China’s Toxic Rice Bowl; 44% of rice samples collected locally contained dangerously high levels of cadmium, a heavy metal that causes cancer, kidney failure and other diseases

May 22, 2013, 12:47 p.m. ET

China’s Toxic Rice Bowl

Elections are the only antidote for cadmium rice and other horrors.

The Guangzhou Food and Drug Administration says that 44% of rice samples collected locally contained dangerously high levels of cadmium, a heavy metal that causes cancer, kidney failure and other diseases. Local residents are rightly worried—and furious. So are Chinese across the country: Rice is the staple food for most of the population, so widespread cadmium exposure is another wake-up call that unaccountable government causes public health disasters.

Cases of cadmium in rice and other crops are not new. In February, a Guangdong newspaper reported that the state-owned Shenzhen Cereals Group distributed a large shipment of cadmium-tainted rice from Hunan in 2009. The company denied the report. But researchers at Nanjing Agricultural University found that 10% of China’s rice crop is contaminated with the metal. The full extent of soil pollution is deemed a state secret, and activists who expose polluters are regularly imprisoned.In January 2012, an estimated 20 tons of cadmium was dumped in the Longjiang River in Guangxi, wiping out fish farms along the waterway. After a five-day cover-up, tap water was turned off for more than three million residents of Liuzhou city. The authorities found seven different companies were discharging heavy metals; cadres from two were punished, but the main culprit wasn’t identified.

Heavy industry is responsible for high cadmium levels in crops. Mines and factories that make paint, batteries or electroplated products discharge waste water into local rivers and lakes. Whole villages suffer from the intense bone pain that is typical of acute cadmium poisoning before they realize what is wrong. But the farmers have to go on growing and selling their produce to survive.

Because local officials protect factories that provide revenue, both legitimate and corrupt, the polluters escape serious punishment. And those same officials allow the farmers to keep selling grain because otherwise they would have to compensate or relocate them.

Another problem is a more pervasive albeit lower-intensity source of cadmium: phosphate fertilizer. Phosphate is mined in several parts of China, and removing impurities like cadmium and uranium is expensive. Not surprisingly, oversight of fertilizer makers is lax.

Even if some cadmium remains in phosphate, it shouldn’t be a major threat to health as long as fertilizer is used in the proper amounts and with good drainage. But Beijing insists the country should be 95% self-sufficient in grain, and it requires provinces to shoot for self-sufficiency too. So it subsidizes fertilizer and encourages farmers to overuse it to maximize crop yields. This is dangerous for those who eat cadmium-laden food, and it imperils China’s future food supply as the soil is damaged.

The obsession with grain self-sufficiency is a holdover from Maoism that is encouraged by enviro-scaremongers such as the Earth Policy Institute’s Lester Brown, who warns that China must prepare for food shortages. If Beijing trusted the market, some farmers would switch from rice to more profitable fruits and vegetables and whole areas would specialize in particular crops. In the short term, prices of staple grains would rise and more rice would need to be imported. But that would stimulate agribusiness to find innovative ways to raise yields without excessive phosphate use.

The industrial sources of cadmium pollution can’t be addressed with more regulation or crackdowns on offenders. China already has plenty of both, and officials and factory owners are always able to collude to keep getting rich at the public’s expense, as a long string of other food safety scandals demonstrates. Protests against construction of new factories show the public understands this well. Democratic accountability via free elections is the only lasting antidote for cadmium rice, melamine baby formula and other horrors.

 

May 22, 2013, 11:33 a.m. ET

China Seeks to Calm Anxiety Over Rice

By JOSH CHIN in Beijing and TE-PING CHEN in Hong Kong

Officials in southern China tested more rice and closed some local mills after the discovery of tainted rice for sale in Guangzhou, which sent some consumers scurrying over the border to Hong Kong to stock up on the staple.

Food-safety officials in the southern province of Guangdong on Wednesday released the results of tests that showed less than 5% of local rice supplies contained excessive levels of cadmium, a carcinogenic heavy metal that can wreak havoc on the kidneys and weaken bones if ingested in large quantities.

Those results contrast with figures published by authorities in the provincial capital of Guangzhou late last week showing high levels of cadmium in almost half of rice samples tested in local markets—a revelation that triggered widespread anger among consumers despite officials’ later statements that the sample size was too small and not representative of the city as a whole.

In response to the public uproar, health officials in Hunan, the Chinese province that produces the most rice, announced on Tuesday the three local rice mills implicated in the sale of the tainted rice had been ordered to suspend production.

All three mills had legitimate production licenses and were operating legally, according to the official Xinhua news agency.

Rice wholesalers at Sanyanqiao Grain Wholesale Market, one of Guangdong’s largest grain markets, had stopped selling rice from Hunan, an executive from the market told The Wall Street Journal on Wednesday.

“They dare not sell Hunan rice,” the executive said, adding that the market is now selling rice produced in the provinces of Hubei, Jiangxi, Henan and in northeastern areas, together with some imported rice from Vietnam and Pakistan.

Official assurances about the safety of rice in Guangdong did little to soothe anxieties online, where social-media users questioned the validity of the most recent numbers. “We’ll only know the truth when there’s an independent investigation,” environmentalist Dong Liangjie wrote on the Twitter-like Sina Weibo microblogging service on Wednesday. “I’m guessing we’re about to see a whole mess of official numbers that show contamination going lower and lower as a way of burying this news.”

Soil contamination has long been an issue in China, were rapid industrialization and lax enforcement of environmental-protection laws have resulted in the pollution of large swathes of arable land with a variety of heavy metals.

The issue came to the fore in February after China’s Ministry of Environmental Protection rejected a Beijing lawyer’s request to see the results of a nationwide soil-pollution survey it launched in 2006, claiming the data was a “state secret.” The ministry was subsequently hammered by both social-media users and state media for its obfuscation, though it continues to keep the results of the survey secret.

The ministry said earlier this month that it would discuss whether to releas the data after conducting further investigations, according to Xinhua.

Skepticism over the government’s claims was on display at an outdoor plaza on the Hong Kong side of the Chinese border on Wednesday, where dozens of shoppers milled around sellers hawking heavy bags of Indian and Thai rice. Buyers ranging from young couples to middle-aged men in shabby suits packed sacks of rice into strollers, while others slung them into backpacks or suitcases with wheels.

“I bought enough for a month’s supply for my family,” said Alin Song, a trader from Shenzhen who said he made the trip to Hong Kong after reading the news about cadmium.

Some users of Sina Weibo tried to discourage shoppers from buying large quantities of rice in Hong Kong, where residents often complain about hordes of mainland Chinese buying up supplies as they pour over the border in search of safer and higher-quality goods. But others joked that a trip to the former British colony might be worth it, despite stiff penalties for carrying more than 15 kilograms of rice out of the city. “Paying a fine is not a big deal,” wrote one user. “And if you have to serve a year in jail, then at least you can eat one year of Hong Kong rice—sweet!”

While there is no official data on the prevalence of cadmium-tainted rice in China as a whole, independent studies suggest the problem is widespread. Based on a survey conducted in 2007 and 2008, researchers at Nanjing Agricultural University estimated that roughly 10% of the country’s rice supplies contained excessive levels of the poisonous metal.

 

Updated May 22, 2013, 11:35 a.m. ET

China’s Cadmium Problem May Be Boost for Rice Exporters

By SAMEER C. MOHINDRU And ZHOUDONG SHANGGUAN

Asian rice exporters are poised to boost sales to China if further testing finds cadmium contamination of Chinese rice continues as a problem, analysts and traders said.

“Unlike costlier meat products, where contamination and disease can drag down consumption, in the case of staple crops like rice, generally such problems can lead to more imports,” said Concepcion Calpe, head of the intergovernmental group on rice at the Rome-based United Nations Food and Agriculture Organization.

The situation represents an opportunity especially for Vietnam and Thailand, the world’s second- and third-largest exporters of the grain. Pakistan may benefit as well, analysts said, while India, the world’s largest rice exporter, isn’t likely in a position to boost sales significantly because China limits purchases from there due to quality concerns.

The Chinese government reported last weekend that nearly half the samples of rice taken in a survey of markets in Guangzhou bore cadmium above permissible levels. The contaminated rice was mainly from nearby Hunan, China’s largest rice-producing province. “If the next main rice harvest in October turns out to be contaminated, it will translate into higher imports by China,” said Milo Hamilton, president of First Grain, a Texas-based international rice consultancy.

But only a few countries likely will benefit, as China almost exclusively buys in rice from Asian suppliers. The government only allows the grain to be imported from Thailand, Vietnam, Pakistan, India, Uruguay and Cambodia. And customs data show that Vietnam, Pakistan and Thailand account for almost all rice imported by China.

Last month, the International Grains Council increased its forecast for China’s rice imports in 2013 by 16% to 2.2 million tons, citing low prices for the grain from some neighbors, particularly Vietnam and Pakistan. That forecast is due for revision May 31.

China’s imports earlier were expected to fall this year. But the country now for the first time may even become the world’s top rice importer, surpassing Nigeria.

Rice wholesalers at Sanyanqiao wholesale market, in China’s Guangdong province, have stopped selling rice from Hunan and are instead buying from elsewhere in China, as well as Vietnam and Pakistan, an executive at the market said. Prices for long-grain milled rice in China are above $600 a metric ton in Guangzhou, the biggest city in the province, compared with Vietnam’s offers for similar grades below $400 a ton, before shipping charges from Vietnamese ports.

“We are monitoring the developments in China and are ready to supply more rice” whenever it is needed, said a senior official in Hanoi at Vietnam Northern Food Corp., a state-run rice-exporting company.

Abdul Aziz Ghaffar, director of RiceTex, a rice brokerage based in Karachi, Pakistan, said that if the contamination problem persists, Pakistan will see more of its rice sold to China.

Thailand, meanwhile, is faced with near-record rice inventories, and exporters said they are asking the government to sell some to China at subsidized rates to capitalize on any additional demand due to the cadmium contamination.

Extra rice demand from China could at the least put a floor under global rice prices, which have been soft due to buoyant supply. Indeed, some Vietnamese rice exporters and suppliers of premium grade Thai jasmine rice have raised prices by around $5 a ton since last week, in anticipation of more demand from Chinese buyers, traders said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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