China’s Belt-And-Road Comes To America’s Heartland, Part 1: The Peculiar Story of Fufeng Group And Grand Forks
ZERO HEDGE | By Tyler Durden | March 24, 2022
The onset of the global COVID-19 pandemic in 2019 has exposed numerous structural weaknesses in how the nations of the world provide food, energy, water, and consumer goods for their people. In the main, these supply chain disruptions are tightly correlated to the manufacturing and export capacity of a single nation – the People’s Republic of China. In the United States, this is especially true for amino acids, specifically of the type used in animal feed. Though little-known amongst the general population, synthetic amino acids such as lysine and threonine play a crucial role in managing animal health and growth. Relatedly, as the use of soybean meal for a primary protein source has increased in feed rations, amino acids become even more important.
These products, generally produced from corn (though cassava root and sugarcane may also be used), require substantial investment into a complex manufacturing process built around fermentation of the corn’s starch. It is also energy intensive, requiring high heat to produce and dry the product. Given the constant attention paid to its food security, China leads the world in research, subsidies, and investment into manufacturing these critical components in the food supply chain, with control of up to 65% of global market share in lysine, perhaps the most widely-used and critical of the amino acid complex.
As many in the feed industry are aware, the most recent bio-fermentation plant proposed in the US is to be built and controlled by Fufeng Group, one of China’s dominant players in the amino acid sector. In the recent past, Fufeng Group has looked at opening production facilities for their bio-fermented products (MSG, xanthan gum, lysine, threonine, tryptophan, valine, isoleucine) in Ukraine, India, and several other countries – as of yet, with no success. These countries are attractive for their generally low energy costs and abundance of starchy raw material. And given the exploding transportation costs for energy and grain commodities worldwide, the need is greater than ever for a manufacturer to locate close to supplies of both. After these failed attempts, it seems Fufeng has now found fertile soil in the city council of Grand Forks, North Dakota, and the state’s governor Doug Burgum.
Initially reassured by positive signals received in 2020 from Governor Burgum – who has been featured in Chinese media outlet China Daily crowing about North Dakota’s egg exports to China in 2018, and who is rated as “Friendly” towards China as of November 2021 by the Chinese Communist Party’s (CCP) United Front propaganda arm – Fufeng hired an American by the name of Eric Chutorash in March of 2020 to assess the viability of opening a full-scale amino acid plant in the United States. In the intervening months, Fufeng has settled on Grand Forks, North Dakota to open their new plant.
The new plant is estimated to consume 25,000,000 bushels of corn for less than one hundred jobs – 250,000 bushels (or 14,000,000 pounds) of American corn per year, per job. Moreover, the Grand Forks City Council and CCP-favorite Governor Burgum are promising to build and subsidize a $150 million natural gas pipeline, and will spend an additional tens of millions of dollars to subsidize construction of Fufeng’s new plant. Fufeng Group will also be offered a “temporary” tax break for years (or decades) to come. Rather than boosting the local economy, the plant will be leeching from it.
One might wonder if Fufeng Group’s founder and chairman, Li Xuechun, shared with the North Dakota luminaries his intention to convert most of the plant’s production to export sales no later than 2025, only a few months after anticipated conclusion of the plant’s buildout? American-made amino acids being sent at the lowest profitable cost possible to feed the swine, beef, and poultry industries of Mexico, Canada, and Brazil, all of whom are much friendlier to China with regard to finished meat exports than the United States is. It’s a canny strategic maneuver, and as is unfortunately typical of our political leadership, the short-term promise of profits, fundraising, and (perhaps) future jobs is a leash with which Chinese companies manipulate their American running dogs.
The bad news continues. Chinese Communist Party personnel overlap with management in Fufeng Group. Founder and Chairman of the Board, Li Xuechun, served as deputy to the Shandong Province 12th People’s Congress starting in 2003 (see page 80) while also being named as the “Model Labour” of the province in the same year. Fufeng itself further exists as a vector of CCP policy. In remarks delivered to the 16th People’s Congress of Qiqihar on 26 December 2017, Mayor Li Yugang emphasized the Party’s role in building and operationalizing Fufeng’s wet corn mill in less than a year, while reinforcing the Party’s commitment to “accelerate” Fufeng’s plans to expand production capacity of amino acids at the plant to consumer more than 3 million metric tons per year of corn. In his annual report issued on 7 January 2020, Mayor Li reiterated that Fufeng is a “national key leading enterprise” in ensuring food security for China.
Also troubling is Fufeng’s plausible connections to the use of forced labor in Xinjiang Province. The primary arm of Fufeng in the province is Xinjiang Fufeng Biotechnologies Co. Ltd, with its manufacturing hub located just west of the Urumqi Export Zone. This site is responsible for a reported $21 million in vitamin and amino acid sales directly to the United States for the first six months of 2021, according to a disclosure filed by Fufeng Group on 28 December 2021 in response to President Biden signing the Uyghur Forced Labor Prevention Act on 23 December 2021.
Curiously, Fufeng’s production facility in the Toutunhe District sits less than two miles from Toutunhe Facility #2, a Tier-4 detention, forced labor, and re-education camp focused on subjugating the Uyghur population in the area. The approximate location of Fufeng’s manufacturing plant is also very near to where a Ugyhur neighborhood was razed to the ground, including a mosque and other cultural sites. Given the $21 million haul in the first half of 2021, and how demand and prices both spiked throughout the second half of the year, it’s not unlikely that Fufeng likely generated in excess of $40 million in trade with the US from this site in 2021. Per Fufeng’s financial reports, the average profit margin for their products averaged 17% in 2020, or $6.8 million if the same margin held into 2021. However, with prices more than doubling for multiple months in the back half of 2021, it’s plausible that sales to the U.S. from the
Xinjiang site exceeded $9 million in profit.
Lastly, it must be a very curious coincidence indeed that Fufeng Group zeroed in so quickly on Grand Forks, ND. The nearby US Air Force installation, Grand Forks AFB, is a critical component in the USAF’s strategic basing network for ISR (Intelligence, Surveillance, Reconnaissance) assets. Further, the base is home to the 10th Space Warning Squadron, a major node in the U.S’ early warning and detection network for ballistic missile threats against North America. It’s also a key element in the USAF Space Surveillance Network, which is tasked with monitoring targets and potential threats in space. Such a short line of sight to the base from Fufeng’s proposed location on the northwest side of Grand Forks makes signal intercept a relatively simply task using low-observable technology mounted unobtrusively to the plant’s superstructure. Perhaps we could consider this a fluke, except another recent high-profile situation would argue that CCP-aligned assets intend to acquire land and infrastructure directly adjacent to important U.S. military installations for purposes potentially ranging from digital snooping to outright sabotage.
It’s frankly astonishing that given the data laid out here, Governor Burgum and the Grand Forks City Council have continued to press ahead with bringing in a CCP-aligned entity to co-opt American resources and families in pursuit of China’s hegemonic goals.
Here, then, is the new Chinese modus operandi: externalize their energy consumption into the US and exploit more readily-available raw materials for China’s benefit. Such a model drives the local prices of energy up long-term, another indirect subsidy paid by North Dakota’s taxpayers, while ensuring that China’s foreign partners have access to exported feed ingredients at the expense of the United States’ meat producers. Even more, the location of Fufeng’s intended site is at best an extremely worrisome coincidence, given many viable alternatives that make more sense from a supply chain standpoint. Taken together, this absolutely follows the playbook of China’s ongoing expansions of the Belt and Road Initiative, and perhaps for the first time, represents a stealth implementation of the project on the United States’ own soil.
American corn.
American energy.
American labor.
American subsidies.
All the raw materials needed for repatriated Chinese profits and export of American food and national security.
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