*3.7. China's Food Supply*

Inputs (fertilizer, water) and their impact on the environment are vital elements of food production (mostly cereal). According to surveys, the global center of nitrogen fertilizer utilization was in Western Europe and the US in the 1960s but was relocated to East Asia, especially to China by the beginning of the 21st century [73]. In the last century, China faced a number of food shortages. In the course of one of them, a quota system was introduced (1955–1993) followed by a land contract reform (1981) that was implemented. Total cereal production increased by 74%, from 354 million tons in 1982 to 618 million tons by 2017, which exceeded the rate of population growth [74]. Currently, China feeds 20% of the global population on 7% of the total agricultural land. In order to maintain this performance, China has paid a high price. The use of chemical fertilizers has tripled in the last three decades. Excessive and ine fficient use achieved 32% e fficiency compared to a global average of 55%. China's water supply is in a similar situation since, apart from low-e fficiency utilization and poor-quality quantitative distribution across the country, it is also uneven. China's available water supply per person is only 2050 m3, which is 25% of the global average. In North China, where only a low amount of water is available, a large volume of underground water is used for agricultural purposes. Therefore, it is of utmost importance for China to proactively investigate how food security can be achieved through the balance of resource management, environmental protection and sustainable agricultural development [74–76]. In 2015, the one-child policy was abolished; families are now allowed to have a second child. However, many people choose not to have more children because they cannot afford the high costs of their upbringing. Thus, according to demographic estimations, the two-child policy will result in only 2–4 million additional people in China annually for the next 10 years. The accelerated growth of China in terms of urban population as compared to rural areas continues to affect food consumption [77]. In 2016, China's urbanization rate rose to 57% and it might increase to 65% by 2025 and to 80% by 2050. However, it should be noted that in the east (China, India), a significant part of the population is concentrated because it is often impossible to live outside these areas (e.g., deserts, high mountains, and jungles). In light of these statistical data, they need to find a solution for further safe and healthy food supply [78].

### *3.8. Food Prices and Food Security*

Changes in food prices fundamentally affect the quantity and quality of food available to an individual. In developing countries, where a high proportion of household income is spent on food, changes in food prices are a critical factor. In these areas, relatively moderated price changes can also have a significant impact on food security. The past few decades have been marked by rising food prices and rising price volatility. These market events require the collective cooperation of the countries concerned in order to mitigate the adverse effects of price changes. Swinnen and Squicciarini (2012) drew attention to the contradictory messages being transmitted by the parties involved in the food safety debate. These messages do not always correctly convey the true effect of high or even low food prices [79].

While the food price boom dates back at least to the 1970s, rising food prices (in nominal terms) in 2007/08 renewed the attention of the policy makers and market analysts to the so-called "commodity boom" again. Not only the price levels, but the higher variability became a concern as well [80]. As Baffes and Haniotis (2016) noted, that the reversal of the downward trend in food prices seen until 2000 has already had consequences for food security in developing countries [81]. The main sources of the price boom between 2000 and 2007 was the increased commodity demand induced by the global economic growth, the dollar depreciation and the changes in the stock to use ratio, according to Timmer (2008) [82]. However, these sources provided an inadequate explanation for the sudden increase in the prices. Additional factors were the growing demand for biofuels (where food crops are the input materials, especially maize), unfavorable weather events, plant diseases and the changes in trade policy. In some cases, panic and hoarding and further speculation has some effect as well [80]. According to the United Nations Conference on Trade and Development (UNCTAD) (2011) study, agricultural prices are more vulnerable to fluctuations by their nature. These effects will require a more efficient risk distribution mechanism among the markets, which would strengthen the safety net related to food price changes. Increased price fluctuation has an adverse effect on developing countries, since there is a high share of rural households with low household income, that often rely heavily on self-produced agriculture commodity products [83].

Oil price changes (and in general, energy price changes) became a crucial factor as well. The effect of oil prices is twofold. Firstly, high oil prices would increase the demand for alternative energy sources, such as biofuel. These changes, in turn, will increase the demand for input materials, which can change the allocation between food, feed and fuel. Second, higher oil prices lead to higher production costs, which decreases the supply of food in the long run [84]. In general, the cost of energy is approximately 10 per cent of the agricultural production, according to the World Bank (2016) estimates, which means that agriculture and its related sectors are highly energy intensive. In developing countries, production technologies and transportation are inefficient. Thus, energy price changes can have serious effects. A significant number of studies have shown a stronger impact of energy prices on agricultural prices and a closer integration of the two markets [85–88]. These studies have found a stronger connection between the energy and the agricultural market after the global economic and financial crisis. Among the results, there was apparent support for possible non-linear effects, increased spillover mechanisms and long-term relations (cointegration). At the same time, the root of the price developments is the fundamental market mechanism, as supply and demand. As Timmer (2008) noted, the long-term question is whether supply can keep up with demand generated by rapid economic growth. While the possibility existed in recent decades and supply could keep up with demand, this time, it is compounded by the scarcity of high-quality, accessible agricultural area, stagnation in yields seen over decades, and rising costs of basic inputs. As research results are often lagging behind in this field, the only possibility is to increase yields until new agricultural technologies emerge. The most effective solution to high food prices is therefore to stimulate an increase in agricultural output. Combining the effect of climate change and water scarcity, the problem requires a quick and efficient solution.

In the wealthiest countries, the concentration of retail trade and the increasing complexity of food businesses, as well as the extended impact of supply chains, play a role of key importance. In poorer countries, many of the listed effects can be overcome. However, according to researchers, cooperation along the supply chain is less effective [89,90]. In addition to cooperation between chain members, traceability is also very important in modern agriculture. The implementation of technological innovations is essential in food supply chains from farm to plate [89].

Cooperation along the supply chain is particularly important in developed countries because food retail is highly concentrated and, in many countries, there are numerous companies with a very strong bargaining position with suppliers and they therefore often push down purchasing prices. Lower profit ratios and higher volumes from more limited suppliers encourage lower prices and increase the number of sales, creating a vicious circle of addiction [91].

Additional income generated by the rising prices of agricultural products and food, therefore, does not reach producers in most of the cases, who are consequently able to introduce production-related innovation only from fewer resources [92]. The share of supermarket-type stores in food retail has become increasingly significant on a global scale in recent decades. Companies dealing with food retail often employ suppliers to ensure a continuous supply of certain product types, which may further increase the exposure of producers in the supply chain [93].
