Myths About China and India's Africa Race

By Anil K. Gupta and Haiyan Wang

More countries in Africa are joining the global economy. Over the last decade, the continent’s GDP expanded at an average annual rate of 5.1 percent, low compared with emerging giants like China and India but still well above the global growth rate of 2.9 percent. During this period, Africa also became far more globally integrated and saw its merchandise trade grow at an annual rate of 12.9 percent, vs. a global growth rate of 8.9 percent.

Africa’s economic ties with China and India have grown at a particularly rapid pace. This development—when put in the context of Asia’s ongoing march toward becoming the world’s economic center—has led many to believe that China and India have taken over from the West as the new economic powers in Africa. That conclusion, however, hinges on some common misconceptions about China and India’s engagement with Africa.

Myth No. 1: China and India dominate the race for Africa.

During 2000-2010, Africa’s merchandise trade with China grew at an annual rate of 29 percent (from $9 billion to $119 billion) and with India at an annual rate of 18 percent (from $7 billion to $35 billion). While these growth rates are very robust, they are building on a very low base. So far, Africa’s economic partnership with Europe dominates that with China or India. In 2010, Europe received 36 percent of Africa’s exports, compared with 13 percent for China and 4 percent for India. Over 37 percent of Africa’s total imports came from Europe, vs. 12 percent from China and 3 percent from India. In 2010, even the U.S. was ahead of China in terms of total merchandise trade with Africa.

To date, China and India also have played only a small, albeit growing, role in terms of capital investment in Africa. Each accounts for less than 5 percent of the total inbound foreign direct investment (FDI) stock in Africa, a tiny fraction of that from Europe and the U.S.

In short, as newly active players, China and India are making rapid headway in Africa. However, appearances notwithstanding, they are still far behind the developed economies—especially Europe—in terms of economic engagement with Africa.

Myth No. 2: China and India’s engagement with Africa is all about natural resources.

Many Indian companies are looking at opportunities to sell in African markets. In 2010, Indian mobile operator Bharti Airtel paid $9 billion for the African telecom operations of Kuwait-headquartered Zain. Tata Motors, India’s largest automaker, has opened an assembly operation in South Africa. Mumbai-based Essar Group is investing in the African steel sector and Godrej, another Indian conglomerate from Mumbai, is very active in Africa’s consumer goods market. Karuturi Global, the Bangalore company that is the world’s largest rose producer, has become one of Africa’s largest players in commercial agriculture and leases 1,200 square miles of land in Ethiopia. Indian companies are also very active in Africa’s emerging IT services market.

Chinese companies are also not just focused on Africa’s natural resources. China has taken a growing interest in helping build Africa’s infrastructure such as roads, railways, bridges, ports, and power stations. At the 2009 China-Africa Summit, China pledged to build 100 clean energy projects in Africa covering solar, biogas, and hydropower. It also announced the phasing in of zero import tariffs for 95 percent of products from the least developed African countries.

Both China and India are beginning to see Africa not just as a resource supplier but also as a market and as a target for capital investment in many sectors of the economy.

Myth No. 3: China and India are the new neocolonialists in Africa.

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As China Says No More Stimulus, Obama Comes Begging For More.... While Promising Even MORE Cuts In The Unknown Future

Proving once again that when it comes to the definition of Banana Republic, America really has no equal, we first read in China Business News that according to PBOC adviser Li Daokui, China will "basically" maintain its existing monetary policy direction, and won't likely introduce stimulus measures as it did in 2008. Sorry "Rest of the World", you are on your own: China will no longer act as the last recourse economic (confidence) dynamo (because who the hell knows just what is going on in the mainland aside from building empty cities and grounding its entire monorail fleet, an action that was accompanied by so-called objective rating agency Dagong giving the rail ministry a rating higher than that of China itself!... once a rating agency...). However, this action of glaring sobriety does not stop our own fiscal monkeys from throwing feces at the stimulus wall in hopes something sticks. Just as last year the payroll tax was supposed to be the $100 billion gift that keeps on giving, yet crashed and burned miserable within months if not weeks, so this year we find that Obama is once again "recommending that the congressional deficit supercommittee back new measures to stimulate the lagging economy, people familiar with White House discussions said Tuesday." But that's not the funny part! No, the funny part is that even as he demands more alms, our munificent president would also "recommend the committee come up with a package that reduces the federal budget deficit by much more that its mandate of $1.5 trillion over the next decade, a senior administration official said, through changes in the tax code and social safety-net programs." So let us get this straight: more stimulus in the short-term, offset by quadrillions...nay... sextillions of savings at some point in the far future, long after the current administration is at the very bottom of the history books. Brilliant! But an even better idea: Obama should pull a Bryan Gardner and forge a money order from Hank Paulson, making Citi hand out a +/-$1 million check to every American, paid out of petty unaccounted for cash, as was the case before. Obviously, nobody noticed then; it is only Banana Republican that nobody will notice now.

More on this latest farce of short- vs long-termism from the WSJ:

"There's no reason to stop at $1.5 trillion," the official said.

Mr. Obama hasn't agreed to a set of proposals, people familiar with the discussions said, but the White House will begin to decide on elements of the plan in coming days. Mr. Obama is expected to make some decisions by Thursday.

Mr. Obama said in Iowa that when Congress returns from recess in September he will put forward "a very specific plan to boost the economy, to create jobs, and to control our deficit." He will unveil his plan before the Joint Select Committee on Deficit Reduction's first meeting on Sept. 16.

The White House is looking for ways to boost the sluggish economy and bring down unemployment that is now stuck above 9%. Mr. Obama, facing re-election next year, has been pushing Congress for months to adopt a variety of stimulus measures, some of which he could urge the committee to embrace. These include extending unemployment-insurance benefits and a payroll-tax cut for employees, which expire at year end and together cost more than $160 billion a year, and an infrastructure bank that could cost as much as $30 billion. The White House is also looking at a payroll-tax cut for employers, worth perhaps as much as roughly $110 billion, and other tax breaks for businesses of as much as $55 billion.

Mr. Obama's recommendations could complicate the committee's task because the stimulus measures, by increasing government spending and reducing revenue, would worsen the deficit in the short term. But Mr. Obama would recommend ways to offset those effects, and the whole package would still reduce the deficit over 10 years.

Oh please, what would he complicate? At this point only the morons at Fitch and Moody's buy anything coming out of the CBO. Zero Hedge is willing to place a bet of unlimited fiat amount that in 3 years, the CBO's current forecast for the 2014 deficit will be at least 50% off from the reality (obviously in the wrong direction), which in turn will mean that the entire debt ceiling farce was for nothing as the $2.1 trillion in 10 year savings will be swallowed by the tens of trillions in additional deficit funding that will mysteriously appear over the next several years, and be required to keep the US(S) PonzAAi from running into yet another iceberg.

So give Obama what he wants.

At this point the only thing that can save the system is if "they" just accelerate the status quo's crash course with fate, and just blow everything up to smithereens, thereby making a grand reset inevitable.

The longer we pretend something, anything can be fixed, the more pain, suffering and death will come to the people of this insolvent world.

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Corn Stocks Plunging as China Adds Brazil-Sized Crop to Demand

Corn Stocks Plunging as China Adds Brazil-Sized Crop to Demand
2011-06-19 15:00:00.0 GMT


By Whitney McFerron and Jeff Wilson
June 20 (Bloomberg) -- Even a fifth consecutive year of record global corn harvests will fail to meet demand for food, fuel and livestock feed, reducing world stockpiles to the lowest in two generations.
Consumption will rise 3 percent in the next marketing year, a 16th consecutive annual gain that saw demand jump 66 percent, according to U.S. Department of Agriculture estimates. Inventory will drop to 47 days of use, the fewest since 1974, the data show. Waterlogged fields in the U.S., the largest exporter, will curb yields, Goldman Sachs Group Inc. says. Corn may jump 36 percent to a record $9 a bushel if conditions worsen, Morgan Stanley says.
Corn purchases are accelerating as droughts and floods limit output gains in everything from soybeans to wheat, driving the Standard & Poor’s Agriculture Index of eight commodities 60 percent higher in 12 months. China, the world’s second-biggest consumer after the U.S., will use 47 percent more than a decade ago, adding an amount greater than the entire crop of Brazil, the third-largest producer.
“There is a storm developing in agriculture,” said Jean Bourlot, global head of commodities at UBS AG in London. “If we have the slightest disruption in any part of the world, the effect on the price will be considerable.”
Corn rose 4.9 percent in Chicago this year, even after dropping 7.4 percent last week to close at $6.60 on June 17.
Prices averaged $7.0225 since Dec. 31, on track for the highest level ever. While investors should be cautious for now, “long- term, I think $6 to $7 is a normal price,” Bourlot said. Costs are rising for Tyson Foods Inc., the biggest U.S. meat processor, and ethanol maker Archer Daniels Midland Co.

Commodity Index

The S&P GSCI index of 24 commodities advanced 5.9 percent this year, and the MSCI World Index of equities was unchanged.
Treasuries returned 3.4 percent, a Bank of America Merrill Lynch index shows.
Global production will rise 5.6 percent to 866.2 million metric tons in 2011-2012, still too little to meet demand of
871.7 million tons, according to the USDA, which combines variable local marketing years for its estimates.
China’s pork consumption doubled in the past two decades and demand for chicken quadrupled, the USDA estimates, boosting requirements for grain-based animal feed. Surging energy prices and subsidies spurred ethanol production, with the U.S. industry using seven times more corn than 10 years ago.
“For the livestock industry, the ethanol industry, and the food industry, it’s going to be a food fight,” said John Cory, the chief executive officer of Rochester, Indiana-based Prairie Mills, which processes corn meal and corn flour. “Any kind of weather problems are really going to be a significant problem.”

U.S. Farmers

Corn fell last week as drier weather enabled U.S. farmers to complete about 99 percent of expected plantings by June 12. A total of 69 percent of crops were in good or excellent condition. Above-average prices will spur farmers to keep sowing even if it means lower yields, Goldman Sachs said in a report June 13. The USDA will release its next acreage and inventory estimates on June 30.
South American producers will also grow more, said Lawrence Kane, a market adviser at Stewart-Peterson Group in Yates City, Illinois. Corn planting starts in September in Argentina and a month later in Brazil.
Demand may not expand as fast as anticipated by the USDA as economic growth weakens. Indexes tracking manufacturing in the New York and Philadelphia regions contracted this month, reports last week showed. Japan entered its third recession in a decade, and the Australian economy shrank the most in 20 years in the first quarter. China raised bank-reserve requirements to a record last week to cool the fastest inflation in three years.

Meat Prices

Livestock owners may cull herds, increasing meat supply, because of higher feed costs. Wholesale choice-beef prices dropped 9.9 percent since reaching a record April 5, and pork is down 2.6 percent from a May 16 high, USDA data show. Bacon retailed at $4.77 a pound in May, 24 percent more than a year earlier, data from the Bureau of Labor Statistics show.
Farmers also may replace corn with wheat in feed, because the grain is the cheapest relative to corn in 15 years.
Effingham Equity, a feed and farm-supply company in Effingham, Illinois, will add wheat in hog-feed rations for the second time in a quarter century, said Mark Tarter, the grains-department manager. Tyson Foods is using some wheat for poultry, said Gary Mickelson, a spokesman at the Springdale, Arkansas-based company.

Higher Feed Costs

Higher feed prices will add $500 million to Tyson’s costs in its fiscal year ending in September, Chief Operating Officer James V. Lochner told investors on a conference call May 9. Corn and soybean meal account for about 42 percent of spending to raise chickens, which generated more than 34 percent of sales in fiscal 2010.
Any decline in demand from livestock producers will be overwhelmed by the anticipated jump in Chinese consumption. The nation will use a record 181 million tons in the year that starts Oct. 1, the USDA said in a June 9 report. China’s pork production will reach an all-time high of 52.5 million tons in 2011, while chicken output will advance to 13.2 million tons, the most ever, according to the USDA.
“People just don’t want to give up a better diet once they shift to eating more meat,” said Steve Nicholson, a commodity procurement specialist at International Food Products Corp., a distributor and adviser on food ingredients in Fenton, Missouri.
He predicts prices above $8 before the end of the year.

Poor Nations Hurt

While higher prices help farmers, they are “devastating”
for the poor in developing nations, Angel Gurria, secretary general of the Paris-based Organization for Economic Cooperation and Development, said in a report June 17. Cereal costs may average 20 percent more and meat 30 percent more over the next decade than in the last one, the group said in the report.
Higher oil prices mean corn would probably have to exceed
$9 to trim demand from ethanol producers, said Dan Basse, the president of AgResource Co., a farm researcher in Chicago. The U.S. will convert a record 5.05 billion bushels into the fuel in the next year, compared with 707 million in 2002, the government estimates. Denatured-ethanol futures jumped 64 percent in the past 12 months on the Chicago Board of Trade.
While the U.S. Senate voted June 16 to eliminate a tax credit and a tariff that subsidize ethanol production, analysts said the measure is unlikely to become law and wouldn’t alter demand as long as fuel prices remain high. Also, Congress hasn’t changed the government mandate for renewable fuels, which will rise to 15 billion gallons in 2015 from 9 billion in 2008.

Gasoline Prices

Regular gasoline on average cost $3.675 a gallon at the pump on June 16, 36 percent more than a year earlier, according to the American Automobile Association. Prices peaked on May 4 at $3.985, the highest in almost three years.
“It’s not going to make a substantial difference to the amount of ethanol produced, to the price of corn, or farm income,” Mark McMinimy, the energy and agriculture policy analyst for MF Global Inc. in Washington, said of the Senate measure. “If oil prices tank and corn prices stay near a high, then ethanol production is going to recede to the level of the mandate. But the mandate continues to go up.”
U.S. farmers are contending with extreme weather in several agricultural states. Rain delayed planting from North Dakota to Ohio, and floods damaged crops along the Mississippi, Ohio and Missouri rivers.

Lost Crops

Those delays increased the risk of supply being lost, said Shawn McCambridge, the senior grain analyst at Prudential Bache Commodities LLC in Chicago. Should hot, dry weather in July or August hurt crops, prices may rise to $8.50, he said. Corn planted in wet soil has shallower roots, diminishing its ability to withstand such conditions.
Temperatures as much as 10 degrees Fahrenheit above normal and dry soil from Texas to North Carolina are already threatening yields, according to Michael Cordonnier, the president of the Soybean and Corn Advisor in Hinsdale, Illinois, a crop forecaster. The concern now is that the heat moves north, he said.
The late planting also puts the crop at greater risk of damage from too much rain during the growing season and frost nearer to the harvest in September, said Allen Motew, a meteorologist at QT Weather in Chicago.
This year’s weather patterns are similar to 1993 and 2009, Motew said. Yields rose in 2009 because the summer months were cool and there was no frost before the harvest, he said. In 1993, yields plunged 23 percent.
“July and August will tell us, because the corn crop is made in that period of time,” said Liddell of Rabo AgriFinance, a unit of Utrecht, Netherlands-based Rabobank Groep. “More things have gone wrong than have gone right.”