The New Silk Road and the Emerging Global AgroEconomy

Michael Ferrari
3 min readApr 4, 2019

The following is an excerpt from a forthcoming article that I will be publishing with my colleague and collaborator Parag Khanna, author of the new book The Future is Asian. Check back for the full article shortly.

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

THE NEW SILK ROAD

China’s ‘New Silk Road’, or the more commonly used moniker, Belt and Road Initiative (BRI) aims to transform global trade and establish new commercial partnerships across a broad transect of industrial operating sectors. The backbone of the initiative involves the development and expansion of an ambitious infrastructure network which touches 84 countries, encompassing land and marine shipping and distribution channels, pipelines, power plants and ports, railways and roads, and more, on a scale never seen before. The New Silk Road will become increasingly important as we attempt to figure out how to feed, shelter, and provide sustainable energy to a growing population with a larger appetite for higher value products. As nations determine whether or not they will visibly support or refrain from the initiative, two themes are starting to surface as they pertain to our evolving interconnected economy: (1) countries may not actually have a choice regarding whether or not they will partner with the BRI, and (2) from both a supply and demand perspective, the global weighting of the US may prove to be less significant than it once was. This will begin to challenge long held perceptions and beliefs about the global economy, and models of how and where goods circulate to and from will need a revision.

Regardless of how the Initiative pans out for the participants and the spectators, it is a near certainty that the traditional global supply network will be at least moderately overhauled, resulting in significant ramifications for producers of material and commodity goods. In the razor-thin margin businesses associated with specialty and bulk commodity production and distribution, those players who do not adapt will likely not survive. When we talk of commodities in this discussion, we are generally referring to the agricultural component consisting of anything that is grown, harvested, extracted, processed, and transformed into any one of many end-user products. Generally, these products can be converted for the consumer into either food, fiber, energy, materials or in some cases a form of currency. In this paper, we go deeper into impact of the Belt and Road Initiative as it relates to the potential disruption to all industries affected by the basket of commodity products that comprise the agriculture complex.

The global agricultural commodity network, perhaps more than any other commercial endeavor, can arguably hold the distinctive position sitting at the cornerstone of global economic activity. At the most basic level. everyone needs to be nourished, otherwise they die. While that sounds dire, it is not an exaggeration. But agriculture, and the global agribusiness juggernaut, is more than ‘just’ food. When we take a broader view of agriculture, we start to include all of the suppliers, distributors, processing facilities, fertilizer manufacturers, chemical input providers, forestry companies, pulp plants, solid waste facilities, transportation conglomerates, and many others, into our supply and demand balance sheets. Taking this a step further, many industries that do not immediately come to mind but are largely dependent upon agriculture for raw materials include pharmaceuticals, energy generation, paper manufacturers, pet food makers, the housing and construction sector, ice cream factories, and the cosmetics sector. The point here is not to list every product that includes something that is harvested from the Earth’s soil; rather, it is to demonstrate that as agriculture is the backbone of the economy for many countries and many more companies, changes to the enabling infrastructure which guides how these products are produced, shipped, sold and consumed will likely spill over into just about every sector and subsector of global business.

What does the expansion of the New Silk Road mean for global agriculture stocks and flows? How will the BRI foster or mitigate emerging threats to food supply-side dynamics? Check back to read the full article (to be published shortly) addressing how the BRI will influence the regional and global agricultural commodity trade.

--

--