The U.S. LNG Pause: Implications for the Global Fertiliser and Food Markets
Peter Fawley
The U.S. LNG Pause
On January 26, the Biden administration announced a temporary pause on approvals of new liquified natural gas (LNG) export projects. The pause applies to proposed or future projects that have not yet received authorisation from the United States (U.S.) Department of Energy (DOE) to export LNG to countries that do not have a free trade agreement (FTA) with the United States. This is significant as many of the largest importers of U.S. LNG–including members of the European Union, the United Kingdom, Japan, and China–do not have FTAs with the United States. Without the DOE authorisation, an LNG project will not be allowed to export to these countries. The policy will not affect existing export projects or those currently under construction. The Department of Energy has not offered any indication for how long the pause will be in effect.
This pause will have political and economic implications across the globe, and is expected to apply further pressure to the LNG market, fertiliser prices, and agricultural production. The following analysis will first delve into the rationale for the pause, the expected impact it will have on global LNG supplies, and the associated risks this poses for the fertiliser and food markets. It will then examine the impact of this policy change on India’s agricultural sector, given that the country is heavily reliant on LNG imports to manufacture fertilisers for agricultural production. The article will conclude with brief remarks about the pause.
Reasons for the Pause
According to the Biden administration, the current review framework is outdated and does not properly account for the contemporary LNG market. The White House’s announcement cited issues related to the consideration of energy costs and environmental impacts. The pause will allow DOE to update the underlying analysis and review process for LNG export authorisations to ensure that they more adequately account for current considerations and are aligned with the public interest.
There are also likely political motivations at play, given the upcoming election in the United States. Both climate considerations and domestic energy prices are expected to garner significant attention during the lead up to the 2024 U.S. presidential election. The Biden administration has been under increasing pressure from environmental activists, the political left, and domestic industry regarding the U.S. LNG industry’s impact on climate goals and domestic energy prices. In fact, over 60 U.S policymakers recently sent a letter to DOE urging its leadership to reexamine how it factors in public interests when authorising new licences for LNG export projects.
These groups have argued that the stark increase in recent U.S. LNG exports is incompatible with U.S. climate commitments and policy objectives, as the LNG value chain has a sizeable emissions footprint. Moreover, there is a concern about the standard it sets for future policy. An implicit and uncontested acceptance of LNG could signal that the U.S is wholly committed to continued use of fossil fuels as an energy source, leading to more industry investments in fossil fuels at the expense of renewable energy technologies. In an unusual political alliance, large U.S. industrial manufacturers are lobbying alongside environmentalists to curb LNG exports. These consumers, who are dependent on natural gas for their manufacturing processes, worry that additional LNG export projects will raise domestic natural gas prices. Therefore, the pause may then be interpreted as an acknowledgement of these concerns and an attempt to reassure supporters that the Biden administration is committed to furthering its climate goals and securing lower domestic energy prices.
Impact on LNG Supplies
Since the pause only pertains to prospective projects, there will be no impact on current U.S. LNG export capacity. However, the pause may constrain supply and reduce forecasted global output as the new policy indefinitely halts progress on proposed LNG projects that are currently awaiting DOE authorisation. In the long-term, this announcement has the potential to tighten the LNG market, potentially resulting in increased natural gas prices and other commercial ramifications. Because the U.S. is currently the world’s largest LNG exporter, a drop in expected future U.S. supplies may force LNG importers to seek to diversify their supply. Some LNG buyers will likely redirect their attention to other, more certain sources of LNG, such as Qatar or Australia. Additionally, industry may be more keen to invest in projects in countries that have less regulatory ambiguity related to LNG projects.
Risk for the Global Fertiliser and Food Markets
Natural gas is key to the production of nitrogen-based fertilisers, which are the most common fertilisers on the market. With regard to the use of natural gas in fertiliser production, most of it (approximately 80 per cent) is employed as a raw material feedstock, while the remaining amount is used to power the synthesis process. Farmers and industry prefer natural gas as a feedstock as it enables the efficient production of effective fertilisers at the least cost.
The U.S. pause on new LNG projects is an unsettling signal to already fragile natural gas markets given the existence of relatively tight current supplies and a forecasted shortfall in future supply levels. This announcement will exacerbate vulnerabilities and put increased pressure on global supplies, potentially leading to greater volatility and price escalation. Additionally, increased global demand for natural gas will further strain the LNG market. Therefore, global fertiliser prices may increase given that natural gas is an integral input in fertiliser production. Natural gas supply uncertainty stemming from the U.S. announcement may not only impact market prices for fertiliser, but could also increase government subsidies needed to support the agricultural industry to protect farmers from price volatility. Due to the increased subsidy outlay, government expenditure on other publicly-funded programs could plausibly be reduced.
The last time there was a significant shock to the natural gas market, fertiliser shortages and greater food insecurity ensued. Following the 2022 Russian invasion of Ukraine, there was a stark increase in natural gas prices, which led to a rise in the cost of fertiliser production. This prompted many firms to curtail output, causing fertiliser prices to soar to multi-year highs. Higher fertiliser costs will theoretically induce farmers to switch from nitrogen-dependent crops (e.g., corn and wheat) to less fertiliser-intensive crops or decrease their overall usage of fertilisers, both of which may jeopardise overall agricultural yield. Given that fertiliser usage and agricultural output are positively correlated, surging fertiliser costs in 2022 translated into higher food prices across the world. While inflationary pressures have subsided in recent time, global food markets remain vulnerable to fertiliser prices and associated supply shocks. This is especially true for countries that are largely dependent on their agricultural industry for both economic output and domestic consumption. Food insecurity and global food supplies may also be further constrained by unrelated impacts on crop yields, such as extreme weather and droughts.
Case Study: India
The future LNG supply shortfall and its impact on fertiliser and food markets may be felt most acutely by India. The country is considered an agrarian economy, as many of its citizens – particularly the rural populations – depend on domestic agricultural production for income and food supplies. Fertiliser use is rampant in India and the country’s agricultural industry relies heavily on nitrogen-based fertilisers for agricultural production. With a steadily rising population and a finite amount of arable land, expanded fertiliser usage will be necessary to increase crop production per acre. As a majority of India’s fertiliser is synthesised from imported LNG, the expected increased demand for fertiliser will necessitate more LNG imports.
LNG imports to India are projected to significantly rise in 2024, with analysts forecasting a year-on-year growth of approximately 10 per cent. Over the long-term, the U.S. Energy Information Administration predicts that overall natural gas imports to India will grow from 3.6 billion cubic feet per day (Bcf/d) in 2022 to 13.7 Bcf/d in 2050, a 4.9 per cent average annual increase. The agricultural industry is a substantial contributor to this growth. This trend is only expected to continue, as India has announced that it plans to phase out urea (a nitrogenous fertiliser) imports by 2025 in order to further develop its domestic fertiliser industry. To ensure adequate supplies for domestic urea production, India is expected to increase its natural gas demand and associated reliance on LNG imports. A recent agreement between Deepak Fertilisers, a large Indian fertiliser firm, and multinational energy company Equinor exemplifies this. The agreement secures supplies of LNG (0.65 million tons annually) for 15 years, starting in 2026.
Concluding Remarks
The U.S. pause on new LNG export facilities will have ramifications for the global natural gas market and supply chain. While current export capacity will not be jeopardised, the policy change will delay future projects and may put investment plans into question. The pause will also have implications for downstream markets in which natural gas is an important input, such as the fertiliser market. There are a couple of questions that now loom over the LNG industry: (1) what will be the duration of the pause; and (2) to what extent will the pause affect LNG markets?
While the U.S. Department of Energy has given no firm timeline for the pause, analysts estimate – based on previous updates – that the DOE review will likely last through at least the end of 2024. The expectation is that the longer the pause remains in effect, the more uncertainty it will create, especially as it relates to private industry investment decisions and confidence in U.S. LNG in the long-term. In addition to the fertiliser and food markets, transportation, electricity generation, chemical, ceramic, textile, and metallurgical industries may all be affected by the pause. One potentially positive consequence is that because LNG is often thought of as a transitional fuel (between coal and renewable energies), a large enough impact on LNG supplies could accelerate the energy transition directly from coal to renewable sources of energy, providing a boost to the clean energy technologies market. However, the pause may also create tensions with trading partners as it could be interpreted as an export control or a discriminatory trade practice, both of which stand in violation of the principles of the multilateral rules-based trading system. This may expose the U.S. to potential challenges and disputes at the World Trade Organization. Although it may be some time before we are provided concrete answers to these questions, the results of the 2024 U.S. presidential election will provide some insight into what LNG policies in the U.S. will look like going forward.
We’ve Got a Fungal Problem: A Looming Threat to Global Wheat Production and Food Security
Wheat is one of the most important staple crops in the world, providing food and income for billions of people. However, wheat production is facing a serious challenge from fusarium blight, a fungal disease that infects wheat ears and reduces grain quality and yield. It also produces mycotoxins, which are harmful to human and animal health. The fungus is influenced by weather conditions, especially temperature and rainfall, and is expected to worsen under climate change scenarios. This spotlight examines the current and projected impacts of fusarium blight on wheat production, prices, and security, and discusses the political implications.
Current Impacts of Fusarium Blight
Fusarium blight is a widespread and devastating disease of wheat, affecting all major wheat-producing regions in the world. The fungus lowers yields and reduces the quality of wheat grains by lowering their test weight, protein content, and germination rate. It also contaminates wheat grains with mycotoxins, such as deoxynivalenol (DON) and zearalenone (ZEA), which can cause acute and chronic health problems in humans and animals, such as vomiting, diarrhoea, reproductive disorders, immune suppression, and cancer. This presence of mycotoxins in wheat affects its marketability and trade, as many countries have set maximum allowable levels for mycotoxins in food and feed.
Fusarium blight outbreaks are highly variable and depend on several factors, such as the susceptibility of wheat cultivars, the timing and duration of flowering, and the weather conditions during flowering and post-flowering. Warm, wet, humid conditions during flowering favour infection by fusarium species, causing ear blights and seed-borne infection. Further rainfall and humid conditions allow secondary infections to occur, allowing further fungal growth and mycotoxin production. Therefore, fusarium blight epidemics are often associated with wet seasons or regions with high rainfall or irrigation.
In terms of specific numbers, the FHB epidemic has been reported to lead to a 10–70% of production loss during epidemic years. For example, in China, a 5–10% yield loss is common due to FHB, but it can reach up to 100% in epidemic years, affecting around 7 million hectares of wheat fields.
These factors can create a supply shortage, which in turn can drive up the price of wheat in the commodity market. However, the exact impact on wheat prices can vary depending on a range of factors, including the severity of the outbreak, the region’s reliance on wheat production, and the global wheat market conditions at the time of the outbreak.
Winter Wheat
Commodity wheat, sometimes referred to as winter or common wheat , accounts for the vast majority of production worldwide as it contains higher protein than other varieties, this allows for a wider range of uses and a higher number of possible products produced from the wheat itself. Winter wheat is planted in the autumn and harvested in the following summer. It is grown in temperate regions of the world, such as Europe, North America, China, and India. Winter wheat also provides soil cover and erosion control during the winter months.
Blight is much more common in winter wheat than in spring wheat because winter wheat has a longer exposure to the risk factors that favour fusarium infection. These risk factors include warm and humid weather during flowering, and susceptible varieties. Winter wheat also tends to flower earlier than spring wheat, which coincides with the peak period of fusarium spore production and dispersal.
Projected Impacts of Fusarium Blight under Climate Change
Climate change is expected to increase the frequency and intensity of extreme weather events, such as heat waves, droughts, floods, storms, and hail. These events can directly affect wheat production by damaging crops or reducing yields. However, climate change can also indirectly affect wheat production by altering the distribution and severity of plant diseases, such as fusarium blight.
The extent to which fusarium blight may affect the prices of winter wheat depends on several factors, such as the magnitude and frequency of fusarium epidemics, the availability and cost of fungicides and resistant varieties, the demand and supply of wheat in the global market, and the regulations and standards for mycotoxin contamination. Fusarium blight can reduce the quantity and quality of winter wheat, which may lower its market value and increase its production costs. Fusarium blight may also pose a threat to food safety and security, as mycotoxins can cause adverse health effects in humans and animals. Therefore, fusarium blight can have negative impacts on the income and welfare of farmers, consumers, processors, traders, and regulators.
Several studies have projected the impacts of climate change on fusarium blight using crop models coupled with disease models and climate scenarios. The results vary depending on the location, time horizon, emission scenario, and model assumptions. However, some general trends can be observed:
Climate change will advance wheat anthesis dates, the stage of the wheat life cycle that allows for full flowering, it is at this stage that wheat is vulnerable to blight and rainfall during this period is predictive of incidents of blight. Due to higher temperatures and shorter growing seasons this may reduce the exposure of wheat to fusarium infection during flowering, as the peak of infection may occur before or after anthesis. However, this may also increase the risk of heat stress and drought stress during grain filling, which can reduce wheat yields and quality.
Climate change will increase the incidence and severity of fusarium blight in regions where rainfall and humidity are projected to increase, especially during flowering. This may enhance the infection by fusarium species and the production of mycotoxins in wheat grains. However, this may also reduce the risk of water stress and increase the water use efficiency of wheat crops.
Climate change will decrease the incidence and severity of fusarium blight in regions where rainfall and humidity are projected to decrease, especially during flowering. This may reduce the infection by fusarium species and the production of mycotoxins in wheat grains. However, this may also increase the risk of water stress and reduce the water use efficiency of wheat crops.
Implications for Wheat Prices and Security
The impacts of fusarium blight on wheat production, quality, and trade have significant implications for wheat prices and security. Wheat prices are determined by the interaction of supply and demand factors in global markets. Supply factors include production, stocks, trade policies, weather shocks, and diseases. Demand factors include consumption, income, population growth, preferences, and biofuel policies. Wheat security refers to the availability, accessibility, utilisation, and stability of wheat for food and feed purposes.
Fusarium blight can affect both supply and demand factors of wheat prices and security. On the supply side, fusarium blight can reduce wheat production by lowering yields and quality. This can create a supply shortage in domestic or international markets, leading to higher prices. Fusarium blight can also affect wheat trade by reducing exports or increasing imports. This can create a trade imbalance or a trade disruption in regional or global markets, leading to price volatility. Fusarium blight can also affect wheat stocks by reducing storage or increasing disposal. This can create a stock depletion or a stock accumulation in national or global markets, leading to price instability.
On the demand side, fusarium blight can reduce wheat consumption by lowering preferences or increasing health risks, even as states maintain high standards, the share of global wheat that meets those standards will decrease thereby decreasing supply and decreasing the amount of high quality wheat products available to consumers. This can create a demand decline in domestic or international markets, leading to lower prices.
On the supply side, fusarium blight can also affect wheat income by reducing profits or increasing costs. This can create an income loss or an income transfer in producer or consumer groups, leading to price inequality. Fusarium blight can also affect wheat population by reducing growth or increasing mortality. This can create a wheat population decrease or a population displacement in rural or urban areas, leading to price insecurity.
Wider Consequences and Political Risk
The wider consequences of fusarium blight in winter wheat are related to its potential effects on food security, public health, trade, and environment. Fusarium blight can reduce the availability and accessibility of wheat as a staple food for millions of people around the world. Fusarium blight can also compromise the nutritional quality and safety of wheat products due to mycotoxin contamination. Fusarium blight can affect the trade relations between countries that produce or import winter wheat, as different countries may have different standards and regulations for mycotoxin levels. Fusarium blight can also have environmental implications, as it may increase the use of fungicides that can have negative effects on biodiversity and water quality.
The political risk of fusarium blight in winter wheat can be explained as the possibility of conflicts or disputes arising from the different interests and perspectives of various stakeholders involved in the production, consumption, and trade of wheat. For example, fusarium blight can create tensions between wheat exporters and importers, as the former may face lower demand and higher costs due to quality issues, while the latter may face higher prices and lower supply due to scarcity issues. Fusarium blight can also create challenges for policymakers and regulators, as they have to balance the needs and expectations of different groups, such as farmers, consumers, processors, traders, and environmentalists. Fusarium blight can also affect the stability and security of regions or countries that depend heavily on wheat as a food source, as it can cause food shortages, malnutrition, and health problems. Fusarium blight can also trigger social unrest or violence, as people may protest or riot against the authorities or other groups for their perceived failures or injustices related to wheat production or distribution.
Conclusion
In conclusion, fusarium blight emerges as a looming threat to global wheat production and security, with its multifaceted impacts on yield, grain quality, human and animal health, and international trade. The intertwined relationship between fusarium blight and climate change exacerbates the challenge, requiring comprehensive and adaptive strategies. Beyond its immediate economic consequences, the disease's far-reaching effects on food security, public health, trade relations, and environmental sustainability underscore the urgency for collaborative international efforts. Addressing fusarium blight demands not only innovative agricultural practices, resistant crop varieties, and stringent regulatory standards but also necessitates a holistic approach, involving policymakers, researchers, farmers, and consumers to ensure the resilience of global wheat production systems in the face of this pressing threat.
Rice Bowls and Revitalization: Navigating China's Complex Food Security Landscape
Introduction
CCP Chairman Xi Jinping has proclaimed that the “Chinese people should hold their rice bowls firmly in their own hands, with grains mainly produced by themselves”. Yet this directly conflicts with his other stated goal of “rural revitalisation”, the effort to identify high value crops and agricultural industries for the purpose of raising farmer’s incomes and to alleviate rural poverty. Such tensions denote the contrast between two old visions of the state's duty to Chinese citizens, with both outlooks sharing little in common with the other.
This is reflective of the dual problems China faces over the coming decades: how to continue on the path of uplifting the rural poor from poverty, whilst simultaneously restricting their choice of crops to core staples in the interest of national food security.
This spotlight presents the problems facing China’s domestic food supply and increasing foreign dependence while discussing the complications caused by goals of both economic uplift of citizens and the long term protection of the nation’s dwindling farmland. Additionally, this spotlight analyses historic trends in Chinese food production and demand and their subsequent effect on global food prices, before reviewing the possible Taiwan-related motivations of the Chinese state.
This spotlight concludes that the proclaimed “guozhidazhe”, meaning a national priority or a main affair of the state, can be considered both as a push for food security while at the same time demonstrating a deliberate decision to prioritise the food security of the urban middle classes over the rural poor, this tradeoff itself having political and social consequences.
Rural Policy Background
The Deng Xiaoping market reforms of the 1980s seem to fade further and further into the rear view mirror as China trundles along towards true self-sufficiency. That’s when collective farms, a staple of most early communist regimes, were split and farmers were permitted to sell any crop they wished at market price.
Current Chairman, Xi Jingping, takes the opposite view, that Chinese farmers must forget the days when premium sellers such as flowers and fruit were harvested on China’s dwindling and already small stocks of arable land. Instead, farmers must focus on harvesting the staples that keep a nation going, a factory’s workers churning, and the nation’s stockpiles ever expanding. As such, China has been building up huge stockpiles in basic foodstuffs such as wheat, rice, and corn (around a year’s national supply of each). This has raised the global price of grain, with China now hoarding over half the world’s supply.
China is not blessed with good conditions for agricultural production. China has long been troubled by famine, with the emperors of antiquity usually looking to fill bellies as the first step to win hearts and minds. Today, China attempts to feed a fifth of humanity with less than 10% of the world’s farmland and only 7% of the world’s fresh water. Despite this, it manages to produce around a quarter of the world’s grain and ranks first across the globe for the production of cereals, fruit, vegetables, meat, poultry, eggs, and fishery products.
China's food security strategy today faces several challenges and trade-offs. One of them is the dilemma between increasing farmer's incomes and promoting the production of basic foodstuffs over cash crops. Cash crops are crops that are grown for sale rather than for domestic consumption, such as cotton, tobacco, tea, and fruits. Cash crops can provide higher returns for farmers and stimulate rural development, but they also compete with food crops for land, water, and other resources. This is causing confusion and resentment on the ground, where generations of shifting national priorities have been felt in the pockets of China’s rural population.
Another challenge is the dependence of China's food security on the stability of the global food market and the geopolitical situation. China is the world's largest importer of agricultural products, including soybeans, corn, wheat, rice, and dairy products. Between 2000 and 2020, the country’s food self-sufficiency ratio decreased from 93.6 percent to 65.8 percent. This is predominantly due to changing diet patterns with imports of edible oils, sugar, meat, and processed foods increasing.
This has been spurred on by the increasingly large Chinese urban middle class. More concerned with food safety than their parents, and dismayed from Chinese brands by decades of little to no strict food safety regulations in the country, these people turn increasingly to internationally imported goods. Additionally, there have been many contaminated and unsafe food scandals in China this side of the millennium, for example a large proportion of parents are still loyal to foreign baby formula as the result of six babies dying and hundreds of thousands being poisoned as a result of contaminated domestically produced formula in 2008.
China is also the largest producer of meat on the planet as stated earlier. This has been achieved by diverting many of the basic foodstuffs to livestock instead of to humans. China consumes around 175 million tonnes of corn in animal feed each year and imports approximately 100 million tonnes of soybeans to also use in animal feed. The growing urban middle class has increased demand for animal products domestically, such that corn used for animal feeds tripled from around 20% in the 1960s to 64% by 1994. This has contributed to state concerns over food security, with more of the staples going to livestock than ever before and the population's nutritional intake increasing in complexity. The reliance on imported food to meet those needs presents China with a problem, not just in terms of quantity for those at the bottom, but also in terms of quality and variety for those in the newly established middle class. China, therefore, is aiming to increase staple harvests not just to meet the needs of the population in terms of calories but also in terms of happiness and nutrition in an evermore complex and dangerous world the CCP perceives in the face of climate and geopolitical threats.
Additionally, it is difficult for food producers to make any meaningful profit farming staples, due to the price controls instituted from the top down. Therefore, another of Xi’s policy staples seems set for the chopping block. Xi has identified the uplifting of the rural poor as a priority for the CCP by allowing them to grow crops of high market value and invest in profitable agricultural industries to achieve rural revitalisation.
China has further diversified its uses for corn into the production of High Fructose Corn Syrup (HFCS). Reforms in the mid-2010s led to a mass sell-off of the nation’s then corn reserves and allowed for HFCS output to increase and for idle capacity to be reignited. HFCS sells for around a third of the price of natural sugar in China and garners a fifth of the domestic sweetener market. Chinese HFCS has also been exported abroad and disrupted the sugar industries of a number of southeast Asian states, with already declining sugar consumption causing concern in the Philippines where sugar cane harvests regularly outstrip demand and where around half of Chinese HFCS ends up. As the CCP pushes for more corn to be grown domestically and therefore be bought within strict price controls, the HFCS industry may further disrupt the growth in sugar demand awaited by many burgeoning economies in the region, particularly India, Indonesia, and Vietnam where imports of Chinese HFCS rank just behind the Philippines.
The Filipino government enacted trade restrictions on Chinese HFCS to protect domestic sugar production, further export of HFCS will increase tensions, place economic pressure on a key Filipino national industry, and inflame tensions in the region.
However, many question what happened to the “Grain to Green” goal set in the 1990s of planting forests to counter soil erosion and limit desertification. China’s food dependence is predicted to continue increasing, as a result of arable land loss. China in 2019 only possessed 95% of the arable land it held in 2013, this has been attributed to overuse of fertilisers, neglect of land, and climate change. Extreme weather, environmental degradation, water scarcity, and pollution all look to be ready to make the problem worse in the coming years and decades. Researchers from both China and the US judged that climate change and the loss of parts of the ozone layer were responsible for a 10% drop in average crop yields from 1981 to 2010.
The implications for global commodities
A fifth of humanity drastically changing the quantities and types of food they eat has unsurprisingly had major effects on the global price of food in the past. The food price hike of 2007-2008 pushed approximately 400 million people into poverty worldwide and was partly blamed by many on China and India’s rising demand for foreign agriculture leading to increased consumer competition on international markets and therefore higher prices.
However, if China stays on course to increase the amount of food produced domestically, at least in the short to medium term, based on the lack of attention paid to the slowly dwindling supply of arable land, then demand internationally for agricultural commodities like wheat, rice, and corn is bound to fall, possibly leading to a reduction in prices for these basic products and the foodstuffs they produce in combination with other materials and ingredients. Some of the poorest and most import-dependent countries on Earth should expect less competition at the table from now on as China prioritises the stomachs of its people over its farmers’ wallets.
Why Change So Much So Quickly?
China’s buildup of stockpiles on top of increasing domestic food production has many analysts worried. With tensions over Taiwan at a high, it raises the possibility that China’s move to increase food security is an attempt to prepare for future US-led sanctions and blockades as a consequence of invading what it considers to be a rebel province.
Alternatively, the justifications of the policy make sense in the opposite terms, not that conflict is planned but that shocks to the global food system, such as the collapse of the Ukraine Russia grain deal of which China was a major beneficiary, are only expected to increase as a result of conflicts in the region, or on the other side of the world.
It can be easily understood that the push for national food security is one caused by external factors alone, but the initiative’s counteraction against ideals of rural revitalisation demonstrate a definite domestic consequence and a readjustment of the urban/rural political and economic relationship in China. Even as improved physical and digital infrastructure draw the educated and successful back to small towns and villages, there has been very little progress towards bridging the urban/rural divide. In 1995, urban workers made three times their rural counterparts, today the ratio is roughly the same even in the face of government efforts to close the gap.
The realignment taking place, for farmers to grow low income but highly needed crops to keep both basic food prices low and maintain a steady supply of cheap other foodstuffs such as meat and sweetener, illuminates China’s prioritisation of the urban middle classes with more complex dietary expectations over the farmers and rural poor reaching to claim their share of the Chinese dream.
Conclusion
China's dual objectives of ensuring food security and promoting rural revitalisation underscore a complex challenge. Balancing the imperative for self-sufficiency with the need to uplift rural communities reveals tensions between historical legacies, socioeconomic aspirations, and global realities. The intricate interplay between these goals not only impacts China's domestic landscape but also resonates internationally through changing trade dynamics and geopolitical considerations. The nation's journey to navigate these complexities will define its agricultural trajectory, with far-reaching implications for both its citizens and the global community.
Image credit: Colin W via Wikimedia Commons
Niger Coup: What Could've Left the Sahel's Last Bastion so Vulnerable?
Introduction
Niger’s President Mohamed Bazoum has been ousted from power, claims the presidential guard, who appeared on national television late on Wednesday night, mere hours after he was captured in the country’s presidential palace. The coup artists claim to have suspended all political institutions in the country. General Abdourahamane Tiani, the head of Niger’s presidential guard, who previously was rumoured to have been in negotiations with the president after Bazoum planned to demote him from head of the organisation, was initially challenged by the wider armed forces and national guard, who threatened to attack the insurrectionists unless they stepped down; those same armed forces now back the coup against Bazoum to supposedly prevent a bloodbath, even as Bazoum pledged to protect the democratic gains made in the country, in spite of recent events.
The following report provides a summary of the potential contributors to the instability in Niger, including the precarious security situation, growing anti-French and pro-Russian sentiments, dwindling food supply, political mismanagement of the world’s fastest growing population, and a sharp rise in the price of fuel.
National Overview
Niger is a multicultural yet overwhelmingly Muslim North-West African nation, around double the size of Texas or France, bordering Nigeria to the South, Mali to the West, Algeria and Libya to the North, and Chad to the East, as well as other smaller nations in all directions. It usually resides at the bottom of most indicators of human development and is one of the poorest nations on earth, with a population of around 25 million people. It is a former French colony, with French being the language of administration. France remains one of its primary import and export partners. Moreover, the country still uses the Franc as its currency.
The Hausa (also majorly present in northern Nigeria) live mainly in the South and centre of the country and are the largest ethnic group at 51% of the population. The Zarma-Songhai make up 21% of the population and primarily reside in the nation’s southwest. 80% of the country’s area is covered by the Sahara Desert. This area, however, only contains 20% of the country’s population, made up primarily of the Tuareg and other ethnic groups, which make up the remainder of Niger’s population. The sheer size of the Sahara makes water scarce, particularly in the north of the country. The South, however, has a more tropical climate with higher rainfall. It is home to both French and American military bases, with both countries involved in the international effort against Jihadist groups in the Sahel region of North West Africa; a section of this region forms part of Niger’s territory.
Situational Background
Niger is no stranger to coups and coup attempts, with military officers overthrowing presidents in 1974, 1996, 1999, and 2010. Bazoum’s ascent to the presidency, however, was the country’s first ever case of a peaceful transfer of power from one president to another, despite an attempted coup just two days before Bazoum’s inauguration in 2021 as well as accusations of fraud from the second place candidate, Mahamane Ousmane, whose supporters have held mass rallies. Bazoum was the preferred successor of his predecessor, Mahamadou Issoufou, who stepped down voluntarily. Rather than a break with Niger’s tradition of military coups, this suggests an aberration created by the transfer of power from one chairman of the board to another, instead of one governmental apparatus handing over to another.
Yet, Bazoum’s regime had begun to be viewed within the country as increasingly repressive and not particularly popular. Additionally, his predecessor may have been viewed internationally as an effective democratic leader, but this view is rarely found in Niger itself, with wide scale industrial action taking place under both Bazoum’s and Issoufou’s reigns respectively.
Militants in the Sahel and Lake Chad Basin
Bazoum, seen by many within Niger as a puppet of French authorities, has stated that France’s anti-Jihadist force in the region is a “relative failure, it’s a shared failure, a failure of the entire coalition." He also stated that France’s troop drawdown in the region would have only a limited impact. In fact, on the same day that Bazoum’s election victory was certified by the nation’s constitutional court, armed men on motorbikes attacked a string of villages on the Mali border, leaving 137 dead in the nation’s deadliest violence in recent times.
There are now more fatalities linked to militant islamist groups in the Sahel than in any other region of Africa. In fact, violence in the Sahel increases year on year, while fatalities linked to islamist groups in other parts of Africa have fallen.
In the West, the Islamic State in the Greater Sahara (ISGS) and Jama’at Nusrat al Islam wal Muslimin (JNIM), made up of various Al Qaeda affiliates, with the Macina Liberation Front (FLM) being the one most active in the Sahel, are the largest contributors to fatalities linked to islamist violence in the region. The Africa Center for Strategic Studies attributes these two groups with the majority of violent attacks and islamist militant violence in the Sahel, which now accounts for 60% of such violence across the continent.
This has led to the displacement of approximately 2.5 million people across the region, although Burkina Faso accounts for the majority of those displaced. Some of the latest data from 2021, the year of Bazmoun’s inauguration, showed a 50% rise in battles between JNIM forces and security forces, while battles with ISGS fell by 45%.
The main groups operating in Eastern Niger, as part of the Lake Chad Basin, are Boko Haram, the Islamic State in West Africa (ISWA), and Ansaru. These groups are also present in Nigeria, Cameroon, and Chad. The Lake Chad Basin is now the second highest region in Africa for fatalities linked to militant islamist groups. Its trend is overall downward, however, as opposed to the increasing violence in the Sahel. As of 2021, the Basin saw a 32% drop in militant islamist activity and a 21% drop in reported fatalities linked to militant islamist groups. Boko Haram is the group most on the decline, with a drop in linked fatalities of 46%, while ISWA only saw a drop of 3%. This discrepancy is most likely due to the death of Boko Haram’s longtime leader, Abubakur Shekau, in May 2021 and subsequent regrouping.
The relative rise in violence in the Sahel, and the drop in Lake Chad, present new problems for security forces in Niger. In 2012, the vast majority of violence that forces in Niger had to contend with was situated in the east of the nation, in the Lake Chad Basin. Although violence in the Basin has recently been on the decline, the sharp rise in violence in the Sahel, contained in parts of western Niger, leaves the counter-islamist-militant coalition split across the country with only vast desert and a small section of tropical savannah linking the two fronts, making transfers of troops and supplies by land vulnerable and logistically difficult.
Growing Anti-French Sentiment and Increasing Russian Influence Across the Region
There is little information on why the same presidential guard that fought to protect Bazoum’s life in March 2021, has captured him and supplanted Niger’s political institutions. There are serious concerns that the Wagner group is connected. Fans were flamed by Wagner Group Commander Yevgeny Prigozhin’s attendance at a recent Russia-Africa summit in St Petersburg, suggesting Wagner and the Russian state remain partners on the continent. Prigozhin's public statements, characterising the coup as “a battle by the people of Niger against their colonisers”, were especially alarming. The Wagner Group’s goals as a private military company (PMC) are to secure profit while advancing Russian socio-economic and foreign policy interests.
Niger and the wider region of Francophone North-West Africa have come under increasing Russian influence in recent times. This has combined with existing anti-colonial and anti-French sentiment to create a perfect storm of public pressure against the French and the West as a whole. The same week as the coup in Niger, the new Mali constitution, brought in via referendum, demoted French as an official language to the status of a “working” language. This subsequently promoted a number of native languages to official status.
The French military’s operations in Mali were always only somewhat supported by the population, with one especially gruesome event where a French air strike killed 22 people at a wedding, exemplifying the tension, propensity for callousness, and frequent unforced errors made by the French military. The French government asserted that those killed were Jihadis, while the UN concluded that they were overwhelmingly civilians. Mali has now turned to the Wagner Group for military aid in fighting insurgencies, and expelled its French forces.
Bazoum, however, has identified France as an easy target for "the populist discourse of certain opinions, especially on social media among African youth” and that “its adversaries want to project an image of France as a neocolonialist power. Some people stick to that cliché, which is not true, but which is very useful for propaganda.” He stated that Wagner had been ineffective in Mali, and that the number of refugees entering Niger from Mali had actually increased since the departure of French forces in the region.
With many of Niger’s neighbours creeping out of western influence, the nation seemed increasingly to be the last bastion of the so-called “coup belt”, a grouping of predominantly Francophone Central and West African countries.
The French government in particular came to view Niger as a partner of last resort, as its other options dissipated. Ibrahim Yahaya Ibrahim, a senior Sahel analyst at the International Crisis Group speaking to the Financial Times, said Bazoum’s pro-western stance had received a mixed reception at home, where he had taken “quite a hit”. “The same anti-French discourse that has proliferated in Mali and Burkina Faso is also present in Niger”. More specifically, Bazoum had complained of disinformation campaigns by Wagner against his government. Perhaps then it is no surprise that supporters of the Niger coup have been seen waving Russian flags all over the country, seen by many as Niger’s ally against western hegemony and colonialism.
Wagner’s preference for payment in natural resources, most commonly valuable raw minerals, is not news. Niger produces 7% of the world’s Uranium, with most of it ending up in France for use in the nation’s many nuclear power stations, which produce around 70% of French power. Around three quarters of France’s Uranium comes from just four countries: Kazakhstan, Australia, Niger, and Uzbekistan. However, Niger has been diversifying its customer base, with significant shares of the country’s uranium now being sold to companies based in Canada and China, with each nation’s operation in Niger maintaining its own extraction sites.
Therefore, the theory has been circulated that the coup in Niger achieves two goals for Wagner and the Russian government. Firstly, Wagner may now be able to operate in Niger in exchange for uranium, which can then be used in Russia for military and/or civilian purposes, or sold on international markets.
Secondly, Wagner may develop the relationships necessary to divert significant amounts of Uranium away from the French energy market, jeopardising the price of energy in France and bringing an energy-borne cost of living crisis there that countries dependent on Russian gas have been experiencing in the rest of Europe. This aspect of the coup will develop further in the coming weeks and is set for much speculation.
The Ukraine War and Global Fertiliser Supply
Much of Niger’s land is used to produce food. Despite this, the country’s largest import is rice, at a value of $275m. This demonstrates a caloric deficit in the country’s domestic food supply and leaves Niger’s food supply vulnerable to international pressures. For instance, the Russian invasion of Ukraine has left the developing world in the lurch. Russia is the largest agricultural fertiliser producer in the world. As such, the supply of such fertilisers has decreased all across the African continent. This is because most fertilisers are produced using coal or natural gas, the global price of which has led to a sharp increase in the price of fertilisers and subsequently food. As a result, the president of the African Development Bank predicts a 20% drop in food production across the continent. At present, around 44% of Nigerien children are malnourished, and around 18% of the population was predicted to have reached crisis levels of food insecurity between June 2022 and June 2023, this was twice as many as the same 12 month period previously. Niger’s population is also uniquely young, with an average population of around 14, which makes the population particularly exposed to food shortages as such a large proportion of the population are children.
A recent emergency response plan from the Nigerien government was budgeted at $280m; however, it became clear that it included a $200m shortfall. Additionally, the UN Food Programme has slashed food rations by 50% since January 2022 in response to the increasing global scarcity of food. So many children are now entering clinics with malnutrition that clinics across the country no longer have the resources to treat them, with many families not even being able to travel to clinics, being forced to watch their children die at home.
The Silent Pandemic of Climate Change
The Ukraine war is one reason for the rise in hunger, but another is climate change. Thousands of farmers in Niger are facing the oncoming storm of what has been called the “silent pandemic”. Niger is especially vulnerable to global warming, with temperatures rising there at a rate 1.5 times faster than the rest of the world. Nigerien farmers are being forced to adapt to their new environment as rainfall both becomes more scarce and increasingly erratic, leading to a cycle of droughts that are progressively eroding the 14% of the country’s land that is arable. As a result, the nation has not had a good harvest for around a decade, with 2021 seeing a 39% drop in cereal production.
Not only can we expect further drops in quantity production but also in quality. Changing conditions in which many grains are grown also have an impact on the quality of that supply and the nutritional benefit of the final product crop. For instance, high levels of atmospheric CO2 lead to a reduction in protein percentage. This, combined with high temperatures limiting the supply of glutenin protein polymers, is likely to have a negative effect on the ability of grain to be turned into dough and thus baked into processed food products such as bread. Additionally, heat stress over 30oC (with temperatures in Niger often reaching 40oC) reduces the rate at which starch accumulates, leading to grains grown in hotter environments containing fewer calories than those grown in more temperate conditions. With the world heating up, the problem of reduced calorie content in grain suggests obvious problems whereby no costs are reduced in production but the final product becomes progressively of less nutritional worth as the planet’s temperature rises.
These factors combine to create what is known as the “lean season”, the period between harvests of about four months. The lean season begins earlier every year, leading many to abandon their villages and settlements in the knowledge that to remain is to ensure starvation, and the only chance they have of survival resides in fleeing either to the cities or relatively aimlessly through the rural areas.
The World’s Fastest Population Growth and the Traitor Narrative
President Bazoum had attempted to make reducing family size a core tenet of his policy programme, with Niger having the world’s highest birth rate. Niger’s population is on track to triple by 2050, from 24 million to 68 million people. For many, this seems to allow Niger to share in the benefits of other populous nations such as China, India, and Nigeria in gaining political clout with the population. However, there are many warnings being made on the link between a high birth rate and rampant poverty.
The attitude most prevalent in Niger, however, is that there is much land but not enough people to fill it. In fact, Garé Amadou, editor in chief of the La Nation newspaper, states that many in the country believe the concerns over population growth are “just something that worries western countries” and that a large proportion of Nigeriens believe that there is a clandestine foreign agenda to contain Africa’s burgeoning population.
Bazoum's public pronouncement of his negative feelings towards rapid population growth has been an act of self-sabotage, especially in combination with specific policy measures. Many in Niger are not comfortable with a president, who has banned his ministers from polygamous marriage and declared the practise “a bad thing” in a country where a third of the population lives in such a marriage. Bazoum has also publicly advocated for the establishment of all girls boarding schools, where children would be educated away from their families by the state. Both of these measures are rooted in the noble goal of keeping women and girls in education for as long as possible. However, many commentators, both within and without Nigerien society, find it hard to comprehend how its president can believe that these measures would ever be popular.
In fact, these public pronouncements have been read by many within the country as rejections of Nigerien culture and the prescriptions of the Koran. This has created a common view that Bazoum is what in the west would be referred to as “virtue signalling” or “making a contribution to moral discourse that aims to convince others that one is ‘morally respectable”. In this case, the Nigerien population views the “others” that Bazoum is trying to convince of his moral respectability as western observers and authorities. This has contributed to the image of the President as being too pro-western, anti-tradition, and a puppet of the French and American governments.
However, almost all involved in the subject, both nationally and internationally, agree that an average of below three children per woman, is a necessary precondition for rapid economic development. Additionally, the Koran does not advocate for the maximum number of wives and children, but for men to have many children and more than one wife as long as they can be provided for, something that Niger’s economy is not capable of doing so healthily. Additionally, many religious leaders in the country are showing the way on increasing the use of contraception to prevent couples from having children they are unable to afford.
There has also been a significant cultural transition in maternity wards, with wives now giving birth in the company of their husbands, something quite rare until relatively recently. Furthermore, pregnant women are receiving more attention and care from their partners during pregnancy. However, the director of Issaka Gazoby maternity hospital in the capital Niamey, Mady Nayama, states that “population growth in Africa is frightening” and that the lack of resources available in the country to sustain such a fast growing population leads to intense poverty with “poverty that turns these children into vagabonds.” Niger’s birth rate is still the highest in the world but has been slowly declining for around 20 years. However, Nayama claims that many are still resistant to change and that “our religion tells us that, if God gives a child, he will feed it. But that’s not happening.”
If Bazoum had communicated the link between lowering the birth rate and increasing economic growth to the population, in addition to leaning into the efforts of religious leaders and medical professionals to increase the use of contraception, he may have been aided in steering the political ship away from the erroneous course of mistrust in the nation’s political institutions and making his own voice the herald of unpopular cultural change.
The End of Nigerian Fuel Subsidies and the Collapse of the Black Market
Most coups and coup attempts in Niger come about to secure the revenues of uranium and/or oil exports from the country. Although, it is not yet certain that this is the case here. The motivations of the coup artists remain elusive, with only their public statements to rely on, the candour of which cannot yet be evaluated. What seems more likely is that the very presence of oil and gold in the country has contributed to political instability, in addition to oil price shocks as a result of policy decisions made in neighbouring countries.
Nigeria’s President Bola Tinubu announced during his inauguration speech in May that the Nigerian “fuel subsidy is gone!”, with measures already taking effect in the country. The price of Premium Motor Spirit (PMS) rose rapidly to somewhere between NGN 488 per litre in the capital and NGN 555 per litre in Borno State.
Niger has also been affected. The major population centres of the south have become dependent on cheap, smuggled, Nigerian-subsidised petrol. Usually arriving at illegal fuel warehouses and being sold on the black market via touts waving petrol canisters by the roadside. The sudden end of subsidies has led to shortages in Niger’s most populated areas and sharp price rises. Previously, a litre of petrol could be bought for around 250 francs (around 45 cents US), but this has risen to around 600 Francs, more expensive than even at regular petrol stations. The rush on those petrol stations is especially severe in the south but is occurring all over the country. According to officials at the nation’s oil ministry, the price of petrol at regular stations has increased tenfold as demand at the pump increases. Consequently, transport costs have increased exponentially. For instance, at markets in the south, the price of a 100 kg sack of maize has risen by 4,000 Francs to 28,000, worsening an already precarious situation around the country’s food supply.
SONIDEP, the Nigerien Company for Oil Products, is coping with the sudden shortfall with reserves from the country’s only oil refinery. However, those reserves will not last forever, and eventually a decision will have to be made on whether to purchase fuel from overseas or begin to operate its sole refinery at maximum output.
The black market also functioned as a primary source of employment for many young men in the south of the country. It is now feared that many of this working-age population will be forced to turn to crime, or worse, to put increasingly expensive food on the table.
Conclusion
This political risk report highlights several key factors contributing to the instability in Niger. The recent ousting of President Bazoum by the presidential guard, leading to the suspension of political institutions, underscores the country's historical vulnerability to coups and power struggles. The precarious security situation, marked by increasing violence from militant Islamist groups in the Sahel and Lake Chad Basin, poses a significant challenge to the nation's stability. Additionally, growing Russian influence left Niger isolated as a bastion of unpopular former colonisers.
Niger's vulnerability to external factors is evident in its food supply situation. Reliance on food imports, particularly rice, coupled with the disruption caused by the Ukraine war and global fertiliser supply issues, exacerbates food insecurity and malnutrition in the country. Climate change is also a critical factor affecting agricultural productivity, contributing to the "silent pandemic" of climate change.
The trajectory of Niger's population growth is a matter of concern, with an anticipated tripling of the population by 2050. The government's attempts to address this issue, such as advocating for smaller family sizes and promoting girls' education, have been met with resistance, leading to perceptions of the president being out of touch with the country's cultural norms and influenced by Western interests.
Furthermore, the recent end of fuel subsidies in Nigeria has had adverse effects on Niger, leading to shortages and price hikes in the country, exacerbating the already challenging economic situation.
Niger faces a complex web of political, security, economic, and social challenges that require careful and strategic management to foster stability and address the underlying causes of instability. Only time will tell if this comes to pass.