Shanghai Gueva Chairman Anning Wei
Mining Profit from Food Safety
In this exclusive interview, one of China's foremost experts on food economics considers how integrated quality control along the entire agricultural production chain can turn crisis into opportunity.
Mining Profit from Food SafetyBy David Huang
When Jiugui, a popular Chinese brand of rice wine, was found to contain excessive phthalates, the news caused a huge stir, leading to its suspension from trading on the Shenzhen Stock Exchange. But this is just the tip of the iceberg when it comes to food safety in China.
"Healthy foods," "feel good about eating"… and other such appeals to food safety on signboards and the sides of public buses have cropped up all around the streets of Beijing. Food safety is the most urgent everyday issue in need of a solution since the rapid rise of China's economy as the people accumulate wealth. "Now I'm afraid to eat snacks!" exclaimed 11 year-old junior reporter, Sun Luyuan, at a press conference at the site where the 18th National Congress of the Chinese Communist party had just concluded, illustrating how pervasive food-related fears have become in the people's minds.
After earning a doctorate in agricultural and consumer economics at the University of Illinois Urbana-Champaign, Anning Wei, current chairman of the Shanghai Gueva Investment Management Company, took a post in charge of agricultural loans for Central Europe at the World Bank. Upon returning to his home country of China, he became standing vice president of the New Hope Group, China's largest private agricultural and food production firm. He also headed up the Yataizhonghui Group of Shandong as its chairman, where he promoted the "Company + Farmer" system, aimed at restoring public confidence in the food supply chain.
Han Jiahuan, chairman of the Dacheng Foods Corporation, praised Anning Wei as the up-and-comer that best understands the food economics of both China and the world. In the following interview, Wei offers his analysis of China's food safety and related business opportunities.
Only a developed country can have outstanding farms, and be able to handle agricultural issues properly. Food security must be assured, all the way from the upstream-level farmers engaged in agriculture and animal husbandry, down to end retailers, to provide consumers with honest information about where their food comes from.
In the past, China's farmers lacked certain knowledge, such as whether to give animals a 0.5 mg or 0.7 mg nutritional injection or inoculation, or administer them in the morning or afternoon. This requires certain advanced knowledge of biology and medicine, something the average farmer lacks.
Working through the "Company + Farmer" system, the company must provide and regulate the varieties the farmer grows and cultivates, the timing of cultivation, and methods of inoculation and pesticide use to ensure safe foods.
China's past food problems stemmed from too much daylight between the upstream and downstream suppliers. Now, there is a demand for unified practices, and farmers are modernizing. Companies can invest in farmers, and vice-versa, so that they form a sphere of common interests. This is how a true agricultural supply chain can be established.
Food Supply Outpaced by Demand
Food security is a further serious issue.
Food prices have risen and fallen (in China) over the past 30 years, but since climbing in 2005 they have not dropped again. The reason for this is that the Green Revolution was taking place around the world over the past 30 years, raising production by 30 to 40 percent through simultaneous technological gains in irrigation, fertilizers, and improved seeds. However, the era of increased production through revolutionized agricultural methods has now passed.
Secondly, usable land has diminished, and there is no surplus land for growing.
The third issue is water resources, as clean water has become increasingly scarce.
So despite an increase in the food supply, the increase has declined to just half of the average growth rate of the past two decades.
Supply has slowed significantly, but demand has rapidly grown. The population has doubled over the past 20 years, and life expectancy is longer. Food not only gives people sustenance, but around 10 percent of grain is used for biofuels. Yet this 10 percent of all grain yield accounts for around 40 percent of grain trade, causing reductions in food exports and trading volume and exacerbating food shortages.
In addition, once people attain wealth they acquire a taste for meat. It takes eight kilos of grain to produce one kilo of beef. Chinese people consume a lot of meat, and their culinary practices and dietary habits consume grain in a hurry.
Rising shipping costs are also a major factor. The same ton of grain could cost around 700 renminbi in the United States. But with oil at 70 to 80 dollars per barrel, it costs an additional 700 renminbi to ship to China, causing a constant rise in grain costs, so that worldwide grain supplies are only getting tighter.
Asian countries are major wasters across the food supply chain. For instance, Asian farmers need 3.5 kilos of grain to produce a kilo of pork, which is 50 percent higher than for advanced countries.
We seek to spread good information and know-how through the platform of privately offered funds, to ease supply and raise the efficiency of grain production to resolve the food issues facing us.
Translated from the Chinese by David Toman
Dr. Anning Wei
Position: Chairman, Shanghai Gueva Investment Management Company
Expertise: Agronomics, health food operation and management
Education: Ph.D. in agricultural and consumer economics, University of Illinois Urbana-Champaign (USA)
Experience: Yataizhonghui Group (Shandong) chairman, New Hope Group standing vice president, World Bank agricultural economist