China’s need for food will help open its borders, says a geopolitical strategist.
Hort Preview: Chaos in international markets
Nov 24, 2015
Peter Zeihan is the hort show keynote speaker and will deliver the annual Batjer Address at 8:45 a.m. December 7 at the Yakima Convention Center. (Courtesy Peter Zeihan)
Peter Zeihan isn’t an orchardist and doesn’t pretend to know what’s involved in producing tree fruit. But his take on geopolitical trends and where the world is headed is relevant to tree fruit growers who make decisions that last for decades.
One prediction of keen interest to tree fruit growers he will share as keynote speaker at the Washington State Tree Fruit Association’s annual meeting is his forecast for China, a country he says is on the verge of output collapse, a drop in goods produced.
“You’re about to lose China as a major source of competition as it moves from being a major competitor to becoming a major consumer,” he said to Good Fruit Grower in advance of giving the meeting’s Batjer memorial address on December 7 in Yakima, Washington.
For industries that depend on China for global supply chains to produce cheap goods, like electronics, the future is grim because they will soon lose a low-cost supplier. “But for agriculture, China’s need for food is going to increase. For growers in the Pacific Northwest, with your close proximity, it’s the best of possible scenarios,” he said.
Zeihan, a geopolitical strategist with an economic development background, uses geopolitics to figure out what’s going on in the world and what will happen. Geopolitics is the study of place and how place shapes everything from cuisine and culture to war and power. “Certain things come from certain geographies,” he explained.
For example, the Midwest, with some of the most productive land in the world, is all about corn, soybeans, and wheat. Places located on the banks of a river, or where multiple rivers meet, are financial centers.
Love of maps
Zeihan was fascinated with maps at an early age. Now he studies maps of all kinds, from climate, soils, and topography to street maps showing urban housing and densities.
“Understanding a place starts with its topography,” he said. “Once you understand the patterns you can start to understand how people think, how they pay for things, what their values are, and you can figure out what makes their country work. When you know what to look for, you can understand how patterns interact and shape global events.”
Throughout global history, powerful countries have enjoyed some type of geographical advantage. The United States has the single largest chunk of contiguous arable land (the Midwest) and the most navigable waterways in the world, according to Zeihan. The Midwest, with its Mississippi River, has 15,000 miles of navigable waters; there are 18,000 miles total in the United States.
“A big chunk of that water—the Columbia River—is in your backyard,” he said in speaking about Pacific Northwest growers. “American farmers have access to some of the lowest cost transportation systems in the world and are located in the most consuming country in the world. Growers on the West Coast have direct access to the Pacific Ocean and, by using the Panama Canal, have access to the Atlantic Ocean.
“There’s no spot on earth like the United States.”
Many of Zeihan’s ideas come from spending more than a decade as an analyst for Stratfor, a geopolitical intelligence firm that provides forecasting to major corporations and organizations.
Three years ago, he launched Zeihan on Geopolitics, his own firm in Austin, Texas. His first book The Accidental Superpower was published last year, and his second book, Shale New World, is due soon.
Accidental Superpower can be divided into forecasts touching three main areas:
1. Chaotic global markets: The global trade we’ve known for 70 years is coming to a close and everyone will have to find a new way to operate.
2. Baby boomer impact: The global demographic inversion of baby boomers retiring will impact other nations much more severely than the baby boomer retirement wave being felt in the United States.
He noted that U.S. baby boomers entering retirement for the next decade will strain health care and Social Security, but such effects are paltry compared to other countries. Many countries have an aging society with very few young people in the 25-year-old range to support retirees.
3. Energy independence: The United States is now the world’s largest exporter of refined oil. Moreover, the North America shale and oil boom will soon create an energy independent United States.
This new energy development is great for U.S. consumers, especially those east of the Rocky Mountains, who will enjoy declining fuel and energy costs.
But energy independence could mean less reason for the U.S. Navy to keep shipping lanes open for foreign oil. “That’s a disaster for large tracts of the planet that depend on the United States to maintain freedom in the oceans and shipping.”
During Zeihan’s keynote address, he will share his take on the challenges and opportunities of markets important to apples, pears, and cherries.
Fortunately for the tree fruit industry, key export markets and the United States have growing numbers of the younger generation.
Mexico, a key market for U.S. tree fruit, is one of the fastest growing markets besides the United States in terms of population in the world.
Mexico and the United States are the top two on his list of tree fruit markets with opportunity.
Southeast Asian countries, including Vietnam, Malaysia, Thailand, and the Philippines, also are at the top of his opportunity list, and he sees strong growth potential for consumption of U.S. fruit. The rapid urbanization of Southeast Asian countries will impact their food output as land is converted to housing and rural populations move to cities. “The need for food in Southeast Asia is going to skyrocket.”
Taiwan, Korea, and Japan are “on the cusp” of showing positive or negative growth potential. They have some of the fastest aging societies in the world, and he’s not sure that the United States will include them in what he calls America’s “friends and family” circle and continue to maintain an ocean patrolling presence.
India is a mix of opportunity and challenge for apples. India is not as dependent on trade as some other countries. It has been a growing market for Washington apples, and he forecasts slow and steady growth of apple sales in the future.
For cherries, Turkey is the main foreign competitor, he noted. “Any country a thousand miles from Turkey will be a market for Northwest cherries,” he said.
He believes European countries are vanishing in terms of international trade. And China? “It will be a disaster, but the country will still need to import food to avoid complete breakdown, which will make it more open to imports.” •
Melissa Hansen is the research program director for the Washington Wine Commission. Hansen previously was an associate editor at Good Fruit Grower from 1996 through 2015.
Read her stories: Author Index