Key Wheat Growing Regions in China Hit by Drought

By: Trader_Mark

Yet another example of how water will ultimately be the most important resource on earth [Jun 18, 2008: The Ultimate Shortage ---> Water] and why arable farmland is most likely the best long term (40-50 years+) investment possible.  Shorter term.... after the Russian droughts/fires of last year, Australian floods this year, and now the Chinese situation, American wheat farmers should be handed a bonanza. 

• China's key wheat-growing province of Shandong is facing its worst drought in at least 40 years as a result of unusually dry weather across northern and eastern China that stands to put further pressure on surging food prices.
• Drought has hit more than half of the land in the province normally used to grow wheat -- about 5 million acres (2 million hectares) -- and that number is rising, according to a notice posted Monday on the provincial water bureau's website.
• Many areas have seen no precipitation in four months, and 870,000 acres (353,000 hectares) of spring wheat has already dried up or is beginning to fail, it said. More than 240,000 people and 107,000 head of livestock already have lost access to drinking water and are forced to rely on deliveries from fire trucks.
• China is the world's largest grain producer at about 500 million tons per year.
• Unusually dry conditions have spread across much of China's northeastern bread basket, including the provinces of Henan, Shanxi, Hebei, Jiangsu and Anhui. Beijing hasn't been spared and has yet to receive snow this winter. Scientists say it is a result of the La Nina effect that is also responsible for the harsh winter weather still gripping large parts of China's south.
• But in some areas water shortages can also be blamed on burgeoning populations. In Beijing, for instance, demand has outstripped supply for the past decade, and the capital has now decided to supplement drinking water supplies with water pumped from the Yellow River. The city's water bureau said Monday that current sources are only sufficient for half of the city's population of 17 million.
• Not only do hundreds of millions of Chinese rely on farming to make a living, but good harvests are crucial to keeping meat, grains and vegetables affordable for the vast majority of lower-class Chinese who spend one-third or more of their income on food.
• Hypersensitive to any signs of potential unrest, the ruling Communist Party is expected to respond by raising interest rates to tame price rises, potentially hitting consumption levels and slowing the global economy in 2012.

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

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