Can the Food Dollar Replace the Petrodollar? An In-Depth Analysis

Recently, German-based American scholar William·Engdahl, following "The Oil War: Oil Politics Determines the New World Order," published another book titled "The Food Crisis." William·Engdahl believes that after the oil and subprime crises, the world's next crisis will be an agricultural product crisis triggered by food prices.

The Food Dollar Is Replacing the Petrodollar

Entering the 21st century, the strategic position of the petrodollar is teetering under challenges from the international community: Eurozone countries are banding together to challenge the dollar, directly carving up the dollar's market share; major oil power Russia, with increased petrodollar earnings, has boosted its international voice and strengthened its competition with the United States; RMB internationalization is also challenging dollar hegemony. Assessing the situation, the United States has set its sights on food, an international bulk commodity, hoping to replicate the glory of the petrodollar and achieve a dollar revival.

The food dollar strategy is based on America's national conditions. The central United States has vast plains, a sparse population, and fertile soil, which favor mechanization and large-scale production. At the same time, U.S. government agricultural subsidies are the highest in the world. This has built America's globally far-ahead competitiveness in food, giving it a dominant position in key agricultural product areas (such as soybeans, corn, feed, wheat and oilseeds).

In the future, the global trade status of food and water resources will certainly surpass the important position of oil in global trade today. The dollar's position in global foreign exchange reserves today relies to a great extent on global oil suppliers such as OPEC. This petrodollar linkage has greatly consumed U.S. military spending. If the food dollar can control a large volume of global market trade transactions, then in the future the euro, yen and gold will all become third-rate currencies.

As the dollar is the main currency for international trade settlement, settling international food trade in dollars is a matter of course. As the U.S. food export surplus grows daily, dollar cash flows back to the United States in a steady stream, increasing America's wealth. Food-importing countries must hold large reserves of dollars to meet their food import needs, and dollar reserves are achieved through the channel of purchasing dollar bonds, so it will be impossible for food-importing countries to decouple their currencies from the dollar. When food dollarization reaches a certain level, the dollar and food become bound together, food replaces oil, and becomes the new anchor for the dollar, holding the global economy hostage just like the petrodollar.

⟦NL> First, they conduct genetically modified engineering research in the name of science, obtain large numbers of patents, and control certain key food varieties, such as large-scale crops like soybeans and rice and important poultry products like chickens and dairy cows. Second, they seek various opportunities, such as large-scale agricultural disasters, wars and debt crises, and with the shelter of certain international organizations, under the name of aid, force farmers in other countries to adopt crop seeds whose intellectual property rights they control.

In the international food market, multinational capital represented by Wilmar International, Cargill, Bunge, ADM and Louis Dreyfus is best at using the powerful advantage of capital to acquire rivals, thereby manipulating prices and monopolizing markets. More seriously, the United States uses its advanced breeding technology to penetrate China's seed market on a large scale. Seeds are the key to food security, and the seed industry is a strategic industry related to the national economy and people's livelihood; in the related supporting industrial chain, seed industry security is almost equivalent to food security and sustainable agricultural development. The top 10 domestic seed companies account for only 0.8% of the global market share, while multinational seed companies represented by the United States long ago used vegetable and flower seeds as a breakthrough to enter China's seed market.

We Must Hold Our Rice Bowl in Our Own Hands

Out of consideration for protection, China's grain prices have long been higher than the international market. Recently, under the impact of imported grain, domestic grain prices have fallen noticeably. According to a report by China Times, farmers in the main rice-producing areas of the south have recently frequently faced difficulties selling grain, because state-owned grain depots are seriously overstocked and basically do not buy grain, and market entities are cautious in purchasing. In He County, a major grain-producing county in Anhui, farmers even have to sell grain at a 20% discount. Because international grain prices have fallen sharply, domestic imported grain has surged, the market is already showing poor absorption, and state granaries are in a saturated state.

China's food security is built on existing import tariffs. Once grain tariffs are lowered or tariff quotas increased, potential shocks to food security will become visible. China's future food security depends not only on the quantity of grain produced, but also on the international competitiveness of grain, because in the era of global economic integration, under the general trend of gradually lowering agricultural product tariffs, food security cannot rely on high tariff protection for the long term.

As industrialization and urbanization continue to accelerate, competition between agriculture and industry, and between rural and urban areas, for resource factors such as arable land, water resources and human resources is becoming increasingly fierce, and domestic grain production capacity faces dual pressures from resource and environmental constraints.

There is also the overloaded operation of domestic land. The United States has more arable land than China, but China's grain output is double that of the United States. Is this because China's agricultural technology is more advanced than America's? No, it is because developed countries, in order to protect the land, adopt the method of fallowing to maintain soil fertility. But China, in order to solve the problem of feeding its people, can only keep the land working nonstop, propped up with chemical fertilizers, resulting in serious degradation of soil fertility.

In June 2015, the National Development and Reform Commission, the National Food Administration and the Ministry of Finance issued the "Plan for Building the Food Collection, Storage and Supply Security Project (2015-2020)," which pointed out that since entering the new century, China's grain production has achieved “eleven consecutive increases,” grain circulation facility conditions have improved, an emergency response system has gradually been established, macroeconomic regulation capacity has continuously strengthened, and a unified, open, competitive and orderly grain market system has gradually improved, laying a good foundation for the country's food security.

But on the other hand, the domestic modern food collection, storage and supply security system is far from complete. With the increase in China's grain output and changes in the supply-demand situation, contradictions such as insufficient grain collection and storage capacity, relatively large quality and safety risks, lagging grain condition monitoring and early warning, and serious post-production losses and waste have become increasingly prominent, and national food supply security still faces severe challenges.

Judging from the situation after the world food crisis occurred, a smokeless world economic war has already unfolded among different economies, and food has become one of the important strategic trump cards. General Secretary Xi Jinping emphasized that we should “firmly build the capacity to guarantee food supply on ourselves and firmly hold the rice bowl in our own hands”; and that grain storage construction should be “grasped firmly and well as a key task of agricultural infrastructure.”