A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Focus on issues

Heat wave on financial markets

Thierry Pouch,

Permanent Assembly of Chambers of Agriculture (APCA)

China sneezes and the world is catching a cold… The steady decline of the Chinese stock market, the devaluation of the yuan and the slowdown of China’s growth have rattled the major Western financial centers. As far as agriculture is concerned, the slowdown has generated a broad-based decline in commodity prices, and ultimately means fewer opportunities for global exporters. Indeed, it is a well-known fact that the Middle Kingdom is the chief purchaser of the world’s commodities, and the prices of some agricultural commodities are intrinsically linked to Chinese economic jolts. In fact, China became the largest importer of dairy products in 2012, and has been buying about 10 percent of the global output since.

In an editorial we are publishing below
1, Thierry Pouch writes that this anxiety-provoking situation cannot be resolved soon. China’s economic turmoil widely impacted the major stock markets, which were also thrown off balance by uncertainties in the American monetary policy. Thierry Pouch adds that such situation is particularly crippling for French farmers. Already limited by the sluggish domestic market and the consequences of the Russian embargo, foreign markets––such as China––are no longer representing prospects that were previously considered as lifesavers. It can only be hoped that a policy leap assists the French and European farmers toward a way out of the crisis and the adoption of strategies that are up to the issues they are confronted to.

momagri Editorial Board

The summer of 2015 was especially hot, and not only in terms of weather. The devaluation of the renminbi––reflecting the slowdown in Chinese growth––created a stock market panic that had not been seen since 2008. Yet the contraction of the Chinese growth had been anticipated. The problem is that, once this occurred, it frightened financial operators, especially in light of its side effects, and agricultural activities are affected.

For several months, the major research organizations––starting with the IMF––were suggesting that global growth was undermined by a slowdown in emerging countries. In fact, these nations were driving this economic growth until now, including China whose market accounted for a sizeable share of world trade, and whose dynamic exports let ward off the specter of a significant trade contraction. Posting an average growth over 10 percent annually, the Chinese economy essentially acted as a catalyst for the rest of the world. Even better, due to its frenetic pace of industrialization, China was buying numerous commodities, thus pushing prices towards seldom reached levels.

The surprise announcement of the renminbi (or yuan) devaluation brought to light the uncertainties regarding the soundness of this growth. Predictions abound, some observers estimating that China will decline to around 5 or 6 percent, while others speak of a 4 percent growth only. The devaluation of the Chinese currency served as an admission of the contraction of activity in the Middle Kingdom. That was enough to send financial markets into a tailspin. In only two days, the Shanghai stock market lost 16 percent, and the Paris CAC40 index fell by 9 percent in a single trading session. By devaluating, Beijing intends to revive exports and rake in some additional growth percentage points to curb social protest. This is indeed ironic, since centering the economy on domestic demand was widely expected. The admission of the Chinese GDP contraction means fewer imports, and thus fewer opportunities for global exporters, starting with commodity producing nations.

All the economies that had based their commodity exports as the cornerstone of their economic growth will pay the price. First Brazil, currently racked by growing social unrest and endemic corruption, has recently slipped into recession for the first time in six years––close to 2 percent in the second quarter. As far as Russia is concerned, the intensity of the recession confirms the estimates given at the end of last year.

The bad shape of the Chinese economy has generated a virtually generalized price decline that contradicts prior projections claiming that markets would stabilize at a lasting high. Since early July, the price of a barrel of oil lost 30 percent in New York, and fell to $42. Unless the renminbi devaluation maintains the Chinese demand for commodities by increasing exports, it is unclear how prices could recover. In addition, one must note that the American currency policy remains vague and unsure, thus fostering investors’ anxiety.

And what about French farmers? They really did not need this, and after being continually told to prepare for entering the Chinese market, they can question the relevance and sustainability of such strategy. With the European market remaining sluggish and the Russian embargo in effect to 2016 blocking all prospects, we now have the faltering Chinese economy. There is nothing to be happy about for for French farmers, and even less for livestock farmers. We were told that the crisis was behind us. What if it was really ahead of us? The fact that China––although converted to a market economy––is in turn experiencing a crisis proves that global capitalism is clearly crippled.

1 The entire text of the editorial is available from:

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Paris, 18 June 2019