Will China Strengthen Farm Subsidy Incentives?

China's farm subsidies need to have stronger production incentives--that was the argument made in an Economic Daily commentary earlier this month. WTO rules, bureaucracy, and dual roles as rural entitlement vs. production incentive have kept China's subsidies surprisingly ineffectual despite their massive size--China reported about 1.4 trillion yuan (roughly $200 billion) in farm support in its most recent notification to the WTO filed last September. 

The Economic Daily commentator criticized China's practice of announcing and distributing crop subsidies with a long lag, usually months or even a year or more after the crop has been planted. The commentator lamented that some farmers call the subsidies "blind boxes," like receiving a gift-wrapped box with little idea of what's inside. 

The commentator asserts that subsidies are an important tool for the State's mobilization of agricultural production and its preservation of national food security. The commentator notes that China has many types of grain subsidies, including minimum prices for rice and wheat, an arable land fertility protection subsidy given to all grain farmers, soybean subsidies, subsidies to encourage production of niche crops like quinoa and buckwheat, and some localities subsidize farming entities that consolidate land into scaled up farms and/or subsidize companies that provide farming services as an agricultural "trusteeship" or "mechanized farming cooperative." 

The commentator says the lag in subsidies has become a pain point for farmers. In some places the arable land fertility protection subsidy is announced after spring planting has started. In some places, wheat farmers don't get news about the farm machinery subsidy until after seedlings have started growing. The commentator says rice farmers commonly ridicule policy announcements that come after the crop is already growing. On the other hand, the commentator claims that there have been some instances where farmers ploughed up fields and replanted them overnight after the subsidy payment level was announced.

There are several reasons for the lack of precision in China's farm subsidy payments. The Economic Daily commentator attributes the problems to bureaucracy and delays in collecting data and issuing payments. She says these can be addressed by establishing a policy calendar that establishes dates for announcement of subsidies and utilizing information technology to gather data on farmers' plantings and to issue funds, 

The commentator does not mention two other interrelated reasons: unclear objectives of the payments and WTO rules. 

China first began issuing small subsidy payments to farmers when the country entered the WTO. Compliance with WTO rules gave officials an excuse to dismantle a "protective price" system invented in the 1990s that engorged a sprawling grain procurement bureaucracy. In 2004, provinces used a portion of a "grain risk fund" (previously used to finance grain-buying stations) to create tiny cash payments distributed to grain farmers. They added a small subsidy for improved seeds and a subsidy for machinery purchases. In 2006 an input subsidy was added to compensate farmers for rising fertilizer and fuel costs. 

Design of the subsidy payments was constrained by WTO rules that place limits on subsidies that are potentially market-distorting. China tried to avoid subsidies that gave farmers strong production incentives so they would not count against the WTO-imposed cap on subsidies--for China the limit is no more than 8.5% of the gross value of any commodity. The subsidy limit was one of the most contentious parts of the WTO accession negotiations and the last to be settled.

Chinese authorities had multiple objectives for farm subsidies. The first batch of subsidies was hailed as a symbol that the communist party actually cared about farmers--a sentiment that was in doubt at the time when farm prices were depressed, rural officials heaped fees and taxes on farmers, and WTO membership was widely believed to have sold out Chinese farmers. However, when officials wanted to prove their commitment to food security, they would stress that the subsidies functioned as a production incentive. 

Within a few years after their introduction China's farm subsidies were widely criticized as ineffectual due to their tiny size, lack of incentives, and anecdotes of subsidies given for land that no longer produced crops. Some farmers got a half-dozen deposits of various subsidies in their bank accounts and didn't know what they were for.

During 2014-16 officials consolidated the seed subsidy, grain payment, and input subsidy into a single payment that would go only to farmers who actually planted grain. They called it an "arable land fertility protection subsidy" (aka "support and protection payment") but did not demand that farmers take any measures to improve soil fertility. Officials told the WTO the new payment was not market distorting so it could be exempt from limits. For domestic audiences, Chinese officials said the subsidy was a critical policy for encouraging farmer to produce grain. 

Since 2012 China has introduced subsidy payments for soybeans, cotton, corn, and rice. Again, they tell the WTO stories about how payments operate so they can be excluded from subsidy limits. Many other subsidies are just never disclosed to the WTO. The impact of these crop-specific subsidies is still questionable because the payments seem to be based on the previous year's planting and are not distributed until after the current year's crop is harvested in the fall. That brings us back to the criticism lodged by the Economic Daily commentator this month.

Will Chinese officials be inclined to re-couple subsidies to production without fear of WTO sanctions? With WTO's enforcement capabilities weakened, perhaps China can give up the cat-and-mouse game and feel free to follow the commentator's advice and give its subsidies stronger production incentives.

China's Feed Output Dropped 6.6 MMT in 2024

China's production of livestock feed totaled 315 million metric tons (MMT) in 2024, down 6.6 MMT (-2.1%) from the previous year, according to a report from China's feed industry association. The 2024 output was still the second-largest output level on record. This was the first decline in China's feed output since it tumbled 8.8-MMT in 2019 during China's African Swine Fever epidemic. 

According to the report, the value of feed industry output declined 10% and operating income fell 11.9%. 

By comparison, official data released by China's National Bureau of Statistics show production of meat and eggs (consumers of most of the feed) increased marginally, by 356,000 metric tons, in 2024. Feed output was 2.38 times the output of meat and eggs.

Source: compiled from China Feed Industry Association reports.

Feed for hogs comprised 45.7% of the output, followed by meat poultry (31%), aquaculture (7.2%), ruminant feed (4.6%), pet food (0.5%), and feed for other animals (0.8%). 

Source: Compiled from China Feed Industry Association data.

Hog feed also accounted for most of the decline in feed output, falling 5.84 MMT (down 3.9%). By comparison, pork production fell by a relatively modest 883,000 metric tons last year. Feed for cattle and sheep plunged by 2.22 MMT (down 13.3%), aquaculture feed output was down 824,000 metric tons (down 3.5%), and feed for laying hens was down 383,000 metric tons (down 1.2%). Feed for meat poultry was the bright spot, rising 2.43 MMT (up 2.6%). Poultry meat output was up 970,000 metric tons. Thus, changes in hog and poultry feed use were both much larger than the corresponding changes in meat output. Feed conversion ratios are typically around 3:1 for hogs and under 2:1 for poultry.

Source: Compiled from China Feed Industry Association reports.

According to the report, production of amino acids reached 6.026 MMT, skyrocketing by 21.7% in 2024. Production of vitamins, however, fell 2.9% to reach 1.425 MMT.

The dynamics of soybean meal and corn use in feed reported are inconsistent with import trends. The report said use of soybean meal by feed manufacturers declined by 2.06 MMT in 2024, but China's customs data show that imports of soybeans increased by more than 6 MMT in 2024. According to the report, use of corn increased 7.93 MMT, while imports of corn decreased by 13.4 MMT. The report said use of wheat in feed plummeted by 52.8% and use of rice decreased 51.3%. The report did not mention sorghum or barley use in feed. 

Shandong Province was clearly the leader in feed manufacturing with output of 46.48 MMT in 2024. Guangdong Province produced 36.8 MMT, and Guangxi Autonomous Region produced 23.8 MMT. Thirteen provinces posted declines in feed output, including a 1.4-percent decline in Shandong's output, while Guangxi's output rose 3.7 percent and Guangdong's output rose 2 percent. 

Shandong posted the largest decrease in hog feed output, with a decline of 1.58 MMT. This is consistent with other news that hog production has been moving out of Shandong due to disease problems and shifting to southern provinces. Henan and Hubei Provinces also had large declines in hog feed output, while hog feed production grew in Guangxi. Shandong is the dominant poultry feed producer, and its output increased 2 percent.

China's GMO Crops Tied Up by Conflicting Interests

China, a country that claims to love science and does everything fast, has spent 3 decades feuding over genetically modified crops. Scientists and farmers saw benefits of pest-resistance and reduced spraying of chemicals, but industry leaders envisioned building a non-GMO wall to shield China from imports and gain an advantage in the soybean market. The story illustrates that China is not as monolithic as most people think. The tangle of conflicting interests and industry protection undermines China's progress more often than outsiders realize.

Last year S&P Global proclaimed that, "The Chinese government has recently taken steps to establish a clear path for the approval and commercialization of [genetically modified] GM crops"--about 40 years after GM varieties were widely adopted in the U.S. and more than 30 years after GM soybeans were adopted in Brazil and Argentina. 

Chinese leaders and consumers had been enthusiastic supporters of genetically modified crops in the 1990s. Pest-resistant GM cotton was rapidly adopted in China when it became available at the end of that decade. A handful of GM varieties of corn, soybeans and rice were already being evaluated in the early 2000s, but they were never (legally) released to the market. 

China's WTO membership in 2001 changed everything. Chinese negotiators had agreed to low tariffs and no import quotas on soybeans, leaving them vulnerable to competition from imports. (China was allowed to install a quota system for corn, wheat, rice, and cotton that allowed authorities to limit the volume of imports when they wanted to.) Ministry of Agriculture economists came up with the idea of using GMO regulations as a nontariff barrier to protect the domestic soybean industry. The strategy was to create two separate markets for soybeans. Imported GM soybeans, corn, cotton, and canola would be approved for sale in China only after a years-long testing and approval process (that could not begin until approvals had been granted in the exporting country), and these could only be used in processing of feed, edible oils, or textiles. Non-GM soybeans, corn, or rapeseed grown in China and used for food products would have much lower hurdles for approval and were expected to be sold at premium prices. 

During the year before and after WTO accession China's authorities passed an agricultural GMO law, introduced a GMO food labeling regulation, and created separate soybean futures contracts for GM and non-GM soybeans on the Dalian Commodities Exchange.  

A 2011 article by a deputy director of The Ministry of Agriculture's Agricultural Trade Promotion Center explained the strategy. He recommended that China should spend more on building non-GM soybean areas in northeastern provinces (this was attempted through a series of "soybean revitalization" initiatives in Heilongjiang Province) and create a non-GM soybean brand to meet demands for non-GM soybean products domestically and in Japan, South Korea, and Europe, enabling China to sell non-GM soybeans at premium prices.

Heilongjiang Province plays a critical role in China's adoption of GM crops since it is the largest producer of China's soybeans and corn. Heilongjiang's agriculture is also dominated by the powerful system of State farms established in the 1950s to defend the lightly populated region from Soviet aggression. Heilongjiang State Farms--supervised by the Ministry of Agriculture--had invented a "Green Food" concept in the 1990s to promote its pristine farming environment, mainly to boost exports to Japan and other countries worried about pesticides and heavy metals in Chinese foodstuffs. 

A 2023 China Quarterly paper by Singapore-based scholars explained how conflict between Heilongjiang Province's objective of protecting its soybean industry and the central Chinese leadership's push to promote GM technology illustrated the clash between local interests and central policies. Heilongjiang Province's soybean association's campaigns were key in turning Chinese public opinion against GM crops and in formulating a GM-free strategy for Heilongjiang. 

The clash came to a head in 2016 when China's State Council announced its intent to push ahead with research and commercialization of GM crops while promising to maintain the world's strictest regulatory system to satisfy the country's many GM food skeptics. A 5-year plan for science and technology issued that year called for commercialization of pest-resistant GM corn and herbicide-resistant GM soybeans by 2020. The following year, state-owned ChemChina paid $43 billion to acquire Syngenta, a Swiss farm chemical company that produces genetically modified seeds.

That same year in December 2016 Heilongjiang Province revised its food safety regulations to ban production of GM crops, ban sale of GM seeds, and prohibit the production, trading or selling GM foods in the province.  (This blog has previously covered the 2016 Heilongjiang GMO ban.) Commercialization of GM crops would undermine the business strategy of keeping the province GMO-free. The ban prompted critiques from official news media. Apparently central officials leaned on Heilongjiang to fall in line with the pro-GM policy--the province lifted the ban 6 months after introducing it and revised its food safety regulations again.

In 2023 the Ministry of Agriculture and Rural Affairs (MARA) science education office posted a terse statement claiming that false information had been spread on the internet regarding Heilongjiang's food safety regulations. The post did not explain what information was false, and a response from Heilongjiang's agriculture and rural department included in the post said its second revision of provincial food safety regulations banned illegal production and processing of edible GM agricultural products. 

Six months later a longer response on social media platform QQ from someone writing as "Doubt Explorer" ("Agriculture Ministry Responds: Heilongjiang Province Can Plant Genetically Modified Crops, Approval from Administrative Agricultural Departments is Sufficient") explained that Heilongjiang had canceled its GM food ban, and its new revision of regulations only banned production of GM crops if they were planted in violation of national laws and regulations. This post insisted that Heilongjiang officials had issued materials praising GM crops as "a great invention of mankind" that "will bring huge economic and social benefits to the development of human society." Since no GM food crops had been approved when Heilongjiang's regulations were announced in 2016, "Doubt Explorer" reasoned that the regulation simply banned planting GM crops without authorization. Doubt Explorer claimed that GM varieties--if they are approved by the Ministry of Agriculture and Rural Affairs--could be planted throughout the country, including Heilongjiang. 

The non-GM market segmentation strategy was still being pushed in some circles. In 2022 Chinese customs authorities promoted the segmentation strategy by creating a new harmonized system code that distinguished imports and exports of non-GM soybeans from GM soybeans. A long essay in Economic Daily in 2022 (posted on the agriculture ministry's web site) discussed the market segmentation strategy at length and argued that China's non-GM soybeans should use their "competitive advantage" to meet demands in China and overseas in a segmented market alongside GM soybeans. The article also suggested that prices for non-GM soybeans could be set independently of imported GM soybeans...with a premium price due to the "scarcity" of non-GM soybeans in the world.

Economic Daily pointed out that China needed to protect the "non-GM purity" of Chinese soybeans to make this strategy work. Allowing GM soybeans to be grown in China threatened to contaminate non-GM crops. 

Chinese authorities allowed a trickle of approvals for GM corn and soybean varieties developed by 26 Chinese seed companies and set up a seed production base in Gansu Province, but as of 2024--four years after the 2016-2020 5-year plan had envisioned full commercialization--GM corn and soybeans could only be grown in 20 trial counties. At an official press conference in January 2024 a MARA official was evasive when asked whether the completion of trials meant that GM corn and soybeans could be legalized or would still be subject to some limits. 

Apparently, not everyone in Heilongjiang was on board with the GM-free strategy. "Doubt Explorer" pointed out that 6 GM soybean varieties and a GM corn variety are being planted on a trial basis in Heilongjiang, and a soybean-crushing company affiliated with Heilongjiang's State Farm system imports large amounts of genetically modified foods annually. A query on the China Customs Administration web site shows that companies registered in Heilongjiang Province imported 1.68 million metric tons of GM soybeans and 563,232 tons of non-GM soybeans during 2024. (Nearly all of the non-GM soybeans imported by Heilongjiang companies came from Russia which shares a long border with Heilongjiang.)

One comment on the "Doubt Explorer" post from Heilongjiang Province insisted, "the Ministry of Agriculture has no control over what is planted in Heilongjiang," describing it as the country's "last food fortress." Another comment from Ningxia Autonomous Region said he/she had observed that the northeastern provinces have been the most opposed to GM crops, and the commenter invited farmers to plant GM crops in the northwest if northeastern provinces don't want to grow them. A comment from Jilin Province reported that friends who planted GM corn and soybeans had only sprayed Roundup once and saved the cost of multiple pesticide applications. The Jilin commenter predicted that all crops would eventually be genetically modified. A commenter from Beijing said, "You are too naive. The Ministry of Agriculture's representative represents the State's thinking." 

Southern Rural News, a Guangdong-based news outlet, reported in its "unofficial" survey of farmers who planted GM crops in 2024 that pest resistance had prompted adoption of GM corn in central Liaoning Province, west-central Jilin, and parts of Heilongjiang. A farmer in Jilin Province shifted 3000 mu (nearly 450 acres) to GM pest-resistant and glyphosate-tolerant corn. He said his net returns went up due to fewer pesticide sprayings, fewer weed problems, and higher sales price due to lower mycotoxins and better kernel quality. The article was vague about how the GM corn was marketed and did not mention whether it was segregated from non-GM corn. Some companies issued announcements that they would refuse to buy GM corn. GMO test strips were widely sold in northeastern China. 

Southern Rural News noted that all the approved GM seeds are produced by Chinese breeding institutions, a nod to China's other objective of freezing multinational seed companies out of China's market. The Chinese companies are not selling seed cheaply, though. Southern Rural News reported that the price of GM corn seed is generally higher than conventional seed, and they cannot grow GM corn from saved seed. The article noted that it takes 5-to-8 years to of R&D, testing, market launch, and regulatory filings for new GM seed varieties with an estimated cost of $136 million.

Meanwhile, China's grain and oilseed producers face a crisis. China's corn crop was reportedly record-large with record-high yields in 2024, but some observers thought the numbers were inflated. Corn imports boomed from 2020 until they dropped last summer. Southern Rural News reported that demand for GM corn seed was curbed last year as some farmers switched to growing potatoes and sunflowers, probably motivated by falling corn prices. 

During an inspection of Heilongjiang's soybean industry last month China's agriculture minister learned that many soybean farmers were losing money and urged officials to provide subsidies, buy up soybeans for reserves, and add soybean processing capacity to encourage farmers to keep planting soybeans. Xi Jinping's "important directive" to boost soybean self-sufficiency and the 23-mmt target for soybean output in 2025 set by the 14th five-year plan have been memory-holed. Instead, the slogan this year is to keep soybean production at the 20-mmt level reported for the last 3 years. 

Back in 2016 the current agriculture minister, Han Jun, announced the pro-GMO initiative when he was rural policy advisor to the State Council. In his tour of soybean-producing areas last month he called for improvements in soybean yields, high-oil and high-protein varieties, but did not mention GM crops. 

China's rejections of meat imports spiked in 2024

Rejections of imported meat by China's customs authority more than tripled in 2024. It is unclear whether problems in meat shipments suddenly increased last year or whether the spike in rejections reflects an effort to bring relief to struggling Chinese meat producers by rejecting imports. 

A compilation of monthly reports of rejected food imports from the Chinese customs web site showed that 778 shipments of beef, pork, chicken, lamb, and deer meat were rejected at China's border last year. The spike in rejections was unusual: China's number of meat rejections had never even reached 300 in previous years (the customs administration took over inspection in a 2018 revamp of border authorities). 

Source: Compilation of monthly reports of rejected food shipments posted on China Customs website.

Rejections increased for each kind of meat, but beef and pork accounted for most of the increase in rejected shipments. China rejected 435 beef shipments, up from 60-to-80 rejections in previous years. Pork rejections increased to 186 in 2024 from about 40-to-70 in previous years. Rejections of chicken posted a smaller increase from 86 to 112 shipments. Rejections of lamb are fewer in number but they have been on a rising trend from 10 in 2019 to 43 last year. 

The rejected shipments by weight totaled 5,633 metric tons, comprising just 0.08 percent of China's 6.7 million metric tons of meat imports in 2024. Rejected pork and chicken shipments included mostly containers of 20-to-27 metric tons while rejected beef shipments were smaller--often 10 to 1000 kilograms. Thus, pork shipments comprised about half of rejected shipments by weight. 

China rejected meat from dozens of countries. Fourteen countries had beef shipments rejected, but Australia had the largest number (144). Of 8 countries with pork rejected, Denmark had the largest number of shipments rejected (101). Brazil had the largest number of chicken shipments rejected, and New Zealand accounted for more than half of rejected lamb shipments.  

Increases in rejections stood out for Australia, European Union countries, Brazil, Argentina, and the USA. The United States had rejections of beef shipments (43), pork (37), and chicken (17). Rejections of Denmark's pork stood out because China had only rejected 10 Danish pork shipments in total over the previous 5 years. Nearly all the rejected Danish shipments came from a prominent company. All the leading meat companies in Europe, North and South America had shipments rejected. 

Source: Compiled from reports on China Customs Administration website.

Only a few shipments were rejected for finding spoiled meat, including many of the rejected U.S. shipments and Russian and Brazilian chicken shipments. Overall, most beef, chicken and lamb shipments were rejected for not having all their documentation in order. Most of the Australian beef rejections were for documentation problems. 

All the Bolivian beef rejections and about 25 Brazilian beef rejections were for detection of a drug used to control ticks. One company told news media that China suspended its Greely, Colorado plant due to detection of the growth compound ractopamine in its shipments, but the two shipments of U.S. beef rejected for ractopamine as reported by China customs listed other companies as the producers. 

In contrast, most of the pork rejections were for detection of an unspecified animal disease, including nearly all the rejections of Denmark's pork. Some Spanish pork was rejected for containing testosterone.

Is China using rejections by customs inspectors to slow down meat imports? China's beef producers have been suffering from steep financial losses due to falling prices over the last two years. The surge in rejections of European pork coincided with China's announcement of an antidumping investigation of European pork and an accusation of overcapacity in European pork industry issued by China in June. News media reported China suspended beef shipments from two U.S. facilities on the same day in May.

Cloud-based Farming Scams Proliferate in China

Four Chinese government departments issued a warning about “cloud-based" farming scams ahead of the lunar new year holiday this week. 

The warning posted jointly by the Ministry of Agriculture and Rural Affairs, Bank Supervision authority, public security bureau, and State Administration of Market Supervision alerted Chinese citizens that cloud-based cattle, fish, tea, and vegetable farming frauds have become rampant. The Ministry of Agriculture issued a similar warning about cloud-based farming frauds last September.

A "cloud cattle farm" in Ningxia Autonomous Region
featured on China Central TV (reposted on Youtube).

One scheme featured in a November article invited investors in Shanghai's posh Xuhui District to invest RMB 5000 to own a cow on an overseas farm with the promise of high returns. Investors were invited to view videos of the farm and monitor their cow's daily life on a video feed. One investor raised his investment to RMB 3 million before he learned that "his" cattle had been bought back by the company in exchange for coupons giving him ownership of 60,000 pounds of beef he had no way of redeeming. The company let him put the beef up for sale on consignment but there were no takers. Shanghai police found that the farm did not actually exist and the video footage had been borrowed from elsewhere. 

According to this week's warning, the frauds often hype science and technology-based farming and other hot topics like rural life, organic ecology, smart agriculture using forged videos and pictures of farms and ranches to fabricate or exaggerate the actual production conditions. They promise low risk and unrealistic high returns. The fraudsters use the Internet and mobile apps to conduct operations and collect and disburse funds. Some operate like a ponzi or multi-level marketing scheme by paying off early investors with money from later investors or inducing participants to recruit more people to join to expand the pool of funds. 

Illustration from a November article warning against
fraudulent online farming investment schemes.

Ironically, China's agriculture departments have used similar fraudulent approaches to promote agricultural ventures for decades. The Internet is littered with shiny images of space-age-looking farming ventures. Agricultural officials constantly hype high-tech farming practices by installing highly subsidized equipment and facilities on model farms and demonstration villages. They then bring in teams of village officials on sponsored tours to observe the new techniques. Officials then borrow money to build the facilities in their home villages which promptly fail because they are unviable without subsidies received by model farms. Failed techniques and farming enterprises have been promoted with staged, doctored, or photoshopped images since the Great Leap Forward and Dazhai, including schemes to feeding wheat straw to cows, communal livestock-raising compounds decimated by disease, seed subsidies used to push lousy seeds from a local monopoly, fake farmer cooperatives set up by officials to meet quotas or run by companies to get tax breaks, intercropping corn and soybeans, and countless abandoned greenhouses.

China's 2024 Ag Imports Shrank in Value

China's agricultural imports declined 7.9 percent during 2024 to reach $215 billion, according to data posted on the customs administration website. The 2024 value was lower than each of the 3 preceding years. Agricultural exports were up 4.1 percent to reach $103 billion.

Source: Data from China Customs Administration December reports.

The top two agricultural import categories by value both declined. Soybeans ($52.75 billion in 2024) fell 10.9 percent, and meat ($23.38 billion) fell 15.1 percent. Cereal grain imports ($15 billion) were down 28 percent and fish & shellfish imports ($18.5 billion) were down 6.2 percent. Edible oils imports ($10.6 billion) were down 17.8 percent. Fruit, rubber, cotton and wool and beverage imports were up for the year.

The decline in value of imports partly reflected a decline in prices. Customs reported that the volume of soybean imports for calendar year 2024 reached a record 105 million metric tons, up 5.6 million metric tons from the previous year according to the customs report. The volume of several other import categories declined less than their value. Imports of cereal grains reached 50.19 million metric tons, 8.9-mmt less than the previous year. Meat imports totaled 6.7 million metric tons, down 9.7 percent from the previous year.

The volume of China's corn imports was down 13.5 mmt, nearly cut in half from 2024, while wheat and rice imports were down less than 1 mmt each. Barley and sorghum imports were up from the previous year. Imports of palm oil were down 1.5 mmt and imports of soybean oil and rapeseed oil posted smaller declines. Beef imports were up 140,000 metric tons, but imports of other types of meat were all down from the previous year. Imports of fish and dairy were also down. 

A year ago China's customs data was apparently doctored to make the soybean import total come in just under 100 mmt for 2023. There seems to have been no such shenanigans this year. China Grain Net's analysis of the 2024 trade numbers acknowledged that soybean imports had broken through 100 mmt and commented that soybean imports fulfill demands of the common people in view of China's land resource limits and pressure on environmental resources. China Grain Net went on to acknowledge that reliance on imports challenges China's national food security "...in the current context of intensified competition among major powers and increasing uncertainty in the external environment."

Calculations based on the customs data and production of domestic soybeans show soybean imports constituted 83.6 percent of China's soybean supply in 2024. Similar calculations show 7.1 percent import reliance for cereal grains and 6.5 percent import reliance for meat. 

Shrinking agricultural import values present a picture of weak consumer demand and economic deflation that present a more serious concern for China's rural economy. China Grain Net commented, "...under the condition of weak domestic grain demand, imports of low-priced grain from abroad may increase supply pressure, drag down grain prices and affect farmers' income from grain production."

The National Bureau of Statistics reported sharp declines in producer prices for grains and oilseeds for Q4 2024 (corresponding to the fall harvest season). Wheat prices were down 11 percent, corn prices were down 17.7 percent, rice was down 4.6 percent, and oilseed prices were down 3.9 percent from a year earlier. Cattle price plummeted 22.7 percent, sheep prices were down 9 percent, and poultry prices were down 2.3 percent. Hog prices were up 12.9 percent from a year ago, but the hog industry downsized by cutting slaughter 3.3 percent.

Preventing rural areas from relapsing into poverty was one of the watchwords for communist party officials stressed in last year's "Document No. 1" as well as the December 2024 rural work meeting. Officially, primary sector (agricultural) GDP grew 3.5 percent in 2024, falling behind the overall GDP growth rate of 5 percent and weaker than growth in manufacturing and service sectors. Fixed asset investment for the primary sector was up only 2.6 percent, despite much publicity about building "high standard fields." 

The National Bureau of Statistics reported that nearly 300 million rural people had non-farm employment during 2024, up 2.2 million (0.7 percent) from the previous year. The increase seems implausible given the contraction in construction and service sectors--two top employers of rural migrants. However, the increases of last two years have been among the slowest ever. Employment in rural areas grew only 0.1 percent in 2024 after declining 2.8 percent the previous year, suggesting an especially weak rural economy. 

Source: Calculated from China National Bureau of Statistics.

The dollar-value of average monthly nonfarm wages earned by rural people has been stagnant for four years as modest gains in wages are offset by depreciation of the Chinese currency against the dollar.

Source: Calculated from China National Bureau of Statistics data.

Ag Ministry Renews Corn-Soy Feed Reduction Program

China's Ministry of Agriculture and Rural Affairs has decreed that the country's livestock industry will reduce use of corn and soybean meal in feed as a strategy for reducing grain imports. However, the new decree mostly recycles ideas that have been pushed for the past 5 years...or even longer.

The Ministry's "Opinion on Implementation of the Livestock Industry Grain-Saving Action Plan" aims to attack animals' consumption of feed grains and protein meals on multiple fronts. Officials plan to promote adoption of precise low protein diets to cut back on use of soybean meal. The plan calls for fully utilizing non-grain feeds such as corn silage and alfalfa, adjusting the mix of livestock species to minimize feed grain use, boost efficiency, and cut production costs. The plan aims to reduce feed intake per animal by 7 percent from the 2023 level by 2030. 

At a news conference a Ministry official indicated the livestock feed action plan is part of the broader grain-saving and food waste reduction action plan issued by China's communist party leadership in November as part of so-called "Chinese-style modernization." 

This plan is the latest in a series of desperate measures issued since the trade war with the United States to cut back on imports of corn and soybeans, two commodities China imports from the U.S. in large volumes. 

• The campaign began in October 2018 with the Ministry's issuance of new feed standards that cut protein requirements in animal feed. 
• By 2021 the Ministry had created a database of feed ingredients and launched a program to replace and reduce use of corn and soybean meal in animal feed.
• In September 2022 the Ministry held a seminar where hog-producing and feed companies explained their achievements in using synthetic amino acids in feed to cut back on soybean meal use. 
• In April 2023 the Ministry issued a 3-year action plan to reduce soybean meal use in feed from 14% in 2022 to 13.5% by 2025.

A 2022 Ministry of Agriculture and Rural Affairs meeting said feed grains are "the most prominent contradiction" in national food security because demand is growing steadily. The meeting described the soybean meal reduction and substitution program as a necessary choice in view of "uncertainty of international supplies." Cutting imports has become even more urgent this year as corn and soybean prices plunge in China, undermining production incentives and potentially triggering unrest as rural incomes fall.

In 2021, the agriculture ministry issued a list of recommended substitutes for corn and soymeal in swine and poultry feed that was comprised mainly of other commodities that would have to be imported. The list included wheat and rice (which are staple food grains...was it a coincidence that China suddenly imported huge quantities of broken rice in 2021 and '22?), wheat bran (already widely used), sorghum, barley and cassava (which are also imported for feed use), DDGS (which has limited quantities domestically, are vulnerable to mycotoxin contamination, and imports face antidumping duties), rapeseed meal (which can only be used in limited quantities and would require imports of rapeseed), cottonseed (high in fiber, mainly suitable for cattle and is produced thousands of miles away in Xinjiang), palm meal (imported from Southeast Asia), and highland barley (small quantities are grown in far western regions Tibet and Qinghai).

This year's action plan once again promises a feed and animal nutrition database. 

Last month the Ministry of Agriculture and Rural Affairs issued its latest report bragging about progress in cutting soybean meal out of feed. One of the projects is using restaurant waste to produce animal feed in 15 pilot cities. (Feeding table scraps to pigs used to be widespread--a real grain-conserving activity--but it was banned during the African swine fever epidemic 5 years ago). There are also two high-tech programs to create protein by fermenting industrial waste and using animal-based protein hydrolysates as feed.

Another project is to feed straw and stalks to cattle and produce grass-fed meat animals. These programs have been around since the 1990s and keep getting resurrected. Subsidies and action plans to grow more corn for silage and alfalfa have been underway for years. Trouble is, Chinese consumers have not been willing to absorb the increase in domestic beef supplies that has already occurred, and beef prices have been falling for two years. 

This blog has pointed out before that China's exports of amino acids have boomed since 2018--during the same years the agriculture ministry claims to have popularized substitution of amino acids in diets to replace soybean meal. If domestic use of amino acids is growing so much, how could exports boom? And why haven't soybean imports fallen if farmers and feed mills have cut use of soybean meal?

The agriculture ministry spokesperson claimed that China had already reduced soybean meal use in feed by 23.7 million metric tons since 2017. This number was reached by applying arithmetic to questionable Chinese feed industry data, but the reduction in soybean meal consumption does not square with the ministry's own estimates that indicate growth in China's production of soybean meal. The soybean balance sheets issued by the ministry's CASDE show an increase in soybeans crushed to produce soybean meal from 91.1 mmt in 2017/18 to 97.9 mmt in 2023/24, an increase of 8.8 mmt. These estimates suggest China's supply of soybean meal increased by about 4.7 mmt since 2017, the year before the anti-soybean-meal campaign began. China has not increased its exports of soymeal so the increased supplies must have been consumed in China.

The Ministry of Agriculture spokesperson told Economic Daily to expect lower corn imports in coming years. Import volumes hit new lows during August-November 2024, and the October import volume of 251,000 metric tons was the lowest since December 2019. Economic Daily estimated that calendar year 2024 corn imports would reach 14 million metric tons (mmt), down 13 mmt from the previous year. 

Economic Daily suggested that authorities will resume enforcing the tariff rate quota of 7.2 mmt. Imports were allowed to exceed the quota for the last 5 years. A Ministry of Agriculture official told Economic Daily that cumulative corn imports reached 100 mmt from January 2020 to September 2024. The official claimed that bumper harvests had reduced the need for corn imports, and he predicted 2025 imports could be within the 7.2-mmt quota. From now on, imported corn will be used to fill temporary deficits, Economic Daily said.

Economic Daily indicated that lower imports will boost "market confidence" and raise corn prices for China's farmers. The drop in imports beginning in August corresponds to industry news that officials issued orders to companies in processing zones last summer to stop importing corn. The drop in imports lines up with the beginning of China's corn marketing season, surely no coincidence. Chinese corn prices have nevertheless continued to drop after the harvest. Economic Daily expects corn prices to begin recovering after the spring festival. 

Source: China's customs data.