Agrodiplomacy: PRC-Ukraine $3B Loans-for-Corn

It's no big secret that Ukraine has been on the ropes financially for the past few years. Alike every sort of commodity exporter nowadays, however, it's found itself in luck as the the world's banker du jour and its voracious appetite have come to the rescue. That is, troubled countries can of course go to the conditionality-laden IMF as Ukraine has. But, if they're lucky, they have commodities to offer that other creditor of note which couldn't care less about economic management, governance and other Western hang-ups.

Actually, there's more to this story than "Ukraine will guarantee its annual output of maize exports to go to China at a set price in exchange for loans from the PRC." Why is there suddenly such a voracious Chinese hunger for corn? Well, that's an easy one to answer. Consider that China is by far the world's most voracious consumer of meat. Treehugger puts it well in the following chart and excerpt:

More than a quarter of all the meat produced worldwide is now eaten in China, and the country’s 1.35 billion people are hungry for more. In 1978, China’s meat consumption of 8 million tons was one third the U.S. consumption of 24 million tons. But by 1992, China had overtaken the United States as the world’s leading meat consumer—-and it has not looked back since. Now China’s annual meat consumption of 71 million tons is more than double that in the United States. With U.S. meat consumption falling and China’s consumption still rising, the trajectories of these two countries are determining the shape of agriculture around the planet.

That's a nice way to put it. The outlines of the deal involve China's Export-Import Bank facilitating this exchange go like this:

Ukraine is set to sign an unusual loan-for-crops contract with China that will see Kiev access $3bn in credit lines in exchange for supplies of corn, a commodity that Beijing has started to import in large quantities...

Mykola Prysyazhnyuk, Ukraine agriculture minister, said in an interview that the deal with the Export-Import Bank of China would be signed in mid October. “China is asking for about 3m tonnes of corn each year ... to be supplied at market prices that are set at the time of export,” Mr Prysyazhnyuk told the Financial Times. 

And yes, it does create trade ties between two countries that don't have so many right now. With global corn prices exploding upwards, it's also a fairly astute move on the part of Beijing. Meanwhile, Ukraine intends to plow back loan proceeds into improving its agricultural technology. Remember especially that corn is an important feed for pigs and cows as meat demand in China keeps rising:

The deal between Kiev and Beijing comes as China has rapidly become the world’s fifth largest importer of corn. The country will buy overseas about 8.3m tonnes of the commodity between 2011 and 2013, or as much as it imported in the previous 15 years combined, according to estimates from the US Department of Agriculture.

Corn is a key feedmeal to fatten cows, sheep and pigs as consumption of meat in China continues to grow, analysts said. “This market is important and attractive for us. We have not yet exported crop there,” Mr Prysyazhnyuk said...

Mr Prysyazhnyuk said the Chinese loans will be used to finance the purchase of Chinese agriculture technologies, herbicides and pesticides. “We will use these investments to boost our harvest and, in turn, fulfil export obligations to China.”

It's a bit unusual, but it's a potential trade win-win nonetheless. It makes you wonder why so many Westerners think the Chinese lack creativity in the practice of diplomacy when they can think of things like this instead of merely getting chased out alike certain others.