China is facing problems with the processing of agricultural products such as soybeans and grain maize. Factories where these products are processed into animal feed, for example, are forced to close. This is due to an energy shortage. How will this affect the agricultural markets?
The harvest of corn and soybeans is in full swing, not only in North America, but also in China. The closure of factories where these crops are processed comes at a particularly unfortunate time. Several factories in the northeast of the country have now been shut down due to an energy shortage. That reports Bloomberg news agency. The three northeastern provinces contain half of all grain corn and soybeans in the country.
All crops affected
Not only these agricultural products are affected. Many more crops may not be able to be processed due to the energy shortage, Bloomberg thinks. The government is asking factories to reduce processing speed to save energy. This applies to crops from peanuts to cotton. Factories of Louis Dreyfus and Wilmar International, among others - where soybeans are processed - are completely closed. Chinese sources report that factories processing corn face the same fate. It concerns the production of corn syrup and corn starch.
The Aviko/Hongyuan Louis chip factory is also located in the northeast, in Xilinhot. For the time being, the company has not had any problems with power shortages. The potato harvest is almost completed and stored. However, there are quality issues. Mainly due to phytophthora as a result of excessive precipitation in the growing season.
More expensive food
Good yields are also expected for the soy and corn harvest. That is precisely why it is important that there is sufficient processing capacity. State media Futures Daily writes that the availability and prices of products are dictated by the energy shortages. Some companies are still trying to quickly purchase diesel generators so that the crops can be dried after harvest in the event of power shortages.
Meanwhile, the government in Beijing is trying to do everything it can to solve this energy crisis. The entire Chinese industry is affected by it and we also notice this in Europe. On the prices of fertilizers, steel and many other raw materials. Producing food for the population of 1,4 billion people is the government's highest priority. After all, satisfied citizens mean a smooth economy.
More expensive tractors and machines
Another industry hit hard by the energy crisis is metals. Prices of aluminum, copper, nickel and steel are currently skyrocketing due to production restrictions. Agricultural entrepreneurs notice this, for example, in the prices of tractors, machines or steel constructions of stables and sheds. They all shoot up. In addition, supply shortages of parts remain an everyday occurrence. The cause of this also largely lies in China.