Dim Sums: Agricultural Markets in China

Until the last decade or so, Chinese people ate few processed, packaged foods. The general culinary practice is to buy fresh vegetables and meat and cook everything from scratch. Since the late 1990s, supermarkets have displaced small vendors and processed foods have crept into the Chinese diet. These foods include many additives: colorings, preservatives, flavorings, binders, etc. that are chemicals. At the same time, Chinese factories have become major suppliers of many food additives for the entire world. On June 24, The Peoples Daily carried an opinion article entitled, "Am I eating food or additives?" that is an indicator of this new food trend and perhaps a sign of the maturation of food safety regulation. The article appears to be calculated to make consumers aware of additives, to publicize new regulations and order local officials to implement them. Here is a translation of the article: "A milk drink my child likes has a new package that lists 10 kinds of food ...

Last year China began a campaign to increase rural consumption by giving subsidies or rebates for purchases of appliances like washing machines, refrigerators, TVs, cell phones, water heaters, and air conditioners. The subsidy is about equal to the value-added tax, so the government is basically waiving tax on products to encourage purchases. The program is now a central part of the government's new coordinated development strategy which emphasizes expanding consumption. A big challenge is to encourage rural people to buy things they can't afford--just like Americans. In Jiangxi Province lack of cash proved to be an obstacle for rural people who want to purchase appliances . Many of them had spent their cash on farm inputs or fixing up their houses. The provincial commerce department enlisted the rural credit cooperatives to earmark "consumer loans" for purchases through the "home appliances down to the countryside" program. In selected districts, rural hous...

The Ministry of Commerce announced a crackdown on livestock and poultry slaughter to assure the public that meat is safe. The crackdown reflects widespread problems and public concern about meat quality and safety. Reports of underground slaughter, sale of meat from sick or dead animals, adulteration of meat with clenbuterol, lax inspection, faked licenses, and pumping pigs with water have been chronicled on this blog and I have other reports I haven't posted yet. The livestock and poultry slaughter quality and safety remediation program, beginning this month and running until December, was announced jointly by the Ministries of Commerce, Agriculture, Public Security Bureau, Industry and Commerce Bureau, Food and Drug Administration, and Agency for Quarantine and Inspection. The remediation program identifies several areas for attention. The first is the slaughter and sale of sick and dead animals. Other matters include the use of clenbuterol and other harmful substances in anima...

"Climate change" has become a watchword in official Chinese agricultural discourse in the last couple of years. Officials blame every drought, flood, snow storm, and "unusual" weather event on "climate change." It seems to now be the "party line" that climate change causes all bad problems. See last week's post here where a party secretary blamed his village's worsening water quality on "climate change ." A Ministry of Agriculture seminar on "low carbon agriculture" held in Beijing on June 18 painted a scary scenario of diseases, pest infestations, water shortages, and desertification disasters. They warn that agriculture is not only a source of greenhouse gas emissions but is also one of the most vulnerable industries to climate change. According to the report, "If measures are not taken, crop production could be reduced by 5%-10% by 2030." "Low carbon agriculture" seminar in Beijing. "Respon...

An article offering an interesting view of the current hog market in China was posted on a number of industry sites . The author notes that losses in hog farming are more and more serious. Normally, this would lead to farmers quitting the industry, but no one is quitting now. The author asks, "What are they waiting for?" The author answers his own question: "They're waiting for other people to quit." He thinks that there have been some fundamental changes in the industry. He suggests that hog farmers have changed their "thinking." The cyclical nature of the industry is now widely understood, so farmers think "happy days" are just around the corner. They just have to wait it out and the industry will recover. Another change is the entry of large-scale farms. He argues that these farms have sunk a lot of money into their farms and don't want to quit and "lose everything." The big farms, he says, have better access to funds, "...

China has seen a wave a new large-scale pig farms operated by companies since 2007 when the government rolled out a series of policies and subsidy programs to encourage the sector to recover from a shortfall of pork that year and to re-engineer the hog sector into a "modern" industry. Every pig creates a lot of waste. A 220-lb finishing hog eats 650-800lbs of feed and probably lots more water over 5-to-6 months. If only 220 lbs of that feed stays in the hog's body (as added weight), that means 430-780 lbs of feed (and lots of urine) comes out the other end in the form of manure and has to go somewhere. Water pollution observed by the reporter. A reporter in Changchun City, of Jilin Province went to a village on the outskirts of the city to investigate the hog pollution problem . Some villagers complained that the stream running through their village had turned black, was full of foreign matter, and emitted an obnoxious odor. One villager blamed the dirty water for bringin...

From June 11 to 13, officials in Laibin City, Wuxuan County of Guangxi Province , received complaints from villagers about dead pigs found in rivers and fish ponds. Government workers disposed of 821 carcasses pulled out of bodies of water. Environmental officials are monitoring the potability of the local water supply. Officials from the health, environmental, and disease control bureaus are looking into the matter. Back in April this blog reported on a larger incident like this in Hangzhou. Such incidents seem to be reported regularly in the Chinese press.

The Ministry of Agriculture announced that the central government will spend 990 million yuan ($144 million) in special funds for national livestock and poultry breed improvement in 2010. Funds will be allocated mostly to swine (650 million yuan) and dairy cattle (260 million) breed improvement, but the program has been expanded to beef cattle (20 million) and sheep (60 million). The dairy breed subsidy was started in 2005. Over the program's five years the dairy breed improvement program has allocated a cumulative total of 715 million yuan covering 24.8 million cattle in four pilot provinces. It is credited with increasing milk production per cow by 568 kg. and raising incomes for 2.7 million farmers. Since the hog breed subsidy was started in 2007 its funding has increased from 180 million yuan to 650 million yuan, and coverage was expanded from 200 counties to 400 counties. In the case of hogs, the program subsidizes artificial inseminations of sows using semen of boars from im...

A 2009 U.S. appropriations bill contained language forbidding USDA from spending any funds to facilitate import of Chinese poultry to the United States. USDA had previously conducted a series of inspections of Chinese poultry plants and concluded that the plants had adequate safety measures in place and could export processed poultry products from a handful of approved plants to the United States. (The poultry meat however could not come from China; it would have to be imported from a country certified to be free of disease issues.) The appropriations bill blocked the implementation of USDA's approval by refusing to allow any funds to be spent to facilitate import of Chinese poultry. China complained to the World Trade Organization about the restriction in the appropriations bill and an article appearing on many Chinese news sites today says that the WTO found in favor of China. Here is a Dimsums translation of the article: China wins WTO case against U.S. restrictions on poultry m...

An article from the China Cooperative Times appearing on lots of websites today paints a grim picture of the situation in China's fertilizer industry. The industry is grappling with chronic excess capacity problems that have been especially pronounced since 2007. This year problems are compounded by slow demand due to droughts and other natural disasters in China and weak global demand. The article moans, "The phenomenon of supply exceeding demand is hard to change in the short run. Everyone knows there is excess capacity but manufacturers keep adding new projects." A similar article that appeared in January says the industry has to face up to four words: "供大于求" ("supply greater than demand"). The article adds, "...and there is no clear increase in world demand, so the excess capacity situation has become more and more serious." Translation: we can't export our way out of this problem. Prices keep going down and companies are losing money...

An article from Daily Economic News gives us a glimpse of the vicious competition in Chinese industry and how China's attempts to stimulate rural demand and "go green" play out in actuality. A whiff of cash draws Chinese entrepreneurs out of the woodwork. Before you know it, heated (no pun intended) competition drives prices down and profits disappear. The article focuses on solar-powered water heaters. These are metal tanks with a series of tubes that sit on the roof of a building to heat up water for household use. They are popular in villages and in cities among folks who want to lower their electricity bills. And, of course, they are a sign that China is a "green" energy-saving country. An ad for solar-powered water heaters aimed at villagers in Guizhou Province. The government has pulled solar water heaters on to the bandwagon. They fit in nicely with the program of "building a new socialist countryside," so many villages have been designated as ...

Hog farmers in China are squeezed by falling hog prices and rising corn prices. Several years ago hog prices were shooting skyward with seemingly no return to earth possible. Now they keep plunging downward. On June 7, a farmer in Shandong's Shanghe County told a reporter , "This month the hog price is down to 5 yuan per jin. If it goes any lower I will start cutting my hog inventory." A spokes person from the Jinan Price Bureau said the average price was down to 4.95 yuan, a decline of 24% from the previous month. The price fell below the breakeven point in March, so hog farmers have been in loss territory for 2 months. Facing these losses, some farmers are cutting their herds to stem losses. One farmer in Shanghe County who has 1,000 hogs said he has cut back his herd by 20% since last year at this time, especially sows. Another farmer told the reporter over the phone that he had cut back 30%. One factor is that summer is the low season for pork consumption. Another is ...

Fisheries officials from Brazil and Namibia each visited China this week, a reminder that China is eager to strengthen relations with Africa and Latin America. Which country rates the bigger welcome? The Namibians meet the Vice Minister in the plush MOA meeting room. The head of Namibia's fisheries and ocean resources department visited China's Ministry of Agriculture on June 7, and vice-minister Niu Dun met with him. In the meeting, Vice-Minister Niu expressed an eagerness to form long-term cooperative relations with Namibia. Niu recommended that as soon as possible the two countries sign a memorandum of understanding that would set up a framework for cooperation in fisheries, with lots of funding and also as soon as possible sign an agreement on animal health and disease that would facilitate trade. The two sides should continue exchange of personnel for training and promote investment in fisheries enterprises. The Brazilians at the fisheries research institute. The head of B...

No one really knows exactly what is driving China's corn prices higher. A couple of articles appearing on financial news web sites seem to agree that the rate of increase in prices is faster than supply-demand conditions warrant and prices could come down in coming months. "Corn Gone Crazy" appeared on dozens of financial sites this week and suggests that the government auctions of corn reserves are being used to drive up prices. Warehouses holding grain reserves are identified as possible speculators. Another article, "Corn Faces Seasonal Decline in June," also points to speculative forces putting froth in corn prices and suggests that the withdrawal of "hot money" from the market and seasonal effects could lead to a reversal of prices this month. The articles agree that the supply and demand situation doesn't seem to warrant such rapid increases in prices. The "Crazy" article points out that the first official corn production statisti...

An article from China Industry Economic News carried on dozens of Chinese web sites this week warns that opening the Chinese market to U.S. pork imports could devastate the industry. The article entitled, "Alert! American Pork's 'soybean appetite,'" warns that the resumption of U.S. pork sales to China announced last month, a year after the H1N1-related ban was put in place, is a dangerous prospect that could "eat up" the Chinese hog industry. An analyst with Beijing Orient advisory services Co. in Beijing warned readers to "be careful of the trap set by Americans." The analyst says it's wrong to think that U.S. imports of as much as 100,000 metric tons will have little impact on a market where demand totals a massive 50 million metric tons annually. He said, "If U.S. pork imports are not limited, [the pork industry] is likely to repeat the mistakes of the soybean industry with disastrous consequences." The article explains that...

Today, in an interview with a Xinhua news service reporter , Peng Sen, the vice chairman of the National Development and Reform Commission concurred that "hot money" flows were one of the factors driving up prices of some agricultural commodities. According to Peng, drought and low temperature at the beginning of the year set off rises in japonica rice and vegetable prices. Then medicinal herbs started rising in March and April. At the end of April and early May garlic and bean prices started rising a lot. The retail price for dried garlic reached 8 yuan per jin, and mung beans are over 10 yuan in some supermarkets. In May, new garlic came on the market and the price already started falling. Now the new garlic price is already down to 2 yuan per jin. (Yesterday's post on this blog shows that the garlic situation is more complicated than portrayed by Peng.) Peng said there was also some investment capital going into markets for garlic and mung beans--products where the pro...