and commercial networks and are responsible for what has been called the greatest transfer of wealth in the history of the world. Militarily, the PRC has been developing technology like EMP weapons systems, capable of disabling our military fleets and the electrical infrastructure of the country as a whole, and has been caught red-handed manufacturing fake computer chips used in U.S. Navy weapons systems.
If you still doubt China’s intentions and expectations, look to other governments, including our own, for signs that someone, somewhere is planning for horrific worst-case scenarios:
- The Russians have scheduled 5,000 underground bunkers for completion this year.
- Europe rapidly designed, built and stocked the so-called Doomsday Seed Vault in Svalbard, Norway, which contains tens of thousands of varieties of seeds and is supposed to preserve them in the event of Armageddon style events like asteroid impacts or nuclear war.
- The United States government has been stockpiling tens of millions of emergency meals and other supplies and regionalizing their emergency distribution centersacross the country (curiously, those supplies never made it to Hurricane Sandy victims)
- The government has purchased nearly 2 billion rounds of ammunition in the last few years.
- The Pentagon has been Actively War Gaming ‘Large Scale Economic Breakdown’ and ‘Civil Unrest’
- China recently made a call, through their Xinhua news agency, for the complete disarmament of the American population (Behind every blade of grass…)
As Kyle Bass noted in a recent speech, “it’s just a question of when will this unravel and how will it unravel.”
Given how similar events have played out in history, we think you know how this ends.
It ends through war.
Governments around the world are stockpiling food, supplies, precious metals and arms, suggesting that there is foreknowledge of an impending event.
Should we be doing the same?
July 22, 2008
Quietly, the last of the U.S. government’s wheat reserves, held in the Bill Emerson Humanitarian Trust, were sold in late May onto the domestic market for cash. The cash was put in a trust for food aid. With no other government wheat holdings, U.S. government wheat stocks are now totally exhausted [see CCC inventory].
The following recent statements by Rebecca Bratter, director of policy for U.S. Wheat Associates, provides insights:
“While the U.S. wheat industry strongly supports the administration’s goal of maintaining current food aid programs to prevent rampant hunger worldwide, there is concern regarding the impact of selling reserve wheat on the domestic market and over the lack of commitment from the administration to replenish the Bill Emerson Humanitarian Trust.The Bill Emerson Humanitarian Trust was established in 1980 by an act of Congress and is authorized to hold up to 4 million metric tons of wheat, corn, sorghum and rice, as a reserve for global food crises. The wheat is purchased and managed by the Commodity Credit Corporation and included in the total amount of wheat owned and held by the U.S. government. Holdings by the BEH Trust for corn, sorghum and rice are also zero.
“U.S. Wheat Associates has shared these concerns with high officials at USDA and on the President’s staff and has asked about the Administration’s intent regarding replenishment of the Bill Emerson Humanitarian Trust. Staff from the office of the President’s Special Agricultural Assistant noted that while there is no commitment at this time, the administration intends to replenish the Trust once the supply and price scenario stabilizes.”
(Note: U.S. Wheat Associates works in 90 countries promoting U.S. wheat exports.)
For the decade of the ‘80s, government wheat holdings (including those in the BEH Trust) averaged 358 million bushels. For the decade of the ‘90s, government wheat holdings averaged 133 million bushels. Since 2000, government wheat holdings dropped steadily until recently when the last of the government-owned wheat was sold.
With no formal plan for wheat stocks by the U.S. government, wheat stocks have defaulted to the arena of the private free-market sector. Unfortunately, the private sector has no plans for any kind of minimum wheat stocks that would protect the American public from a price and/or availability standpoint.
Private wheat stocks are divided into two major categories — on-farm wheat stocks owned by farmers, and off-farm wheat stocks owned by warehouses and grain companies. These two together held 305.6 million bushels of wheat as of June 1 (or roughly 1 bushel per person living in the United States) the lowest level in 60 years.
Of these stocks, on-farm wheat stocks are at 25.6 million bushels, the lowest level of on-farm wheat stocks since the USDA started keeping tabs back in 1934. So as you are driving in rural America before wheat harvest, the farmer’s bins have never been so empty.
The USDA, projects America to have a bumper wheat crop in 2008, producing 2.43 billion bushels and consuming and exporting 2.30 billion bushels. This leaves a meager 133 million bushels (5.5 percent of production) as a margin for error. Globally, the USDA projects wheat production to be 24.36 billion bushels, consumption to be 23.74 billion bushels for a relatively smaller margin of 622 million bushels or 2.6% of production.
The recent wheat crises in America was sparked by the nation exporting more wheat than it produced. This means the true 2008 wheat margin for Americans is really the global margin of 2.6%. Any decline from global projections could precipitate greater wheat exports from America and further draw down already low domestic and global wheat stocks.
Food security is emerging as a global focal point. With the U.S. government and the private sector lacking visions for stocks, food security is poised to grow as a grass-roots issue around the nation.
The United States has in the past kept a strategic grain reserve, but it was largely eliminated under the 1996 Freedom to Farm Act. Since the beginning of agriculture, farmers have recognized the need to manage stocks of grain to prevent starvation in times of scarcity. Grains are an easy-to-store and nutritious way to provide the basic needs of a population facing a food emergency until alternative food supplies can be arranged. To ensure food security, many countries stockpile strategic grain reserves (SGRs) to help cope with food emergencies, but grain reserves are also used to stabilize grain prices and as a loan commodity. Today, there are no remaining grain reserves in the U.S., and there haven't been since July 2008. Millions of people may die in the next few years because of inadequate world grain reserves.
The United States has in the past kept a strategic grain reserve, but it was largely eliminated under the 1996 Freedom to Farm Act. Today, there are no remaining grain reserves in the U.S., and there haven't been since July 2008 [this was shortly after the sale of 18.37 million bushels of wheat from USDA’s Commodity Credit Corporation (CCC) to the Bill Emerson Humanitarian Trust, which left only only 2.7 million bushels of wheat in the entire CCC inventory]. In addition to having no grain reserves, the U.S. has nothing else in its emergency food pantry: there is no cheese, no butter, no rice, no corn, or anything else left in reserve except for dry milk.
Since the beginning of agriculture, farmers have recognized the need to manage stocks of grain to prevent starvation in times of scarcity. In the Hebrew Bible, the Egyptians were directed to stockpile seven years of harvests in preparation for seven years of famine. The primary purpose of grain reserves is to help cope with food emergencies, but grain reserves are also used to stabilize grain prices and as a loan commodity.In the wake of global food issues in early 2008, a number of groups in the U.S. are lobbying to create a strategic grain reserve:
Food security in the fullest sense would mean that all people at all times have access to adequate quantities of safe and nutritious food. To ensure food security, many countries stockpile strategic grain reserves (SGRs). Grains are an easy-to-store and nutritious way to provide the basic needs of a population facing a food emergency until alternative food supplies can be arranged. Food emergencies can result from natural causes, such as pest outbreaks sparked by drought, floods, storms, earthquakes, or crop failures, as well as from war and terrorism.
to establish national grain reserves and to demonstrate willingness to participate in concert with other large grain-producing countries in a world food bank. The factors leading to this resolution where as follows:
In 1996, the Federal Agriculture Improvement and Reform Act of 1996 ("Freedom to Farm Act") called for elimination of government stockpiles of grain, except for a very small amount in the Emerson Humanitarian Trust Reserve intended for foreign aid. The misguided policies of the Bill Clinton administration and the Republican Congresses of the 1990s (as exemplified by the 1996 "Freedom to Farm Act") eliminated historic food-security provisions and handed over control of grain stocks to corporate agribusiness giants and commodities speculators.
- Millions of people may die in the next few years because of inadequate world grain reserves; and drought and other causes have rendered grain production unstable, which drives prices up and forces poorer countries out of the world grain market;
- It has been demonstrated that when adequate world grain reserves are maintained, price fluctuations are minimized even in times of small harvests;
- The United States, Canada and other large grain producers hold the key to stable world-wide food reserves that have been allowed to dwindle to a fraction of their former levels; and
- The United States, Canada and other large grain producers, through climatic and other circumstances, may themselves experience shortage.
The National Family Farm Coalition has for years been warning that a global trading system designed to enrich agribusiness conglomerates, while undermining the interests of working farmers in the U.S. and abroad, would lead to precisely the disaster that is now unfolding. Now, the United States government has no reserves of butter, cheese, barley, corn, oats, sorghum, soybeans, wheat, rice, sugar, honey, peanuts, canola seed, crambe, flaxseed, mustard seed, rapeseed, safflower seed, sunflower seed, peas, lentils and chickpeas. [Source: U.S. Farm Service Agency, Current CCC Inventory (PDF file)]
According to Patrick Woodall, senior policy analyst with Food and Water Watch:
“Consumers see cereal prices go up when input prices rise, but they never see the pass-through when input prices fall... When the crop prices collapsed in 1996 (due to the 1996 "Freedom to Farm Act"), the grocery store prices didn’t come down at all. In many cases, they went up for things like pork chops, ground beef and milk.”We are just one drought away from possibly seeing $10/bushel corn or $20/bushel wheat with absolutely no plan in place to deal with such a calamity. The President and U.S. Congress have irresponsibly ignored this issue throughout the entire Farm Bill debate, even as other countries such as China and India build up their strategic stocks. - National Family Farm Coalition
In the developing world, Woodall said, the cereal price index rose 88 percent between March 2007 and March 2008. “Much of the global cereal trading below the cost of production was a deterrent to holding onto any reserves at all.”
Woodall says another factor driving stocks down in the Third World is that “the World Bank has pressured countries to eliminate their own reserve programs, much like the United States... Countries like Kenya and Malawi were forced by the World Bank to sell off their reserves. That was partly because of fiscal austerity reasons, but it was also partly to repay debt to the World Bank.”
As these programs have been eliminated to conform with World Bank directives, “we’re now in a situation where there’s no buffer to protect people from a severe food crisis.”
China is aggressively building its grain reserves. Reuters reported that China will raise spending on reserves of grain, edible oils and materials by 61% in 2009, bringing the total to CNY 178.045 billion or 4.1% of its budget spending. According to the report, the spending includes CNY 78.341 billion to stimulate domestic demand by expanding reserves of important materials such as grain, edible oils, crude oil, non-ferrous metals and specialty steel, as well as developing storage facilities. Direct subsidies to grain producers will also rise 25.8% to CNY 19 billion.
New Wheat Crisis Plagues World Food Supply
China Adds 292 Million Tons to Grain Reserve in 2008
China, South Korea, Japan, Saudi Arabia, Kuwait Grabbing Land for Food
South Asian Nations Agree to Build Grain Reserves
China Says to Spend $26 Billion on Commodity Reserves; Veg Oil, Grain
China Boosts Rural Economy Spending, Power Reform
China Adds $10 Billion to Commodity Stockpiling Budget
Food Grain Export Ban by India, China Harming Third World
Family Farmers Respond to the Food Crisis
An Open Letter to Congress on the Need for Strategic Grain Reserves
Growers and Economists Push for Strategic Grain Reserves
U.S. Farm Group Backs World Grain Reserve Proposal
Final Declaration of Farmers at High Level Meeting on Food Security, January 27, 2009
Full Article Here:
The U.S. Has No Remaining Grain Reserves; the 2008 Food Crisis Is Not Over