Tuesday, September 18, 2018

African Swine Fever: 18 Cases, Divergent Price Trends

With new cases confirmed recently in Inner Mongolia, Anhui, and Heilongjiang Provinces, China has had 18 outbreaks of African Swine Fever from August 1 to September 17. Cases have been widely spread, but Anhui Province has been hardest hit with 8 confirmed cases so far, including the latest on Monday. Other cases were confirmed on farms in Inner Mongolia and Henan Province last week.

China has had 18 cases of African swine fever confirmed as of September 17
Emergency measures have been adopted to cull swine, disinfect farms and stop transportation of pigs in the areas surrounding farms where the virus has been discovered. There is great uncertainty about the impact of African swine fever on retail markets and prices.

The Ministry of Commerce issued a notice ordering local commerce officials to pay close attention to possible effects of African swine fever and other animal diseases on food markets during the mid-Autumn Festival next week and the National Day Holiday coming up in early October. Local officials are ordered to carefully monitor pork supplies, keep prices stable and ensure that meat is safe. To avoid disruption in supplies, officials are advised to arrange deals between suppliers and vendors in their region.
A notice in Henan Province forbids loads of pigs on trucks bearing 
license plates from several other districts of Henan:
Xinxiang, Jiaozuo, and Zhengzhou. Source: Soozhu.com

African swine fever's impact on China's pork market is uncertain. Hog prices have risen in regions that rely on shipping in hogs from the hinterland, and prices are falling in major production regions. Prices are highest in eastern regions that rely on shipping in hogs from other regions. Similarly, prices have climbed to a high level in the western region. At the other end of the spectrum, prices are depressed in the northeast--the first region where African swine fever appeared in China and which has been hit hardest by bans on outbound shipment of hogs. The north and central regions have had the most outbreaks and are also seeing sinking prices. Prices in the South surged early this month but have since begun to fall.
Adapted from zhue.com

Thursday, September 13, 2018

Villas Disguised as Greenhouses Skirt China Land Zoning Rules

Chinese authorities are cracking down on rural villas disguised as greenhouses to skirt bans on residential use of land zoned for crop production. News media have been reporting instances of villas, resorts, and restaurants built around a greenhouse or hidden inside a giant greenhouse. The "greenhouse villas" (大棚房) skirt rules forbidding nonagricultural use of land designated for grain production or as "permanent farmland" by building a greenhouse and calling it a "modern agriculture" project. Most of the structures are occupied or operated by city people from outside the village that owns the land. Such developments are found all over the country.

A resort-type building and landscaping being constructed inside a greenhouse to evade restrictions on developing farmland.

A fancy teahouse built inside a greenhouse.

China Central Television reported finding an entire real estate development hidden under greenhouses that had been approved as a "vegetable production base" featuring greenhouse farming and a "company + base + farmer" model. A salesperson offered the CCTV reporter a choice of several options of varying sizes and prices and assured the reporter that the developers had an agreement to lease the land from the village for 50 years.

In Tianjin, a number of farmers' vegetable cooperatives have developed greenhouse villa projects. For example, one cooperative set up in 2013 gained control of a village land parcel and recruited an outside sales company the following year. Some renters constructed houses, gardens and paved walkways inside greenhouses. This year there were 155 greenhouse villas covering 6 hectares designated as "permanent farmland." The local land administration bureau destroyed the project this year.

On August 20, the Ministries of Natural Resources and Agriculture and Rural Affairs began a remediation campaign, destroying 14 greenhouse villas as examples. Supposedly, the land is being returned to crop production.
On September 9, the central communist party leadership launched a special cleanup remediation action to crack down on greenhouse villas.

Greenhouse villas are destroyed in Langfang, Hebei Province as part of the rectification program.

Wednesday, September 12, 2018

China Sells GMOs Overseas to Open Home Market

A Chinese company is seeking Argentine approval for a genetically modified soybean strain that would be grown in South America and exported back to China. This appears to be a gambit to break down Chinese consumers' resistance to commercializing GM crops in China. By demonstrating that foreign scientists think GM seeds are safe, Chinese government and industry leaders hope consumers will give up their resistance to allowing GM food crops to be grown in China.

According to Science and Technology Daily, Da Bei Nong (also known as DBN) Group, a feed, seed and crop protection company based in Beijing, has spent three years seeking Argentine approval to commercialize a GMO soybean variety that is resistant to both glyphosate and glufinosate--two common herbicides. DBN is working with Argentine company Bioceres to gain the approval and eventually develop marketing channels for the seed in Argentina. This has also been reported by an international organization ISAAA.

The Science and Technology Daily article describes the expected approval as validating DBN's own intellectual property and allowing the company to compete with "multinational companies such as Bayer and Dow-Dupont" whose seeds dominate soybean production in Latin America. The main thrust of the article, however, seems to highlight foreign approvals of Chinese GMO crops to assure Chinese readers that scientists in foreign countries think these crops are safe. The article also hypes the "safety-type" approval by the U.S. FDA and EPA of a Chinese GMO pest-resistant rice strain "Hua Hui No. 1" developed by Central China Agricultural University. "FDA" appears five times in the article. One of the headings in the article is "Safety is not a problem." The article also says China was the first to develop a genetically modified fast-growing carp during the 1980s and notes that a GM disease-resistant type of tobacco grown widely in Henan Province was exported to the United States during the 1980s and '90s.

Science and Technology Daily also highlights an "embarrassing" situation in which Chinese farmers are not permitted to benefit from GMO crop varieties developed by Chinese companies; instead farmers in Argentina will benefit from growing the soybeans and export most of them to China, the article said. The soybean variety will have to go through a Chinese approval process before the soybeans can be imported to China.

No major genetically modified food crops have been approved for commercial production in China. Cotton is the only major GM crop commercially grown there. For years Chinese consumers have been blasted with propaganda about the dangers of American genetically modified soybeans--that they cause cancer and/or sterility--that Americans do not eat genetically modified foods themselves, and that imported GM soybeans are wiping out the Chinese soybean industry. "Genetically modified" and "American" were often used as near-synonyms in past years, but that rhetoric has now vanished from Chinese news media.

The Chinese leadership's 2016-2020 five-year plan for science and technology endorsed production of GM crops--including herbicide-tolerant soybeans--as a major project. Xi Jinping gave a personal endorsement of GM crops--insisting that China remain on the forefront of an important area of science while maintaining the "strictest" policy of testing and evaluating the crops. A scientist quoted by Science and Technology Daily refers to the five-year plan and describes GM crops as having social benefits by meeting consumer demand with greater efficiency.

Sunday, September 2, 2018

China Hog Farm Closures in Pockets of Resistance

China's 5-year program to clean up rivers by closing pig farms is reaching further into the hinterland where there has been resistance from farmers and tepid support from local officials. Starting in 2013, Chinese officials issued a series of edicts ordering local officials to designate zones where pig farms would be banned, limited, or encouraged, based on potential to pollute rivers, concentration of residential housing, and scenic spots. Environmental officials have reported closing or moving over 100,000 farms, but there have evidently been pockets of resistance.

Polluted canal in Yulin, Guangxi Province shown to demonstrate persisting poll

Officials appear to be making an example of Yulin, a city in Guangxi Province midway between the provincial capital Nanning and Guangzhou. On June 4, the central government's Ministry of Environmental Protection admonished Yulin officials for failing to carry out directives to ban livestock and poultry farms in zones near the Nanliu River and to build waste treatment facilities. Measurements taken in a section of the Nanliu River earlier this year found the level of ammonia nitrogen was up 141 percent from 2016 and the level of phosphorus was up 83 percent. Official news media posted disgusting photos of black water, decomposing pig carcasses, and trash piled along the banks of the river. Yulin City officials have now designated zones containing 10,832 swine farms which will have to be closed or moved.
Pig manure collection tank adjacent to an irrigation channel in Yulin.

A May 2018 Consumer Daily investigation in Qi County of northern Henan Province discovered black ponds for storing swine waste that contained bags with rotting pig carcasses of all sizes. The reporter called the waste a public heath threat and complained that no regulatory officials appeared during the two hours he/she spent at the site.
Bags containing dead pigs were floating in a manure collection pit in Henan Province.

Some other localities are reporting success. Dayu County in central Jiangxi Province reported demolishing and rebuilding two farms with over 1000 pigs each and outfitting them with methane gas digesters after a survey discovered they were not up to pollution control standards.
These open pig sties in Jiangxi Province are reportedly being replaced
Local officials are a target of the propaganda. Meizhou Daily in Guangdong Province emphasizes that Sanhe village instructed local communist party officials regarding the importance of pollution control and the necessity of transitioning from traditional farming to environmentally-sustainable farms. The article highlights a farmer who replaced his pig farm with fruit trees and free-range chickens.

There is some vigorous pushback from farmers. The Meizhou Daily article acknowledges that closing pig farms is difficult because they are an important source of income in the region's villages.

A more vigorous complaint about pig farm closures was posted on a pig industry web site. The author complained that local officials are obsessed with closing pig farms in his district while a nearby chemical plant spews black smoke into the air and unidentifiable yellow material appears in the river when it rains. He attributes the high rate of cancer and loss of teeth by people in their 40s and 50s to pollution from the chemical plant.
This cartoon illustrated the complaint about pig-farm closures. The butcher knife is labeled "livestock-raising ban," and the pig is tethered to a post that says "businessman."
The author said farmers had their fields expropriated with modest compensation which they invested in pig farms. Now the pig farms are being closed with little or no compensation. "What are farmers supposed to do?" the author asks. He accuses officials of going easy on the chemical factory because it is one of the top sources of local tax revenue. He says farmers are not educated enough and lack sophistication to push back against officials taking advantage of them.

The author lashed out at local officials: "You don't care about farmers. You don't care about smokestacks. You only care about stopping pig-farming."

Friday, August 31, 2018

Fifth African Swine Fever Outbreak in China

On August 30, China's Ministry of Agriculture and Rural Affairs confirmed that African Swine Fever (ASF) was the cause of illness and death in a herd of 459 pigs on a farm in Anhui Province's Wuhu municipality. Testing was conducted by the National Animal Disease Control Center after 80 pigs on the farm died and 185 became ill from unknown causes. All pigs on the farm have now been culled and emergency measures have been taken to prevent stop movement of pigs out of the area.

The ASF outbreak in Anhui Province is China's fifth confirmed this month. The disease was first discovered August 1 on a farm in the northeastern city of Shenyang. Since then the disease has been discovered in widely scattered locations: in a load of pigs arriving at a slaughterhouse in Zhengzhou, and at farms in Jiangsu Province's Lianyungang municipality, in Zhejiang Province's Wenzhou, and now in Anhui Province's Wuhu municipality.
Occurrences of African Swine Fever confirmed in China, August 2018
Surveillance efforts earlier this year focused on the border with Russia in Heilongjiang Province. According to an investigation, the load of infected pigs arriving in Zhengzhou that had been loaded on a truck in Jiamusi, Heilongjiang Province August 12, but the presence of the virus has not been detected there. The Shenyang, Lianyungang, and Wuhu out breaks have been on modest-sized farms with hundreds of pigs, and the Wenzhou outbreak was in a livestock-raising zone where farmers keep their pigs together.

There has been no conclusive results about the source of the disease or how it has spread. Several theories have been floated:
  • The virus could have been introduced in smuggled or imported meat. A New Tang Dynasty report speculates that a July shipment of pork from Russia "to fill the gap left by American pork" could have introduced the virus. Others have noted that three of the first outbreaks have been in coastal ports far from Russia. 
  • The "American conspiracy theory" apparently based on a purported link between the concentration of outbreaks of ASF near Chinese ports and timing of NATO Naval exercises held in the Baltic Sea during June, prior to the outbreaks.
  • "Garbage-feeding theory." The virus can be spread through infected pork products or waste water in slop fed to pigs which is not uncommon on the outskirts of Chinese cities. There have been no reports confirming that farms affected by outbreaks fed slop to their pigs. 
  • The China outbreak followed the soccer World Cup held during June-July in Russia -- the focus of ASF outbreaks over the last decade.
  • There has been an uptick in travel and trade between China and ASF-infected regions of Eastern Europe and Africa as part of China's One Belt One Road initiative. These include many projects in agricultural areas.
A Chinese Academy of Agricultural Sciences pork analyst noted that the load of pigs purportedly shipped from Heilongjiang to Zhengzhou could have contracted the virus from manure, urine, or blood in one of the six provinces they passed through. A veterinarian at the Academy said most local veterinary stations don't have the equipment to detect the virus, and it takes two days to send samples to a provincial or national lab for testing. 

Chinese Agricultural officials have assured the population that African Swine Fever cannot spread to humans, but anecdotal reports indicate that consumers are avoiding pork. Northeastern consumers were said to be shunning pork after the first outbreak in Shenyang. Last week, a reporter found that consumers in Zhengzhou were switching to beef and lamb, and he/she found most of the pork counters abandoned in food markets near the Wenzhou outbreak. 

The impacts on the market are uncertain. Reports show hog prices falling in some regions and rising in others. Farmers could accelerate slaughter of hogs to get ahead of the spread of the disease, depressing prices in the immediate term. Due to disease concerns, farmers are reportedly hesitant to stock up on pigs, but the peak consumption periods are on the horizon with the September mid-Autumn festival, October 1 National Day, and February Spring Festival coming up in the next four months. Supplies of imported pork are constrained by prohibitive retaliatory tariffs imposed on U.S. pork in July. 

Thursday, August 30, 2018

China Food Security Propaganda Turned Up

The Chinese Government has turned up the volume on its food security propaganda this month as the country faces shrinking output of major farm commodities while the United States and Brazil are turning out monster crops. 

On August 24, the chief of the National Bureau of Statistics rural office issued a proclamation that national grain production is basically doing well. Noting that the issue of maintaining the food supply for more than 1.3 billion people is a "first class issue" for governing the nation, he recited the creed of the necessity of relying on domestic production in a new era with changes in the agricultural sector.

The same day, the chief statistician from the same office explained that their estimate of a 4.3-percent decline in this year's early rice crop is not a concern since the country's inventory of rice is relatively large.

On August 27, a spokesperson for the Administration of Grain and Commodity Reserves assured listeners that the plummeting volume of wheat purchases this summer is not a threat to food security. From June through August 20, purchases of wheat by all types of enterprises totaled less than 42 million metric tons, 21 mmt less than last year at this time. This spokesperson also assured the public that there is lots of wheat in inventory to keep the supply stable.

August 22, Ministry of Agriculture and Rural Affairs director of rural institutional management noted that grain is a large country's powerhouse and declared that the inventory of farmland must be the protected at all times. He warned that the stock of farmland must never cross the "red line" of 1.8 billion mu (120 million hectares) in any place or any time, and land must not be diverted to other uses or brought into real estate development. He recited the same food security rhetoric and added some flourishes about "rural revitalization."

Maybe the food security propaganda blitz was prompted by "Northeast Corn and Soybeans Encounter Drought Over Wide Areas; Will Grain Supplies be Reduced?" published August 20 in Securities Times. In a rare departure from the party line, Securities Times said a reduction in corn yield is likely this year due to widespread drought in northeastern regions, plus damage by army worms and hail storms. Additionally, the article estimated that China's soybean area is down 1.7 percent this year: farmers were discouraged by poor returns from soybeans and difficulty selling last year's soybean crop and the announcement of fat soybean subsidies came too late to change planting decisions, Securities Times said. The article cited the 33-percent decline in wheat purchases and reported observations from news media that output in parts of Henan Province had declined sharply this year. One wheat trader quoted by Securities Times said, "As I went from county to county in Henan, I heard about unprecedented declines in production." Farmers expecting wheat prices to surge are holding on to their crop instead of selling it. Flour mills are not able to procure adequate amounts of quality grain.

Could it be that government officials have other information showing their farm policies are not working? The Ministry of Agriculture and Rural Affairs official's stern warning about loss of cropland to development could reflect the discovery that local officials have not been reclaiming enough new land to replace land lost to the vast real estate developments, industrial parks and highways.

The National Bureau of Statistics rural survey official also pointed to the importance of preserving land in his remarks, but it was the only item for which he reported no statistics. He reported statistics on tractors, irrigation facilities, and new-type farm operators from the agricultural census conducted last year, but nothing about cropland area. In fact, it was previously announced that the census will NOT report a new inventory of cropland--the piece of information that is most fundamental to farm production statistics--instead they will rely on a dicey number reported by the Ministry of Land Resources that has been suspiciously stagnant for years at a level just above the so-called "red line" of 120 million hectares.

Is it possible that the scaling-up of farms is not going well? The initial set of ag census results released last year showed a 2-million jump in the number of large-scale farms, but it also reported that the number of agricultural households had increased by 7 million over 10 years. The census found just half the 1.8-million farmer cooperatives officially registered were actually in operation. And why would anyone expect several million farmers with no experience farming on a large scale to be immediately successful in growing crops on hundreds or thousands of acres? Why would anyone be motivated to grow vast tracts of wheat or soybeans that bring skimpy returns when they could grow vegetables, tree saplings to sell to real estate developers, or watermelons that bring much higher profits?

Saturday, August 18, 2018

China Meat Smuggling Dodges Taxes

Trade in smuggled meat keeps some restaurant operators in business, according to an August 10 report by China's Ban Yue Tan (Comment) online magazine. China's small restaurant owners and processors struggling to remain profitable may be the most vulnerable to China's tariffs on imports from the United States. As tariffs rise higher, the incentive to smuggle is increased proportionately and China's customs authorities say they are cracking down (again).

The Comment reporter said most of the 40 merchants he interviewed in two wholesale meat markets in Chongqing--a major hub of commerce in southwest China--sold both legal and smuggled frozen meat products. Smuggled products included frozen pork, beef and poultry.

Vendors asked the Comment reporter, "Do you want [meat] with a certificate or without? It's much cheaper without a certificate."

The product without certificates was smuggled meat that lacked import clearances and inspection documents. The smuggled meat was in boxes labeled only in English, a violation of China's requirement that imported foods be labeled in Chinese. Smuggled boxes were covered with plastic bags to prevent mixing with legal products.
Described by Comment as smuggled meat on a loading dock.  

A vendor quoted prices of 460 yuan for a 20-kg box of smuggled chicken feet or 540 yuan for a box of legal chicken feet--a 17 percent discount for smuggled product.

Another vendor offered a bigger discount on smuggled beef that the reporter said was not discernibly different from legal beef: 720 yuan for smuggled and 960 yuan for 20-kg of legal beef, a discount of 33 percent.

The Comment reporter said there is no way to estimate the volume of smuggled meat sold, but he was told selling smuggled meat is an "unspoken rule." The meat arrives at the market on trucks with license plates from all over China. One driver from Henan Province told the reporter that he has been transporting meat for 5 years and has done business in 10 provinces.

The main buyers are food service establishments from all over southwestern China. The restaurant business is highly competitive and every operator is looking for ways to cut costs.

The Comment reporter described the pressure to use smuggled meat as a "Gresham's Law" in which bad meat drives out good. Many companies deal in illegal meat "as a last resort" because the high cost of legal meat would put them out of business, the Comment reporter said.

One buyer told the Comment reporter, "Business is not good now and tax-free meat is cheap, saving me money. Many people in the industry use this kind of meat, and if I use only legal meat the cost pressure would be too great."

The article in Comment--a news site operated by the communist part--appears to be part of an anti-smuggling campaign. The article concluded by recommending a crackdown on smuggling and market regulation to prevent loss of tax revenue, eliminate hidden food safety risks and maintain order in the market.

An "opinion" piece from Hangzhou's newspaper posted on Peoples Daily and Xinhua news sites on August 13 worried about the Comment article's revelation that officials who operate the Chongqing markets send text messages to give vendors advance notice of inspections, allowing them to hide smuggled product or close their shop before inspectors arrive. The Hangzhou paper noted that merchants and market managers had incentive to collude so they can split the profit from smuggled meat.

On August 14, Guangzhou customs inspectors said they intercepted a vessel carrying 427 metric tons of smuggled frozen meat on July 19.  Smugglers carried 16 containers of beef, pig feet and tongues and chicken feet that originated in the United States. The decommissioned boat stripped of monitoring gear and fitted with a fake name plate was apprehended on a river in Guangdong. Authorities say they will step up patrols on rivers in Guangdong as part of the 2018 "national sword" campaign focused on grain, frozen foods, sugar and other agricultural products.

Merchants told the Comment reporter they had seen news about crackdowns from time to time, but the cost of dealing in smuggled meat is still relatively low.