Monday, September 27, 2010

Swine fever epidemic rumors

The overseas Chinese news service, Epoch Times, has reported a serious epidemic of swine fever in the northeastern part of Heilongjiang Province, centered in and around Shuang Ya Shan city. The Chinese press is not reporting it and officials will not talk about it.

Gruesome video from New Tang Dynasty TV available here: 新唐人電視台

In Jixian County, Yong’an Town, Lianming village previously had over 200 sows that started dying in July, and now there are about 20 left. A villager named Lin said, "Most of the pigs in this area have died. In particular, breeding hogs have nearly all died. There are piles of dead pigs and their rotting offal pollutes the river water. The whole village stinks and it’s hard to breathe."

The epidemic is also serious in areas of Jiamusi and Suihua muncipalities. One post on Baidu said, "There is a serious epidemic among pigs near Harbin. Could this be African Swine Fever?"

The government is not reporting it, and phone calls by reporters to local government offices went unanswered. Rumors are spreading that the disease may be transmitted to humans.

According to a September 14 Heilongjiang news report, the Heilongjiang Provincial government is carrying out a fall-winter campaign to vaccinate hogs, cattle, sheep and poultry, to "control outbreaks of foot and mouth disease and take precautions against African Swine Fever." The campaign includes compulsory vaccinations of hogs for foot and mouth, classical swine fever, and highly pathogenic blue ear disease, as well as highly-pathogenic avian influenza for poultry, type-O and Asian type-I foot and mouth for sheep and cattle, and type-A foot and mouth for dairy cattle.

According to reports from local people in the areas affected by the swine fever epidemic, some of the dead pigs have been butchered and sold at a discount as frozen pork. In the afflicted areas, however, the meat sellers have shut down and no one dares eat pork. People are eating only vegetables and fish. They can only eat fish raised in ponds since the dead pigs have polluted the river water.

Sunday, September 26, 2010

Mechanize the corn harvest!

A summit on corn harvest mechanization was held in Shandong Province's Weifang City on September 20. The meeting lauded the great progress, but charged local officials with working hard to achieve the goal of mechanizing at least half of the corn harvest by 2020.

Chinese authorities began giving subsidies for agricultural machinery in 2004. The value of output in the farm machinery industry rose from 75.3 billion yuan in 2003 to 230 billion yuan in 2009 (makes one wonder whether the subsidy is for farmers or for farm equipment makers).

The degree of mechanization is uneven. Wheat harvesting is said to be almost entirely mechanized. According to the article, corn cultivation is 83.5% mechanized, sowing is 72.5% mechanized, but corn harvest is only 16.9% mechanized. It varies by region. Shandong Province has the highest rate of mechanized corn harvest, covering 70% of corn area. Henan's rate increased to over 40%, an increase of 12 percentage points. Hebei is at 25%. The rate is expected to rise 5 percentage points in the northeastern provinces. In hilly and mountainous southern regions, the rate is low.

The article offers no reasons, but probably Shandong's mechanization is high because farmers often harvest wheat in the early summer and then quickly plant a corn crop. The two crops need to be harvested and planted quickly and machines used for wheat can also be used for corn. In southern regions, corn is often planted on hillsides and are small, not conducive to mechanization.

Local officials are commanded to adopted a sense of urgency and "crisis" to get busy increasing the degree of corn mechanization. They are to formulate mechanization plans and offer more subsidies for machinery. The national machinery subsidy should be "tilted" toward corn-producing regions and harvesting machinery. Officials are told to enact strict regulations and standards, cracking down on quality problems with machinery. They are instructed to publicize the superiority of mechanized harvest and get farmers excited about mechanization. They should improve services for machinery and organize machinery cooperatives.

Saturday, September 25, 2010

NDRC grain comments

In comments at a press conference on September 14, Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission, emphasized China's resolve to keep its grain markets insulated from the world market. While soybean imports continue to soar, Zhang's comments suggest that the leadership intends to keep imports of rice, wheat, and corn at minimal levels. Look for China's corn imports to dry up soon if this fall's corn harvest is good.

Vice Chairman Zhang said, "Currently, the country's grain supply and demand are in we can be assured that no big fluctuation in grain prices will occur." He said this summer's grain harvest is about the same as last year's, and the fall grain harvest will be a little higher. If there are no major natural disasters, China should have an increased grain harvest for the seventh year in a row.

Zhang emphasized that grain reserves are very high and the ratio of inventories to consumption is far above the internationally recognized "safe" level of 18%, large enough to influence domestic prices.

Regarding international price fluctuations, Zhang stressed that there is little relationship between domestic and international grain markets. Apart from soybeans, China's imports of wheat, rice, and corn are less than 1% of domestic production. Since grain needs are met domestically, Chinese grain prices are not affected by international price fluctuations.

Mr. Zhang said China's grain security faces severe challenges since demand for grain is rising as population grows and living standards rise, production growth is constrained by various factors, and there is limited scope for using the international market to fill deficits in the domestic market. Related departments need to continue strengthening monitoring and analysis of grain markets, do a good job in putting grain reserves into the market, increase monitoring and supervision of markets, and stabilize prices.

Friday, September 10, 2010

Better city, better life

The theme of this year's Shanghai expo is "better city, better life." This slogan also reflects China's growth strategy which concentrates huge investments in magnificent new cities built with the cheap labor of rural migrants who are not allowed to settle down in China's cities.

Perhaps feeling somewhat guilty about the massive concentration of wealth in Shanghai and other Chinese cities, a conference on rural income inequality was held in Shaoxing--a couple hours down the road from Shanghai--to dissuage the guilt by at least discussing the widening inequality of income between rural and urban residents.

To show how great their concern is, they invited a Nobel laureate, Eric Maskin from Princeton. Maskin noted that "China's fast economic growth has come with side effects, the most notable of which has been an increase in income inequality, especially that between cities and the countryside."

The rising inequality is not just incidental to China's growth strategy; it's a core part of it. China's vast number of industrial parks, housing estates, shopping malls, airports, etc. were all built on farmland seized from peasants for virtually nothing. Local governments sold it off at sky-high rates, generating treasure for themselves, their cronies, and their tax coffers. Some of the displaced peasants get jobs paying $1-to-$2 per day building glitzy shopping malls or working in factories. The peasants still in the countryside are told to plant grain that earns them a few hundred dollars a year. Now they get subsidies amounting to over $50 for planting grain and maintaining the country's "grain security."

When the peasants have some savings, they deposit them in their local rural credit cooperative. The credit cooperative is not interested in lending money to peasants scattered across the countryside, so the credit cooperative redeposits those funds with the central bank, which makes them available for loans to the real estate developers so they can finance their shopping malls.

The usual way to get rich in China is in real estate. Nearly every company in China--including those in agriculture and food--has a subsidiary that is in the real estate business. Urban people started doing well when housing was mostly privatized and employees were gifted their homes at bargain basement rates in the late 1990s. Now it's common for middle class urban Chinese households to own multiple houses.

What about peasants? No land ownership for them. That would violate China's constitution, and we know that the Chinese government would never violate one of its laws. Peasants are allowed to rent out the rights to use their land for the equivalent of $25-$50 a year, but they can't sell the land. If their land is converted to urban real estate, the peasants might get compensated big-time, $5,000 or so, but the officials will sell it for $50,000.

After showing their great concern conference attendees no doubt went back to rest in their hotel rooms that cost the equivalent of a factory worker's monthly wage per night.

Wednesday, September 8, 2010

You can't grow more of everything

China's agricultural production statistics come out with a one-year-plus lag. However, local surveys are often available in a more timely fashion that open a window on what's happening now.

The Nanyang City statistics bureau's planting area survey shows that grain area has risen sharply but vegetables, potatoes, and cotton area down. The data are based on a survey of just 360 farmers in this region of Henan Province, smack in the middle of China, but it seems to be consistent with other pieces of information out there.

Sown area in Nanyang City was just under 29 million mu this year. Somehow the farmers in this region increased planted area by 4% this year. I don't know how you increase crop area with cities expanding and roads being built at the current rate in China.

Wheat was stable, with area just under 10 million mu, up 0.7%.
Corn was planted on 5.47 million mu, up 38.8%.
Rapeseed was planted on 4.7 million mu, up 2.6%.
Vegetable plantings were 3.46 million mu, down 3.6%.
Cotton was planted on 1.54 million mu, down 3.4%.
Potatoes were planted on 858,000 mu, down 8.7%.
Tobacco was planted on 309,200 mu, down 9.3%.

According to the report, the general trend is for grain to go up, and "economic crops" to go down. It cites subsidies and rising prices for increasing grain production. Per-mu returns from grain are about equal to returns from "some" economic crops this year and higher than some others. Corn prices are up about 20% this year. The report doesn't mention it, but rapeseed also had a support price and a fungus was found on Canadian canola to keep it out of the market.

On the other hand, declining cotton prices and its high labor requirements have discouraged farmers from planting it.

The surge in grain area is probably linked to the big concern about lack of vegetable supply and rising vegetable prices that led to the State Council's call for policies to support vegetable production. If you plant more grain, you have to give up something else.

China's early-season rice down 2 mmt

On August 27, the National Bureau of Statistics (NBS) released its estimate of early-season rice production. This is the rice crop planted in the early spring (in southern provinces) and harvested in summer. After harvest the fields can be planted with another rice crop or other crops to be harvested in the fall.

This year's early rice harvest was affected by the severe drought in southwestern provinces, low temperatures in early spring, and flooding this summer.

NBS estimates the early rice crop at 31.32 million metric tons, down 2.04 mmt from last year. That's a decrease of 6.1%. Given all the problems listed above, this is a relatively modest decrease.

NBS says 1.6-mmt of the decrease was due to lower yields. Reduced planted area accounted for the other 400,000-mt of the decrease.

The early rice yield was down 4.9% from last year. The yield averaged 5,405 kg/ha, down 276.8 kg from last year. In Jiangxi the yield was down 11.1%, in Zhejiang it was down 8.7%, and in Hubei it was down 4.5%.

Early rice planted area was down 1.3%. National early rice area was estimated at 5,794,000 ha, down 76,100 ha from last year. The severe impacts of drought are reflected in Yunnan's 34% decrease in early rice area. There were declines of 24,000 ha in Guangxi (-2.4%) and 20,100 ha (-1.5%) in Hunan.

The three leading provinces accounted for three-fourths of the decline in production. The leading provinces: Hunan down 450,000 mt (-5.6%); Jiangxi down 880,000 mt (-11.1%); Guangxi down 220,000 mt (-3.9%).

In a promising new development the NBS report contains an addendum explaining the general methodology for obtaining estimates. They are obtained from sample surveys conducted on 17,000 plots in 2000 villages chosen from 8 provinces that account for over 96% of production. The surveys are supplemented by statistics from minor producing areas.

Wednesday, September 1, 2010

Store up vegetables!

Hubei Province has plans for cities to store up a 5-to-7-day supply of vegetable reserves. This bright idea, intended to "stabilize" vegetable prices, was inspired by rising vegetable prices this spring and summer. According to the article, there was a shortage of vegetables this spring due to drought and floods in the south, and vegetable prices are 84% higher than in 2007.

In the peak seasons of April-May and August-September, Hubei has to bring in 6 million tons of vegetables from other provinces at higher prices than local prices.

This program is part of the "vegetable basket" program that has been in place since the early 1990s. Muncipal leaders are responsible for ensuring that their cities have sufficient supplies of vegetables, fruits, and meats. A provincial "vegetable basket risk fund" will be established to finance interregional vegetable sales at certain times. Strict plans will be made to guarantee that cities have minimum supplies of vegetables, and a mechanism to balance supply and demand including compensation systems will be set up.

The province has a 5-year plan to set up standardized production bases for products in the "vegetable basket." Products will be traceable back to source of production. Vegetable production area in Hubei will be held at a minimum of 8 million mu. The system will increase Hubei's self-sufficiency in "vegetable basket" products.

Are shoppers really going to want to buy shriveled carrots that have been stored in a warehouse for months?