Dim Sums: Agricultural Markets in China

According to a report from China corn market net on Dec. 26, traders say Chinese officials have decided to postpone their issuance of new corn export quotas, cut back on the amount of quotas, and may not give any policy support [e.g. VAT rebate] for exports in order to "control prices and ensure domestic supplies." The article says that China's decline in corn exports will allow American gain traders to maintain their Asian market share. Chinese corn prices have already bounced back from their two-year low due to the Chinese government's support of prices through increased reserve procurement. China mainly exports corn to South Korea and Japan. According to customs statistics, this year's exports through November totaled 235,379 mt, down 95%. This week the government required local grain bureaus to procure an additional 20 mmt of corn from farmers, bringing the total to 30 mmt. Here is the planned procurement in the latest round which is to be completed by the en...

Agriculture Minister Sun Zhengcai, speaking at a national agriculture work conference on Dec. 27, 2008, proclaimed that Chinese agriculture continued its stable development this year despite the challenging situation, achieving several years of breakthroughs. Grain output and yields have both increased five consecutive years, both reaching record highs. Grain production for 2008 is estimated at 528.5 million metric tons, an increase of 5.4%. Yield was estimated to increase 4.2%. Rural household income also saw a relatively good increase of about 8%, also a fifth-straight increase. Oilseeds production also recovered, reversing 8 straight years of falling self-sufficiency rates. There was a rapid recovery of hog production, livestock and aquaculture production continued stable development, and "vegetable basket" supplies were plentiful. Hog inventories were estimated at 470 million head for 2008, a 7.4% increase, and hog slaughter was estimated at 600 million, up 6%. There was ...

As if China needed more stimulus of artificial demand...The National Development and Reform Commission announced a 100 billion yuan stimulus spending plan for next year. It includes *construction of low-cost housing that will reconstruct urban migrant squatter settlements (10 billion yuan); *rural gas, drinking water, electrification, roads, and postal service projects, water management, rural cultural centers and other rural infrastructure stuff (34 billion); *railroads, highways, airports and other big infrastructure (25 billion); *basic health and family planning service system, repair and construction of schools in central and western provinces, medical clinics, education, cultural and social development (13 billion); *urban water treatment, solid waste disposal facilities, focus on water treatment and pollution prevention, energy conservation and ecological projects (12 billion); *independent innovation and production restructuring projects (6 billion). Financial departments have ...

A Dec. 19 article in the Economic Information Daily reports that this year's turbulent market environment is forcing Chinese food companies to look more closely at domestic markets. Chinese companies and officials have viewed themselves as a success if they exported. The domestic market was for the weak companies that couldn't make it overseas. This year's food safety incidents (pesticide-laced dumplings found in Japan, melamine in milk powder and eggs), the global economic crisis, and appreciation of the Chinese yuan have all contributed to a more sour outlook for Chinese food exports. The reporter gives the Longda Food Group, China's biggest processed food company, as an example. Longda's export sales (80% of them to Japan) fell 20% this year in terms of volume. The article reports that most food exporters have been raising prices. This reflects rising raw materials costs (i.e. food price increases), higher labor costs due to a new labor law this year, and other ...

China's cotton demand has fallen as U.S. demand for Chinese textiles has slowed. Textile manufacturers are closing or cutting back production as they experience losses and accumulate unsold inventories. Commercial reserves of cotton in November were 3.5 million metric tons (mmt), 10% higher than November 2007 (1.78 mmt in Xinjiang alone). Unsold textile and yarn inventories were up too. Enterprises were estimated to be holding 28.5 days of unsold textile products and 21.57 days of yarn inventory. As is the case in the soybean market, the government is the main active buyer as it procures cotton for government reserves to prevent prices from collapsing. On Dec. 9, the State Council issued a document floating ideas for policy support of the cotton market that featured planned procurement of 1.5 million metric tons (mmt) of cotton at 12,600 yuan/mt. According to one news report State procurement for cotton reserves totals 660,000 mt this year so far, but commercial reserves are still ...

In 2007 China’s hog supply was in a severe shortage situation and pork prices soared by about 50%. One of the key policies the government introduced was financial support for breeding sows. Apparently, the policy worked. According to an article from the China Animal Husbandry and Veterinary net , NBS data say the third quarter 2008 inventory of breeding sows was up 12.4% year-on-year. The inventory of all hogs was up 6.6% and hog slaughter was up 5.8%. There has also been an increase in the scale of hog farms. Traditionally, hog production has taken place on a very small scale in a “hog in every home” pattern. This year it is estimated that farms slaughtering 50 or more head account for over 70% of production. In past years, the share was reversed—about 70% came from “backyard” farms. The number of farms slaughtering 50 or more hogs is targeted to reach 50% of the total production nationally by the end of the year. The government at the central and local level is implementing all kinds...

In its December report, USDA raised its estimate of Chinese corn production this year to 160 million metric tons (mmt) from its previous estimate of 154 mmt. In comparison, China's National Grain and Oils Information Center (NGOIC) kept its estimate at 156 mmt. Nobody knows how much corn is produced in China. It is important not to take any statistics about China too seriously, no matter who produces them. As I understand it, this estimate is a based on crunching dicey preliminary Chinese numbers on provincial grain output and observing the very good weather during the growing season this year. Those provincial numbers don't break out corn separately and are routinely revised downward later. (The number-crunching took this into account, making assumptions about downward revisions in the numbers and the proportion of corn in total grain.) The danger is that analysts will see this and attribute falling corn prices to China's big increase in corn output. Reports from China ind...

Two articles posted on the China Price Bureau web site December 12, 2008 announced that Wal-Mart, McDonalds, and Kentucky Fried Chicken stores in China are cutting prices before and after the Chinese New Year (January-February). These price cuts are indicators of the serious lack of demand in the Chinese economy right now and possibly reflect desperate government efforts to get things going. McDonalds and KFC are giving out coupons that give discount prices on chicken nuggets and other items by up to 36%. KFC is giving out a coupon that cuts the price of a 6-piece chicken nugget meal from 11 yuan to 7 yuan during January; another coupon cuts the price of 2 pieces of chicken in February from 15 to 10 yuan. McDonalds is offering prices for meals that are lower than its prices from 10 years ago. Wal-Mart is cutting prices on groceries, clothing, health products, and furniture. For example, the price of chicken legs is being cut from 22.8 Yuan/500g to 14.8 yuan, a 35% price cut that cur...

As global commodity prices sink, China is struggling to support domestic prices, keep farm incomes from falling and preserve incentives to plant grain next year. Chinese corn demand is nearly stagnant as the livestock sector slows down. There is another surplus of pork and demand for milk and eggs has collapsed after the melamine incident. Meanwhile, China has had its fifth consecutive big grain harvest and now is cursed with a flood of grain that has little demand. Prices are on the way down, and farmers are keeping their grain in storage to see if prices get better later. The government has upped its purchases of corn and soybeans, but what does it do with all this grain in "temporary" reserves? In past years the government subsidized exports of surplus corn or turned it into ethanol. These ideas are being floated again. There is a rumor that an export quota of 5 mmt will be approved. Trouble is, Chinese corn is now much more expensive than corn on the world market. In pre-...

Highlights from Yumi.com cash corn market report, Dec. 5, 2008 China announced its increase in planned temporary reserve purchases in Heilongjiang Province: Soybean 1.03mmt, corn 1.3 mmt, paddy rice 2.6 mmt. Latest statistics on corn procurement as of Nov 20, in 10 major provinces (Hebei, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Shandong, Henan, Sichuan, Shaanxi, Gansu) grain enterprises procured an estimated 4.929 mmt of corn, an increase of 3.746 mt from the same period last year. Of that total, 1.188 mmt (24%) was purchased for central reserves, up 0.996 mmt from last year. The NDRC, grain bureau, finance ministry, and agricultural development bank issued a notice that the national plan for temporarily increasing grain inventories will be raised by 14 mmt, including 7.5 mmt rice, 5 mmt corn, 1.5 mmt soybeans. Farmers are cautious in selling corn, waiting for the price to go up, so the actual pace of sales is sluggish. Farmers are eager to sell because they need to repay loans ...

Just a few months ago all the experts saw world food price inflation as a permanent fact of life. Now, following another record harvest and a big reversal in world commodity markets, China is struggling to keep commodity prices from falling. China had a big soybean harvest this year and demand is soft, so prices are falling. In October the government announced plans to buy 1.5 million metric tons (mmt) of soybeans from northeastern provinces for central government reserves at a price of 3700 yuan/mt. Market prices are still a lot lower. As of Dec. 5, the market price of soybeans in Jiamusi, Heilongjiang Province's biggest soybean production area, was 3400 yuan/mt, 300 yuan below the support price. Problem: imported soybeans cost only 3100 yuan/mt. Nobody wants to buy domestic soybeans. On Dec. 3, the government reserve purchase amount was doubled to 3 mmt. (Corn reserve purchases were also doubled to 10mmt.) Here are the numbers presented by the manager of a soybean crushing plant...

According to the Economic Observer newspaper, Chinese residents desperate for safe milk powder after the melamine adulteration incident are importing foreign milk powder through the mail. The postal bureau in Suzhou reported that it processed 65 shipments amounting to over 750 kg. of milk powder during October 1-15. Meanwhile, the Harbin Daily boasts (with no apologies or concerns) that Heilongjiang Province has been pumping out record-setting exports of milk powder. Heilongjiang Province exported 30,000 metric tons of milk powder during the first 9 months of 2008, a 40% increase from last year. That was 51.5% of the whole country's exports. Major markets for the stuff were Venezuela (joke's on you Comrade Chavez), Africa, Taiwan and Hong Kong. In other Chinese dairy news, third quarter financial reports for major dairy companies were grim. Sales were down and losses of several hundred million yuan were reported for major companies. The exception was Beijing Sanyuan whose milk ...

Last week China made a big splash by announcing plans for a huge stimulus package to revive its economy and show the world how important and resonsible China is. Having spent 40-to-50% of GDP annually over the past decade on building roads to everywhere, a railroad over the Himalayas, new sports stadiums and airports in every major city, subways, mag-lev trains, bullet trains, a rather large dam, and three huge water diversion projects, Chinese bureaucrats are now assigned to come up with ways to spend $586 billion more, mostly on infrastructure. As one newsletter put it, "The hills are alive with the sound of building." Authorities are even thinking about building low-cost housing for rural migrants in cities (although developers used to building high end luxury projects may not go along with this.) China has also put new emphasis on protecting farmland. It has set a "red line" for the minimum amount of farmland and a minimum grain planted area threshold. It just a...

On November 13, the National Development and Reform Commission (NDRC) announced a “National Grain Security Mid- and Long-term Plan” to build a network of grain production areas to guarantee food security. The plan is full of sloganeering and doesn't give specifics. The plan sounds like pretty much what the government is already doing, but it lays out China's general approach to grain policy. It hearkens back to the days of central planning and dredges up the nearly-forgotten but still intact "governors' responsibility system" as the government worries about being able to feed its population. The document stresses that China can't rely on grain imports because its demand is so huge it could outstrip world supplies. The country will concentrate on building a set of production regions based on good production conditions, high production level and maintaining ecological protection, pay close attention to research to increase local grain production plans and measur...

China's industrial use of corn has been booming over the last few years. Chinese analysts estimate that starch, alcohol, and related industries use about 40 million metric tons of corn annually compared with about 92 mmt used for animal feed. The starch industry has a history of booms and busts. The industry apparently is overbuilt and Chinese industry reports indicate some starch products are in surplus and a large share of some products are being exported. According China National Grain and Oils Oct. 30 Corn report: China’s corn starch exports for Jan-Sept 2008 totaled 397,000 mt, up 74% from same period last year. From 1992-2006, exports were never more than 200,000 mt. The total for calendar year 2007 was 342,000 mt, which will be surpassed this year for a new record. The main reason is that domestic starch production is in a serious surplus situation; the excess is exported. This year China’s corn starch exports mainly go to SE Asia and other Asian countries, including 27.2% t...

China' National Development and Reform Commission announced the minimum procurement prices for wheat produced in 2009. Usually the minimum price is not announced until May, just before the wheat harvest and 6-7 months after it was planted. This time they announced the minimum price in October, early enough to influence planting decisions. Minimum prices for last 3 years (yuan/50 kg) 2007 White 72; Red 69; Mixed 69 2008 White 77; Red 72; Mixed 72 2009 White 87; Red 83; Mixed 83 [corrected May 25, 2009]

The professors haven't had a chance to publish their erudite articles explaining the causes of this year's food price spike yet, and already world commodity prices are dropping like a rock--faster than anyone anticipated. So are ocean shipping rates. The whole food price landscape is changing. Where a few months ago Chinese authorities were desperately trying to protect consumers from “food inflation,” now they are desperately trying to support prices for farmers while world prices are dropping. The China National Grain and Oils Information Center (CNGOIC) weekly report on edible oils markets describes the soybean situation. In coastal regions where most soybeans are imported, prices have fallen from about 3800 yuan/mt to 3150 yuan/mt over the past 4 weeks. Soy oil and meal prices are also weakening. The landed cost of soybeans arriving in November (including duty) is expected to be 3100 yuan, which is lower than the price of soymeal. Chinese authorities have announced that the...

The Chinese Communist Party held a high-profile meeting—the third plenum of the 17th party congress if you want to be precise—which focused on rural affairs. In the lead-up to the meeting, there were many expectations floated that watershed reforms would be issued. Much was made of the fact that 2008 is the 30-year anniversary of the 1978 reforms that broke up the failed farm commune system, awarded farmers leases to plots of land, and started China on its unprecedented economic boom. The document released on October 12 goes on and on (the English translation is 22 pages in a Word document) about principles and strategies, etc. I do not see any major reforms here—it looks to me like a validation of strategies China has been pursuing in recent years. The aspect that received the most attention leading up to and during the meeting was the prospect for giving farmers greater rights over their land, including the possibility of transferring it and consolidating land into bigger farms. I ha...

[Warning: this is not a real document--this is satire.] An open letter from Comrade Hu Jintao, Chairman of the Central Committee of the Communist Party of China to the 750 million comrades in the countryside Dear Comrades: In the spirit of the 17th Party Congress, following Marxism-Leninism, based on Mao Zedong Thought, Deng Xiaoping Theory, and the Three Representatives, the glorious Motherland has taken a new step forward in rural reforms. I know I may have gotten your hopes up in advance of our big party plenum this month by making a symbolic visit to Xiaogang Village in Anhui and suggesting that we might let you own the land you toil on year-in and year-out. Many of you have been clamoring for ownership of your land. Some even took the capitalist road by asserting that you owned land that in fact belongs to the people of our great motherland. Comrades, please understand that it is not reasonable for you to own your land. If we did that, you would be vulnerable to cut-throat capital...

Color is one of the chief attributes Chinese consumers look for when buying meat and fish. But an article on the China animal husbandry bureau web site, " What kind of Meat is unwanted by 10 million buyers ?" warns that buying meat based on its color could be a losing proposition. The reporter frequently hears shoppers in the market uttering phrases like, “This chicken foot is very yellow; I’ll buy this one,” or “The pork here is very red; this kind is good.” Some consumers will not buy chicken feet unless they are a yellow color. They also prefer red pork. A bright color connotes the all-important "freshness" or a new unusual food item--both popular attributes with Chinese shoppers. The reporter notes that not long ago there was a type of fish with yellow bones called a “strange banana fish” in a market in Shunde. An individual with a Chinese feed company told the reporter that this is a mistake. If you eat very yellow chicken feet or red pork, they were mostly li...

China's CPI still seems to indicate "inflation" in food prices, but most prices seem to be on the way down. The August CPI overall shows 4.9 percent inflation and meat 8 percent. Average retail prices through September reported on the Price Bureau web site show that prices are falling and close to their year-earlier levels. An article on the Ministry of Agriculture web site refers to plummeting hog prices in "Hog Industry Black September" and uses language like "disaster" and "landslide" to describe the hog price situation. As reported earlier on this blog, prices are falling below break-even levels and there is a growing sentiment among farmers to start reducing hog inventories. Vegetable oil prices are still above year-earlier levels, but falling: Pork and cooking oil experienced the biggest price hikes in 2007. Looking at Chinese cabbage (Da bai cai) as an example of a quite different food commodity, we see a spike around the February wint...

China's State Council issued a notice directing everybody to deal with the infant formula problem. On Oct. 1 (a holiday in China--normally nothing gets done all week) the Ministry of Agriculture web site carried news items from most of the provinces on how they are addressing the adulterated milk powder crisis. This illustrates China's latent central-planning instincts and its approach to regulation: the central government issues a directive and the responsibility is passed down to the province and then to the county and so on. Food safety regulation can vary widely depending on who is in charge in various communities and how much money is available. The Ministry of Agriculture says there are exactly 152,653 inspectors checking milk stations nationwide. Exactly 18,803 had been checked and registered as of September 29. Heilongjiang's article has the theme of "solving the issue of difficulty selling milk." The provincial government has organized exactly 8 guidanc...

An article from the China grain net detects weakening rice prices as a big new harvest comes on the market. The author of the article speculates that the government will try boost prices by increasing procurement for state reserves. The author notes the influence of the government on prices. Early-season rice harvested this summer opened with a relatively high price after harvest, but it fell when government procurement tailed off. In Hunan, Hubei, Chongqing, and other areas of the south where grain reserve depots have been procuring rice the price for middle-season rice is about 0.9 yuan/jin or higher. In Sichuan, the price is about 0.9 or lower--the weak prices there are attributed to government aid (rice) pumped into the region affected by earthquake, pushing supply beyond demand. In the northeastern provinces, rice has just started coming on the market. The author anticipates a similar pattern of high opening price followed by a decline unless the government decides to support pri...

Cotton has been one of the hottest agricultural import items since China's WTO accession. Much of this cotton is manufactured into garments that are re-exported. The slowing U.S. economy may be slowing the Chinese export machine. A Sept. 24 article reports that blazing growth of textile exports slowed in August to just 2.8% above year-earlier exports. Textile/apparel exports grew 12% in 2007 and that was down from over 20% growth in 2006. The slow-down in textile demand combined with burgeoning domestic cotton supplies translates to a slowing of cotton imports. Cotton imports were down 27% year-on-year in August. Domestic cotton is in excess supply, especially in Xinjiang autonomous region in China's far west (the biggest cotton-producing region). According to railroad statistics, in 2007 cotton transported from Xinjiang totaled about 2.93 mmt, about 8.7% higher than the previous year. Approaching the end of the current market year, by the end of august Chinese cotton enterpris...

A Washington Post article on the current financial crisis points out the major role of Chinese funds in the Wall Street meltdown and provides more evidence of the symbiotic relationship between the U.S. and Chinese economy. It is estimated that China has a fifth of its foreign exchange reserves invested in $400 billion of Fannie Mae and Freddie Mac securities. Chinese banks have billions more invested in teetering Wall Street firms. The article points out "the Industrial and Commercial Bank of China, for example, has $151 million in bonds issued or linked to Lehman; China Merchants Bank has $70 million of Lehman bonds; and the Bank of China has $75.62 million of Lehman bonds." Wall Street is now reaching out to Chinese investors, asking them to provide a needed infusion of funds. Isn't most of China's foreign currency reserves already in U.S. assets? Why would Chinese investors want to pour good money after bad? One of the big investments made by China's sovereig...

According to the Ministry of Agriculture (MOA), the national average pork price slid below 10 yuan per jin for the first time this year. It is now generally recognized that this is a typical hog price cycle (but with greater amplitude than usual). In Henan, prices started to shoot up May 18 of last year. The peak price was around February of this year (just after the spring festival). Prices have been slowly falling since then and seem to be dropping faster now as more signs of oversupply become evident. Currently (September 2008), prices are about 2 yuan below their peak and at about the level they hit in August 2007. People thought prices would pick up at the mid-Autumn festival but prices kept falling. Profit margins are getting slim. Farmers report that prices are nearing the break-even level where their profits evaporate. According to monitoring of 3600 large and small hog farms in 20 provinces, hog inventories were up 10.6% in the first half of the year, slaughter was up 4.8%, an...

Illnesses due to tainted milk powder now exceed 6,000 and 3 deaths. Powder from the biggest dairy companies in China have all tested positive for adulteration with melamine. Test results showed melamine present in samples of 69 products from 22 brands of milk powder tested, 14% of the products and 20% of the brands tested. There were 87 brands that were free of melamine in the tests. According to the State Council , there are 175 milk powder producers nationwide, of which 66 have stopped production. The 69 products that tested positive are not allowed to leave the factory. All 11 Sanlu brand samples tested positive with far higher concentration of melamine than any other brand. The two biggest companies were not free of melamine but were not among the worst performers: Yili had 1 out of 38 samples test positive and Mengniu had 3 out of 28 positive. Sanlu's concentration of 2563 mg/kg was much higher than 68.2 mg/kg for Mengniu and 12 mg/kg for Yili. The vice-secretary and mayor of ...

Over 1,250 (so far, the number keeps rising day by day) babies have become sick and two have died from consuming infant formula adulterated with melamine—a chemical derived from coal. This scandal combines elements from two of China’s biggest food safety incidents. You’ll recall that the big publicity about food safety problems with Chinese food imports started in 2007 when dog and cat deaths were linked to melamine. China’s watershed domestic food safety incident came in 2004 when a series of babies died from malnutrition due to fake infant formula that had little nutritive value. The latest problem is centered in Gansu Province in western China where babies had been showing up at hospitals with kidney stone problems since March or April of this year. The link among the cases was that all the babies consumed the same brand of milk powder. According to the Chinese Xinhua article of Sept 11 , the condition found in the babies is usually the result of poor nutrition typically found only ...

This year I've gotten a lot of inquiries about Chinese agricultural data from individuals whose email signature sounds like some kind of investment firm. They are usually interested in statistics on meat consumption. I don't ask questions, but one individual told me his boss wanted a list of Chinese companies to invest in. I think another was working on a major investment in Chinese poultry that was in the news recently. I infer from this that agriculture, especially anything that has to do with or can be influenced by Chinese demand for meat, is the latest investment fad. There have been several big investments in Chinese livestock industry in the news lately. An article in the Aug 31 Washington Post seems to confirm this trend toward ag investments and notes that the shine has quickly rubbed off farm-related stocks. Many of "the smartest guys in the room" working in investment houses and banks have never been through a big agricultural boom and bust before. They may...

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...

The biofuels industry is on a quixotic quest for a free lunch--to find raw materials that don't cost anything--switchgrass, jatropha, used vegetable oil, wind, etc. Most of these are years or decades away from practical use. But let’s consider cassava, also known as tapioca, a “nongrain” feedstock that has already been brought into production. In December 2007 China opened its first biofuel factory that uses a nongrain feedstock—cassava, also known as tapioca. Cassava is basically a weed that will grow anywhere. You just stick a piece of it in the ground and come back 8 months later to pull up its starchy root. It grows mostly in Guangxi Province and other parts of Southeast Asia where there is lots of rain, sunshine, and marginal soils. The idea is that biofuel can be produced from cassava without diverting grain away from food or feed users—that is, basically a “free” good. (If you skipped the first chapter of your economics textbook, the basic fact of scarcity is that ...