Dim Sums: Agricultural Markets in China

We were wowed by the Olympic ceremonies. This amazing display demonstrated how China can concentrate resources on a problem it wants to solve regardless of the cost. Food safety was one of the big concerns in preparations for the games. Organizers worried that sick athletes or failed doping tests due to hormone-laced meat would give China bad publicity. So since 2005 there has been a massive effort to develop an elaborate system of production bases for vegetables, milk, poultry, etc., including secret pig farms where the hogs eat like kings, have to swear off drugs and get to roam around in exercise yards in accord with European animal welfare requirements. Last year I visited the control room in northwest Beijing to see the city's food safety monitoring system. Like the opening ceremonies it was an awe-inspiring martialing of technology and "Big Brother"-type control. The wall was covered by a bank of video and computer screens. There is a massive database that allegedly...

More signs that China's supply situation is turning the corner. Perceived shortages that prompted panic-driven cut-off of grain exports, stuffing of grain inventories, and furious purchases of soybeans and vegetable oil are gradually turning into gluts. China National Grain and Oils Information Center predicts a record corn harvest this year. They raised their projection to 156 million metric tons, up 3 million from their forecast last month. The rise in corn production is due to excellent weather. It comes despite a slight decline in corn acreage as farmers switched some area to soybeans to take advantage of the high soybean prices. CNGOIC says last year severe drought in july and august hit corn yields, cutting yields over 10% in many areas and 20% in some places. (No one was admitting this last fall.) The drought also devastated China's soybean production last fall, probably more than reflected in government statistics. With a big new corn crop prices are likely to fall. Ear...

Sweet sorghum is another crop being touted as a costless source of biofuel, but the road is not so smooth. Sweet sorghum looks like a giant corn stalk about 10 feet high. The stalk contains sugar that can be squeezed out and distilled into alcohol. Sweet sorghum is seen as an attractive alternative because it can grow on poor land that’s unsuitable for other crops. Nongrain biofuel projects are the “in” thing and they’re being pushed by the government and everyone wants a piece of the action. Especially since there are generous government subsidies available. Mr. Liu, an official of the local Agricultural Bureau’s seed company in Huanghua ( Hebei Province ), complained to a China Times journalist that COFCO had left the farmers at the altar. In March 2007 COFCO and its partner, BP petroleum, made plans for pilot projects in Hebei, Shandong, and Inner Mongolia, giving local officials and farmers some sort of promise that they would buy the sorghum to make biofuel on a trial basis. ( CO...

Some news gleaned from a late July feed industry report from China China ’s Commerce Ministry imported 200,000 metric tons of U.S. pork as a buffer to ensure pork price stability during the Olympics. The report notes that 40,000 mt went to a company in Jinan, Shandong Province (Wei’er kang = Wellcome? Foods). In Anhui and Hubei Provinces (central China) there are rumors of spreading “high fever sickness” among hogs. Hog prices have been slowly declining for months, but the ratio of hog-feed prices is still well above the historical average. Chicken prices are down slightly and egg prices up slightly. Beef and mutton mostly stable. In southern China the effects of typhoons (transportation limited, high temperatures, high humidity that promotes disease) have induced farmers to slaughter more animals. The report conveys a general sluggishness in livestock and feed industries in the south. They are past the seasonal peak and waiting for the build-up to the Chinese new year peak. Fee...