Dim Sums: Agricultural Markets in China

At a meeting on April 22, Premier Wen Jiabao announced that the central government will start giving farmers subsidies to build improved grain storage facilities . Most grain inventories are held by state-owned grain enterprises at different levels--national, provincial, and local--and commercial enterprises. According The amount of grain reserve storage reported by different departments varies. The Grain Bureau says 350 mmt; the Ministry of Agriculture says 300 mmt; the National Development and Reform Commission says 250 mmt. I think this is capacity, not amount in inventory. If facilities are near capacity, China has more than half a year's production/consumption in storage. The FAO guideline is 17-18%. According to Li Chenggui, a researcher at the China Academy of Social Sciences, about half of China's grain stocks have been held by farmers in recent years. After 5 consecutive big grain harvests and a big grain purchase program to support prices this year, storage facilities...

When China joined the WTO in 2001, officials were busy trying to come up with ways to protect their farmers from big subsidized farmers in the United States and other countries. One of the "countermeasures" was to give out direct subsidies to farmers. Sounds simple, but the reality is that it takes a small army of accountants and clerks to compile lists of eligible farmers, figure out how much each farmer should get, verify it, and send out the money to 200 million farmers. Then make sure the money doesn't get skimmed off before getting to the farmers. China began its grain subsidy program in 13 provinces in 2004. At first, many localities deducted the subsidy amount from their taxes instead of giving out cash. The government took pains to publicize the subsidy program so farmers would know how much was due them and prevent officials from stealing the money. Over the years, the distribution methods have evolved. In recent years, they have been distributing funds by deposi...

Little of China’s massive fixed asset investment has found its way into the agricultural sector. But authorities are now encouraging investment through subsidies for machinery purchases and a number of other strategies that include building infrastructure, breeding stations, barns, bioenergy facilities, and other fixed assets. They typically include modest subsidies split among central, provincial, and local governments and enticements to private agribusiness companies. Many of these campaigns fall under the rubric of developing “modern agriculture.” One of these campaigns is “facilities agriculture” which seems to encompass mainly building greenhouses to produce vegetables. It includes construction of various kinds of greenhouses, demonstration projects, breeding stations, and technical training. “Facilities agriculture” was featured in the 11th 5-year plan and the “Decision” of the 3rd plenum of the 17th party congress in October 2008. Campaigns to build greenhouses have been around ...

The Ministry of Agriculture held its cotton work conference in Beijing on April 1. With lower textile exports, plunging prices, and "pressure from imported cotton," farmers are not eager to plant cotton this year. The MOA's planting survey shows that cotton area will be down 11.6% this year. The article on the conference describes the situation as "grim", but the 5.1 million hectares forecast for this year is about the same as 2005 and roughly the historical average since 1949. Why do Chinese officials think the country needs to produce so much cotton? The country has been using massive amounts of cotton that was turned into blue jeans that landed on shelves of the Gap and Wal-Mart in the rest of the world. Now it's back to reasonable levels. This is not a problem; we're getting back to sanity. Nevertheless, "facing the current grim situation," MOA vice minister Wei Chao'an emphasized the need to raise this year’s cotton production. Cotton...