Dim Sums: Agricultural Markets in China

On December 29, the Ministry of Agriculture held its meeting to discuss work on livestock and animal disease control in 2010 . The new agriculture minister, Han Changfu, and the vice minister, Gao Jibing, gave speeches. The meeting conveys a sense of urgency about problems facing the industry. China's livestock industry is growing rapidly and experiencing rapid structural transformation. It faces the challenges of supplying the Chinese population's demand for animal products, avoiding food safety scandals like the melamine disaster, and preventing dangerous disease epidemics. Vice Minister Gao depicts the situation as grim and warns specifically of avian influenza, hoof and mouth disease and the threat of cross-border epidemics. The meeting called for fully implementing "modern" livestock industry, and laid out 9 points for work in 2010 that reflect concerns about instability in livestock markets, problems with out-of-control rogue vendors, and animal disease. The sol...

The Chinese pork sector is subject to cyclical ups and downs in prices. In Sichuan Province, 135 tons of live hogs went unsold at an auction , raising fears that the industry may be facing a downturn. The provincial government got concerned and sent a group of officials out to investigate the situation. Their preliminary conclusions are that there is not currently a serious problem with unsold pigs because it's the peak season for pork consumption (leading up to the Chinese new year). However, farmers are having trouble selling feeder pigs. Corn prices are up, cutting into profits. Pork demand will fall off in the spring months, so farmers are not eager to buy a lot of replacement pigs. This year has been a mild roller coaster for Chinese pig farmers. The industry suffered losses in April-June due to a cyclical surge in supply and fears of catching H1N1 from pork. The industry recovered beginning in July. Now profits are still positive but shrinking due to a rising corn price. Farm...

The Agricultural Development Bank of China [the bank in charge of financing grain, cotton, and edible oil policies] issued a “Notice on Supply and Management of Loan Funds for Completion of Northeastern Fall Grain Procurement” to implement the central government's minimum price procurement policy. Branches of the bank are to supply funds to designated grain enterprises and Sinograin Co. from now until the end of April 2010 to purchase japonica rice, corn, and soybeans at minimum prices set by the government and to rotate grain reserves. Loans must be issued during the time when grain is purchased and according to the actual amount of grain purchased. Purchasers cannot refuse or limit grain purchases [from farmers]. The notice also directs banks to provide loans to fund subsidies and working capital for soybean crushing enterprises for purchase of soybeans.

Central government leaders announced that they will put priority on addressing serious pollution in "problem villages" that have serious environmental hazards that affect villagers health and impede rural sustainable development. The environmental protection minister made the announcement at a national rural environmental protection and ecological improvement work meeting. The "using awards to promote governance" policy will be used to give financial awards to encourage the masses to address environmental hazards in rural areas, both developed and less-developed areas where rural people face health hazards. The Environment Minister said the central government will allocate 1.5 billion yuan to support 2160 rural environamental rectification and ecological improvement projects, combined with 2.5 billion yuan of local government funds. This is expected to benefit 13 million rural people and improve the appearance of most villages.

How 'ya gonna keep 'em down on the farm once they've seen Dongguan? Give them some subsidies and training! In 2007-08, there were many reports of farmers abandoning small-scale livestock production. Now they are returning to the industry with a little prodding from Jiangxi Province officials. Early this year, the big concern was about rural migrants who lost their jobs in closed export factories. China's economic planners in Jiangxi apparently decided to put migrants to work in raising livestock. According to Farmers Daily (Dec. 17), Jiangxi provincial officials claim that 90,000 returned migrants are now raising livestock. Of those, 42,000 set up their own farms, and 48,000 are employed on large-scale farms, in companies, and "production bases." They are reportedly tending 26 million animals and poultry. Officials claim that these farmers' monthly income is 511 yuan higher than it was working as migrants last year. Provincial officials plugged migrants i...

On November 30th a 2-day meeting was held in Guiyang , capital of Guizhou Province, to mark the 10th anniversary of the “Develop the West” policy and discuss improvements in the policy. Zhang Ping, chairman of the National Development and Reform Commission, Lin Shusen, the governor of Guizhou, and Du Ying, vice-chair of NDRC were the featured participants. The policy is basically a massive investment project that pours money into China’s 12 western provinces to build infrastructure, industrial parks, and factories. This has an impact on the world agri-food system. China’s dominance of the world apple juice market, tomato paste exports, a big chunk of China’s cotton production, and rising trade with central and southeast Asia are linked to this program. The meeting cited “great achievements” of the program. The growth rate of the western region exceeded the national rate in the third quarter of this year. The western region is in a “new stage of development,” and the program “faces many...

All sorts of religious movements have flourished in rural China during the last few decades. We can get some insights about the Communist Party’s approach to religion from a document apparently prepared to instruct village party leaders on how to stamp out religious movements in their communities. The article discusses Xinzhai Village in Pingtang County, an “autonomous” region populated by the Miao minority (known as Hmong in southeast Asia) in Guizhou Province, south of Guiyang. The Miao have their own traditional religions, but Christian belief has spread widely among the Miao in China in recent years (as it did among Hmong in Laos in earlier decades). The article reports that a Christian Church has been active in Xiuzhai Village since 1993. There were 23 people (in a village of over 2000 people) who joined the church activities--16 men and 7 women, ranging in age from 34 to 64. They not only believed themselves, but also brought family members to religious activities. After joining ...

A news report about a 5-class system in a village in Inner Mongolia crystallized some of the fundamental strains placed on China’s anachronistic rural land system. According to the December 1 news report, Yinliuyao village, on the outskirts of Baotou City, has divided families in the village into five classes according to the year the family moved to the village. The first class includes those who settled in the village before 1963. The second class is those who settled there during 1963-75, third class 1976-85, fourth class 1986-96, and fifth class includes those who arrived after 1996. The classes reflect waves of migration to the village. Some earlier migrants were resettled when their villages were flooded by new reservoirs. More recent arrivals came seeking urban jobs. Apparently, new arrivals were allocated shares of the village collective’s land, so they are entitled to compensation when village land is sold off. The village, being on the outskirts of the city, has had its land...

As the 2009 harvest finishes, China's northeastern region has a glut of grain coming on the market, so the central government has announced another round of subsidies to bribe companies to buy the grain at minimum prices. The Farmers Daily announced on November 30 that minimum price procurement policies for northeastern soybeans and corn will be continued. Companies can get a subsidy for each kilogram of soybeans they process, and companies in other parts of the country can get subsidies to transport corn or japonica rice out of the northeastern region. This year, corn's temporary reserve purchase price will be 0.76 yuan/jin in Inner Mongolia and Liaoning, 0.75 yuan/jin in Jilin, and 0.74 yuan in Heilongjiang. The soybean temporary reserve purchase price will be 1.87 yuan/jin [3740 yuan/mt, up from 3700 yuan last year]. The purchase period is December 1, 2009 to April 30, 2010. The notice said the peoples’ government in the northeastern provinces chose soybean crushing enterpri...

The Ministry of Agriculture held a training session for over 100 personnel engaged in dairy quality and safety monitoring. The article describes recovery in the industry. By October, the inventory of dairy cattle had risen 7 months in a row and reached 12.71 million head. Fresh milk output was 2.77 million metric tons, up 6.68%. Since last year 6,377 milk purchase stations have closed or been shut down. There are now 14,016 nationwide. Now there are 11,412 mechanized milking stations, 81.4% of the total, up 31.4 percentage points from last year. In 11 provinces, including Beijing, Henan and Jiangsu, accreditation of milk purchasing has been completed. The Ministry of Agriculture organized 13,129 checks of fresh milk and none had melamine over the specified limits, leather hydrolyzed protein, starch, alkalinity. Since the end of 2008, each level of veterinary stations have cracked down on adulterative substances. Around milk purchase stations and trucks, the two key points, deep launch ...

According to a posting on the China veterinary association site , the Chia Tai Company, known as Zhengda in China, is planning to de-emphasize its poultry business to emphasize its food processing and feed operations. The company plans to reduce the share of its revenue derived from chickens and ducks from 47% to 33%. The company plans to increase the food processing share of sales from 18% to 30-33%. The feed share of sales will be maintained at the current 35% share. The measure is motivated by fears of market risks due to avian flu. Zhengda is one of the biggest players in the meat and livestock businesses in China. The 2004 outbreak of avian influenza had a major effect on Zhengda. It plans to keep its poultry farm in Thailand and purchase additional poultry from outside the company. Zhengda has been operating in China for about 30 years and has over 20 poultry-raising enterprises that have capacity to raise about 100 million chicks annually. The company typically raises chicks on ...

China plans to promote use of crop biomass (straw, stalks, leaves, etc.) as a clean source of energy, for animal feed, and organic matter for the soil, according to an official of the National Development and Reform Commission at a conference held in Anhui Province, November 9. According to the article from Xinhua , last year the State Council issued a document calling for increased utilization of crop residues--the target is to utilize more than 80% by 2015. According to the official, a nationwide plan with a rational regional layout will be set up in accordance with each region's crop biomass residue resources and market demand. Practical pricing, subsidy and tax policies will be studied to promote incentives for different uses of crop residues. "Breakthroughs" in scientific research, use of processing equipment, and energy generation technologies will be developed. The strategy includes companies as the "dragon head," forming a harvest, storage, transportatio...

China still has a system of massive state farms, mostly in desolate border regions like Heilongjiang, Xinjiang, and Yunnan, and on the outskirts of cities. In Chinese, they are known as "reclamation" farms (nong ken) since many are established in desolate areas or on reclaimed marsh, jungle or mountain land. These are holdovers from the central planning period that have now morphed into big agribusiness enterprises. Since they have large scale and access to government resources, they are on the vanguard of many trends. The state farm system held a conference in Beijing this week to publicize its traceability system that involves 50 state farm enterprises and 6 local enterprises in 23 provinces. According to Farmer's Daily , it is an early implementation of the objective of bringing into play a “record-keeping in production, product-tracing in distribution, information retrievability, accountability” system. During November 7-14, the Ministry of Agriculture’s state farm bu...

Wage statistics are one of China's "dim sums" that don't reflect reality. Farmer's Daily says The National Bureau of Statistics announced that it will begin to include private firms and small businesses in its survey of wage statistics. Current statistics are based on surveys that include only government, quasi-government service units, state-owned and collective enterprises. In 2008, the average urban salary was reported as 29,299 yuan, but a survey of private enterprises found their average was just 17,071 yuan, 58% of the reported average. The statistics clearly don't reflect actual earnings of "the masses." The former survey only covered 110 million urban employed persons. At the end of 2008, it was estimated by NBS that private enterprises employed 66.76 million. It is estimated that there are 50 million small merchants (ge ti hu). The change is being made partly because the common people ("old hundred names") don't believe officia...

China is emphasizing large-scale production that standardizes varieties and techniques, introduces branded products, and consolidates scattered plots into big fields. The latest big project is to create large-scale vegetable farms. Watch out California! The Ministry of Agriculture launched a new plan to set up a nationwide network of 400 standardized vegetable farming areas over the next two years. At a rally held in Yinchuan, capital of Ningxia Hui Autonomous Region in northwestern China, the director of the MOA's crop production office said MOA will set up 200 standardized vegetable farming areas (the Chinese word is "yuan," or garden) that have fields of 200 mu (33 acres) or more, and another "open-field" vegetable farms with fields of 1000 mu (165 acres) or more. In these projects the production will be standardized (using same varieties and production methods), pest and disease control will be unified, and all vegetables will be grown for the market (not fo...

An article entitled, " Main characteristics of our country’s new-style grain reserve system ," seems to be aimed at assuring the Chinese citizenry that plenty of grain is on hand and the government is wasting much less money on storing it than in past years. The article says China must have "grain reserves with Chinese characteristics": massive grain reserves that are getting even bigger, stored in bins all over the country, and owned by the government. The article tells us that China needs these massive grain inventories because it has a big population, is in the midst of rapid industrialization and urbanization and because of the small-scale pattern of grain production. Reserves are needed to guarantee food security and intervene in the market to stabilize prices. Reserves are held by two levels of government: central and local. The central grain reserves are used to make interregional adjustments in grain markets under the State Council's instructions to cent...

Zhejiang Province introduced new regulations allowing registration of rural mutual aid funds. The regulations were jointly issued by Zhejiang’s commerce bureau and provincial branch of the bank regulatory commission, and they took effect October 28. The mutual aid funds are described as a cooperative-style community banking organization that can take deposits, make loans, and perform settlement business. They can only do business with members, and business must be in the local community; they cannot form branch organizations. They can be established at the township level with minimum investment of 300,000 yuan (under $44,000) or at the village level with 100,000 yuan ($15,000). No member's share can exceed 10% of the value of stock; bank regulator approval is required if a member's share exceeds 5%. The article notes that farmers and small rural enterprises can "voluntarily" form mutual aid funds at the township or village level. This contrasts with the rural credit ...

According an online report , a forum on the "Farmer-Supermarket Linkage" program was held in Beijing on October 29, where the Ministries of Commerce and Agriculture signed memoranda of cooperation with Wal-Mart. This project promotes direct purchases of produce by supermarket chains from farmers (actually cooperatives or distribution centers run by farmers). Wal-Mart announced that it plans to involve 1 million Chinese farmers in its “farmer-supermarket linkage” project by the end of 2011. Since 2007, Wal-Mart has established 11 direct purchasing bases in 7 provinces. The bases cover an area of 150,000 mu [10,000 hectares] and 200,000 farmers directly benefit [10 farmers per hectare!] Wal-Mart’s International Business chief told a reporter, “The farmer-supermarket linkage program is representative of Wal-Mart’s development strategy in China. We want to bring our world-wide experience in farm product operations into China’s supply chain, spread scientific crop-production, envi...

The mantra of China's current administration is "scientific development." The implicit assumption is that all problems can be solved by science and technology. And it has to be Chinese technology, not from Dupont, Monsanto, Pioneer, or some other foreign company. This week, China's Ministry of Agriculture is trumpeting its ambitions to be a leader in science and technology. On October 26, a meeting on national agricultural science and technology innovation and dissemination work. The Minister of Agriculture, Sun Zhengcai, said China will strive to become a world leader in agricultural science and technology in the next 10 years or so, relying on science and technology with "Chinese characteristics" suited to the special situation of the country and the industry. The speech calls for support for creating agricultural innovations that increase the productive capacity of agriculture. An interesting phrase is the reference to independent innovation--not sure wh...

China is emerging as an interesting player in the world of "green" policy. China knows it has serious environmental/ecological problems, and the country has adopted all kinds of "green" measures. Not many people are aware of the extent of what China has been doing. On October 16, the Farmer's Daily described efforts to install an "ecological compensation system," apparently based on a conference held in Ningxia to discuss ways to improve the program. It's not clear how this works, but it seems to involve government funding to address deforestation and desertification problems, mostly in western China. They have plans to use tax incentives and arm-twisting of banks and companies to chip in funds in the future. According to the article, China started a pilot fund for central forest ecological efficiency compensation in 2001-04. Since 2005, the Ministry of Finance invested over 20 billion yuan, and the program covers 700 mllion mu of key ecological fo...

Each April local teams conduct surveys of a sample of farmers' grain sales, income, and on-farm stocks for the preceding 12-month period. The samples are small and results are released for only a few prefectures, but the surveys provide a small window into what's happening in grain markets. Like Chinese grain farmers under a microscope. I came across two articles--one from Suyu in northern Jiangsu and a second from Wenling in eastern Zhejiang. Farmers in both areas grow long-grain indica rice and short-grain japonica rice. In Suyu they also grow some wheat. The Suyu article emphasizes the effect of improved indica rice varieties. Traditionally, farmers here prefer japonica rice, but a new indica variety with high yield and improved taste has made inroads. Farmers have been switching to indica because it has lower production cost and the price is now about the same as for japonica. They're eating more indica rice too. The Suyu article also emphasizes the social changes. Most...

In April 2009 the State Council ordered a nationwide check to find out the actual level of grain inventories. There were 10 government departments involved and thousands of provincial, prefecture, and county people involved. The check was carried out in response to rumors that warehouses supposedly filled with grain were actually empty. The results show that at the end of March 2009 national state-owned grain enterprises held inventories of 450.8 billion jin (225.4 million metric tons in unmilled grain). This is in line with figures revealed previously. The inventory surpassed half of the 2008 harvest (roughly 6 months of consumption). The March date was presumably chosen because it precedes the summer grain harvest and inventories would be near their seasonal low. This total appears to be central government reserves. There are also provincial and county-level reserves. It does not include private sector reserves (probably much smaller). Usually there are surveys of on-farm reserves c...

The dollar is sinking. That tends to happen when you print vast amounts of your currency and drive interest rates to zero. Making matters worse, Australia and some others are starting think maybe it's time to start raising interest rates. Can you hear the great sucking sound of currency leaving the U.S.? What no one seems to be talking about is the U.S. dollar is taking the Chinese yuan down with it. The dollar has not depreciated substantially against the Chinese yuan because Chinese monetary authorities won't let it do so. They have kept the exchange rate pegged at near 6.84 yuan per dollar since July 2008. That means as the dollar goes down it takes the yuan with it. The U.S. dollar has depreciated by about 13% against the Euro since February, but the yuan has depreciated by 13% against the Euro as well. That means bargain vacations at the Great Wall and cheaper adoptions of Chinese orphan girls for Europeans. But how can the currency of the country that supposedly is leadin...

On September 27, the Ministry of Commerce issued documents announcing an antidumping investigation of imported chicken products originating in the United States. The investigation covers broiler products of chicken products. In case you're wondering, this includes HS codes 02071100、02071200、02071311、02071319、02071321、02071329、02071411、02071419、02071421、02071422、02071429 and 05040021。 On September 30, an article posted by the National Food Quality and Safety Supervision and Testing Center trumpets "Emerging Problems with Imported Food From the United States." A google search shows the article was carried on dozens of Chinese web sites. According to the article, testing by Chinese inspection officials have been catching an increasing number of food products from the United States. Of a 154-name “black list”, 39 problem products came from the United States. Of those, 12 were frozen pork and frozen chicken meat. "Lean meat powder" (probably ractopamine which is leg...

Everybody knows that Chinese farmers have been moving to cities in greater numbers and renting out their land to others in recent years. But nobody really knows the extent of renting out land. A short article by Wu Zhigang published in the annual report of China's Research Center for Rural Economy (RCRE) provides a good set of statistics on land renting from a large national sample of rural households. Better yet, they survey more or less the same farmers every year, so the data can show us whether farmers are increasing their rental of land. From 2003 to 2008, more and more farm households transferred land. About 8% of all rural households subcontracted land to others in 2003. That share fell in 2004 (coinciding with the introduction of farm subsidies that year), but it rose to over 8% again in 2006-07 and reached 9.8% in 2008. The rise reflects increasing departure from agriculture. The share of all rural households who subcontract land from others has been fairly steady at about...

Recently, there have been reports of labor shortages in China's coastal manufacturing regions. A Sept. 30 article in the Farmers Daily provides some good economic analysis of the emergent labor scarcity. The article notes that a July report from Zhejiang Province said employers were only able to hire 354,000 of the 603,000 they wanted, and a Shenzhen's labor shortage increased form 23,000 in April to 60,000 in June. The author asks, "Where did all those people go?" Moreover, there are seemingly contradictory reports of many rural workers who can't find satisfactory work and other factories who have no problem finding work. The author argues that China doesn't have a shortage of labor; it has a shortage of cheap labor. The recent experience of factories hiring workers as commodities at rock-bottom wages is not the future of China. Rural Chinese people are gaining more skills and higher expectations for their lives. Moreover, they have more choices. There are mo...

Officials in China have made noise about the U.S. “dumping” poultry, auto parts, and even soybeans in retaliation for tariffs on tires. Want to find dumping? We can find it without using any dicey “nonmarket economy” methods (e.g., picking a reference price out of an Indian newspaper). Consider China’s apple exports. Chinese customs statistics show that exported apples had an average price leaving China in July of 68 cents per kg. The average Chinese retail price of apples was 4.44 yuan/500g in mid-July, which works out to $1.30 per kg. Exported apples cost about half what Chinese consumers pay for them. For reference, the average retail price in the United States works out to be $2.60 per kg, but you won't find any Chinese apples in a U.S. supermarket. Source: calculations based on data from Chinaprice.gov.cn, Jinan Price Information Net, customs statistics, exchange rate from St. Louis Federal Reserve. Apples are expensive to transport in China. They’re heavy and there’s lots o...

The provincial and local branches of China's inspection and quarantine bureaus undertake a lot of programs to introduce and promote international quality and safety standards, and help companies qualify for export markets. The Henan branch of China's Inspection and Quarantine Administration (AQSIQ) has been busy helping farms register to export live hogs and pork to Hong Kong. The provincial bureau has a program to “cultivate a group of potential enterprises, support a group of large enterprises, elevate a group of advantaged enterprises” to cultivate and assist companies obtain eligibility to export and encourage enterprises to upgrade product quality and their profile. AQSIQ approved 7 farms of Yuming Livestock Ltd. Co. in Luoshan County of Henan Province to supply live hogs to Hong Kong, bringing the total farms approved in Henan to 36. The production capacity is now 700,000 head. The bureau’s animal inspection office inspected the company and six others in the county for e...

The Ministry of Agriculture press office reports that tests of 600 batches of milk from 300 collection stations sampled from 5 provinces found no melamine. Compliance was 100%. No starch was found either. According to the Ministry, the overall milk quality and safety situation now is good.

"Reducing farmers' burdens" (cutting taxes and fees) has been one of the slogans guiding China's rural policy during this decade. This translated to one of the biggest tax-cut projects in history in the world's largest Communist nation. Of course, officials everywhere have a strong instinct to extract revenues, and the central government issued a document calling for local officials to clean up remaining pockets of rural fee-extraction. Like many other measures, this one seems tied to maintaining stability around the upcoming 60th anniversary of the Peoples' Republic on October 1. First, some background: During the 1990s, China's policy was economic growth first and foremost, mostly focused on cities and industry. Government support for rural affairs was neglected and rural officials had free rein to buy cars, seize farmland for industrial parks, and build town squares, hotels and amusement parks with no customers in the name of rural development. By the e...

In earlier decades, Chinese economic planners adopted the concept of the “dragon head enterprise” (longtou qiye) as a strategy for connecting small-scale farmers with modern markets. To westerners, the “dragon head” sounds sinister and menacing, but in China the dragon is a benevolent creature. The concept comes from the dragon dance where the leader wears the head of the dragon and the rest of the dancers follow him in a line, making up the body of the dragon. Thus, the “dragon head” leads (daidong) a long line of farmers where they need to go—selling to markets (instead of for own consumption or to neighbors) and getting information about markets, new techniques and standards. Some English translations use the words “leading” or “flagship” enterprise instead of a literal translation. The dragon head enterprises have been a key component of the “agricultural industrialization” strategy. The government has designated hundreds of dragon head companies at the national, provincial, and co...

As part of its push to achieve "modern" agriculture, China has been ramping up subsidies for improved livestock breeds. Initially, the subsidies have been focused on dairy cattle and hogs. Now there are plans to expand the program to beef cattle and sheep. September 3-5, the Ministry of Agriculture is holding a training conference in Changchun for 150 officials from veterinary and breeding stations who are in charge of carrying out the program. According to the Ministry, there are already clear results from the program. Over half of dairy cattle are covered by the subsidy and national milk production per cow has risen about 10%. The utilization of boar breeding in project areas has risen ten-fold and the rate of artificial insemination has risen 8-10 percentage points nationally. Dairy and hog farmers’ subsidies for breed improvement have increase their incomes about 23 billion yuan with clear increases in profits. The breeding system has been improved. Dairy cattle breed imp...

Northeastern China and parts of other provinces have had severe drought this summer. Recently there have been some rains, alleviating drought conditions, but the damage has already been done to the crop. It's a question of how much production will fall and there are widely differing opinions. A yumi.com.cn report from on a field trip through the northeast painted a fairly dire scenario, showing fields that were dried up and comparisons of corn cobs from last year and this year. The report had a county by county estimate of corn production that showed declines of 50% or more in the worst-hit areas. National Grain and Oils Information Center's latest weekly report downplays the effects of the drought. One segment of the report says that estimates of the reduction in corn output range from 5 to 20 mmt; another says the increase in area will probably offset the effects of the drought on yield. Another report from the Jiangsu grain net says reports on field trips to the northeast fr...