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China fearing the second wave of Covid19 asks food companies to boost supply

Though China had managed to flatten the curve of the novel coronavirus, the suspicions regarding the non-reporting of actual numbers and the possibility of a second wave of the pandemic have the epicentre’s authorities on its toes. Epidemiologists believe that the second wave shall be even more brutal than the first one, taking thousands of lives all over the world.

“Authorities asked to producers to boost supply”

Chinese authorities have asked trading firms and food processors to boost inventories of grains and oilseeds as much as possible in fear of the second wave of coronavirus cases and worsening infection rates elsewhere that has been raising concerns about global supply lines.

As per a Reuters report, both state and private grain traders and food producers have been asked to procure higher volumes of crops such as soybeans, soy oil and corn via calls between traders and the government.

“There may be a possibility of a breakdown in supply pipelines thanks to the coronavirus infections. For example, a port of origin or destination might pack up,” said a senior trader at one among China’s leading food processors.

“They have advised us to extend stocks, keep supplies above we usually have. Things are not wealthy in Brazil,” he added, pertaining to China’s main supplier of soybeans and a key meat exporter where the amount of coronavirus cases has surpassed those in Spain and
Italy. This information was provided by one of the leading food processors in China.

A second source in China who was briefed by an individual who attended one among the meetings said China’s Ministry of Commerce met with some state companies on Tuesday to debate the way to guarantee supplies during the pandemic. “One of the most concerns is how the epidemic in South America might impact supplies (of beans) to China,” the source said.

The Ministry of China has refrained to answer any questions related to this topic.

“Soy Shock”

Brazil is one of the leading suppliers of Chinese staple food grain soybeans. However, the shipments of these soybeans were delayed in the months of March and April due to the pandemic which resulted in reduced manpower. The supply was also severely hit by heavy rains reported in the two months. This led to a huge downfall in Chinese soy inventories to record lows.

To further worsen the situation, the shipments from Brazil have been rebounded but authorities have stayed wary of the new disruptions.

The state-owned agriculture conglomerate China Oil and Foodstuffs Corporations (COFCO) and grain stockpiler Sinograin are stepping up purchases of U.S. soybeans and corn in recent weeks due to the extreme shortages being witnessed by the country.

The imports account for at least four shipments which would be approximately about 240,000 tons from the United States. This order shall be shipped at the beginning of July. However, the pressure on China to purchase grains from the US has been solidified under a trade deal signed between the two nation-states in January which has led to trade sources to expect a greater amount of crops being transported to China from the US once the South American export season ends and the North American harvests approach in the autumn season.

U.S. crop export sales data shows that Chinese buyers have accelerated soybean purchases of the upcoming crop, with new crop bookings of 374,000 tons already registered, compared with an average of 60,000 tons for this period since 2016.

Further, Beijing has increased its state allocations of crop import quotas to major grain buyers to ensure more purchases in the future.

“The effort is to build supplies, not just from Brazil, but from all over,” said the senior trader at the food processing company. “U.S. beans are looking attractive from September onwards,” he added.

“Meat imports”

China has also been one of the most major meat importers from Africa. However, due to the swine fever outbreak, even this supply has fallen short. This has led to China being forced to look towards the US, one of the top global exporters of pork, leading to an increase in trade between the two. Yet, the stagnation of slaughterhouses in the US due to the COVID-19 outbreak may cause an issue in the supply chain.

China has booked a record volume of U.S. pork shipments already this year, raising concerns about fresh tensions between the countries if U.S. meat production problems curb domestic supplies at a time when shipments to China remain strong.

“Shifting global dynamics”

However, experts have stated that there is a growing dependence of China on the United States and people can expect this to grow as the US systematically may emerge as an economic superpower once again, reclaiming the fame it lost to China in the recent past.

Further, the lawsuit filed by the US on China for the outbreak also seeks to bring the Chinese economy to shambles as the amount of the lawsuit amounted to USD 20 trillion, the estimated GDP of China.

The widespread fear of a second wave of the global pandemic has caused a frenzy amongst all governments as they get ready for the worst scenario.

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