Dim Sums: Agricultural Markets in China

The Rizhao City harbor district's layout of industry zones In some ways, China is one of the most market-driven economies ever seen. Yet the Communist Party retains the concept of the "five-year" plan that came out of the Stalin-era Soviet Union and was widely adopted in mid-20th century by developing countries. Almost everyone else has abandoned five-year plans but China is about to roll out its 12th five-year plan. In the 12th five-year plan China plans to upgrade its industry structure to include more high-tech, large-scale industry in place of the low-end small-scale manufacturers that have driven the economy over the past few decades. Official strategies for accomplishing this include developing comprehensive regional plans that will concentrate industry clusters in "advantaged" regions that take advantage of local resource availabilities and strong companies. Investment comes from foreign and domestic investors as well as publicly-funded projects. Consider...

Conservation tillage is one of the new techniques Chinese agricultural officials are encouraging farmers to use in order control soil erosion and improve productivity. In September, the Agricultural Machinery Department of Donggang District (Rizhao in eastern Shandong) held a conservation tillage meeting at Xihu Town’s Dahuaya Village to promote fall conservation tillage in the district. Donggang District began disseminating conservation tillage techniques in 2007 and after three years there are 5000 mu of model farms that influence the surrounding 20,000 mu. Demonstrating conservation tillage Techniques include no-till and minimum-tillage, utilizing organic matter from stalks, leaving corn stubble residue as a ground cover, mechanical sub-soiling, and pest control methods. By reducing the amount of ploughing and leaving residue on the surface, wind and water erosion is reduced and more moisture is retained in the soil. This helps crops during times of drought. According to the articl...

China is constructing a massive South-to-North water diversion project, a system of reservoirs and canals that will divert water from central China to the parched northern provinces. The official web site for the project is here . Since there are people living just about everywhere in China, the hardest part about these projects is moving people who are in the way and finding another place to put them. The project will begin in northern Hubei and southern Henan where some 300,000 people will be moved and resettled. This is the second-largest resettlement after the Three Gorges dam. The dam required moving over 1 million people over 14 years. This time they will move fewer people, but in a shorter time period. Above is a map of the middle route of the water diversion project begins in Hubei's Danjiangkou City, then passes through Henan and Hebei provinces to reach Beijing and Tianjin Officials in Hubei and Henan Provinces have been hard at work making preparations to move the first ...

Chinese officials see subsidies as the magic cure for all problems in agriculture. Virtually all reports by government analysts conclude with a section that usually recommends more or better subsidies. Another common theme in news media and government reports is that subsidies give American farmers their advantage, so Chinese farmers need to have subsidies too. China introduced direct farm subsidies and price supports in 2004, and since then they have multiplied in the number of subsidies offered and the amount of money. China's subsidies are now comparable to those of the United States in total spending and dollars per acre. The subsidies are basically trying to counteract market forces by paying farmers to plant grain crops that produce little income. This is becoming more difficult as the markets for land, labor, and credit improve. Labor markets for rural people are well-established and wages are rising. Even land markets are developing, despite the lack of land ownership and w...

Like other commodity prices, edible oil and oilseed prices are rising, and Chinese officials are getting worried. An article from the Dongfang Daily newspaper reports that edible oil prices have been rising since this summer. Futures prices have reached their highest level since the 2008 financial crisis. Upward pressure has been building this month after the National Day holiday. At a Shanghai wholesale market, the price of one type of soy oil went up from 164 yuan per box to 180 yuan this month, and Jinlongyu mixed oil went from 210 yuan to 225 yuan/box. The Shanghai grain and oil industry association secretary Zhao Zhiwei said Shanghai supermarket prices for 5-liter bottles of soy oil went up about 6 yuan this month. Several factors contribute to rising edible oil prices: the rising cost of imported soybeans since July, buildup of inventories ahead of the peak season, and a general upward trend in commodity prices and inflationary expectations. Against the background of rising oil p...

A steady stream of articles in the Chinese press warn about multinational companies taking over Chinese agricultural markets. Even a Chinese agricultural economics journal recently contained a lead article that was a tirade against the "ABCD" companies: ADM, Bunge, Cargill, and Louis Dreyfuss. A long article from the National Enterprise magazine, "Multinational Grain Merchants Impact Business of State Enterprises," warns that increasing control by multinational companies threatens China's food security. As usual, China's soybean industry is presented as victim no. 1. The author points out that China accounted for 91% of world soybean production in 1936 , but today multinational companies control 80% of the soybean crushing capacity in China. Moreover, the article warns that multinational grain traders are spreading the scope of their operations to include upstream storage and grain processing, posing a threat to China's food security. Against this backg...

The region around Poyang Lake in Jiangxi Province is the target of a high-profile "green" development project. An article in the government media promoting the project urged readers to strengthen environmental protection and reveals the massive environmental problems in rural China. The article begins by referring to a number of major environmental disasters, including the recent oil spill in Dalian, a chemical spill in the Songhua River in Jilin, and a massive fish kill in Fujian resulting from a leak from a copper smelter. Plus the BP oil spill in the Gulf of Mexico. Then the article says, we should pay attention to our own pollution problems. The author recalls his idyllic childhood in the countryside of "clean mountains, beautiful water and good air," when happy peasants could wash their clothes and dishes in nearby streams and ponds or take a quick swim after a hard day in the fields. However, the author says much of the countryside today is better described a...

The Dalian Commodity Exchange gathered futures analysts to hold a "Beijing Region Futures Salon" where they discussed the outlook for China's corn market. An article in Futures Daily summarizes the interesting discussion. The discussion focused on the growing demand for corn. A major change is the explosive growth in industrial processors' demand for corn. One analyst notes that capacity in this sector grew rapidly during 2002-07 and industrial uses now account for 28% of corn consumption in China. If the processing capacity of 77.5 mmt were entirely utilized, this sector would consume 47% of the corn crop. The analyst suggests that the sector faces "integration" (consolidation?) in the next 3 years, but its growth has changed the "amount and rhythm" of corn demand. Other major demanders for corn are feed mills and corn reserve warehouses. Feed demand is robust, given the rapid growth in China's economy. Analysts said that enterprises now have...

The China Grain Net (cngrain.com, affiliated with Sinograin, the government's grain reserve company) organized a crop tour of northeastern provinces in mid-September . The group investigated mostly the corn and soybean situation in Siping of Jilin Province, Qiqihar and Heihe in Heilongjiang Province. The group found that corn area and yield are up from last year. This year's corn prices are good and farmers have been encouraged by government policies. A lot of farmers in Siping and Qiqihar have shifted area from soybeans to corn. In Siping, corn area is estimated to be 11 million mu this year, up 1.7 million mu from last year. Rice area is also up. However, soybean area is down about 50%. Soybean yields look better this year, but production will be down due to the fall in area. Planting was late this year in Siping, so farmers chose early-maturing varieties. There have been some problems with flooding. In Qiqihar, this year's corn crop is estimated to be mostly 1st or 2nd g...

On September 28, a glowing report from the Ministry of Agriculture carried on many web sites announced that the fall grain harvest is well underway and it looks like another year of big grain production. According to MOA, the area planted in fall-harvested grain is up 10 million mu (1.5 million hectares) and yield is on an upward trend in all regions. The MOA report gives no concrete evidence for the rosy forecast. Instead it lists this year's serious setbacks -- a horrendous drought in the southwest last winter, cold temperatures in eastern provinces, serious flooding this summer. The report does recount all the efforts made by "central leaders and comrades" to guide anti-disaster work. The State Council held many special meetings, subsidies for special seeds and machinery purchases were increased, other subsidy funds were given out earlier, minimum support prices for rice and wheat were raised. The Ministry requires agriculture officials at all levels to resolutely carr...

There is an ongoing spat over poultry trade between the U.S. and China. This week, on September 30, the WTO announced its support of China's complaint against the U.S. section 727, which forbade USDA from implementing measures to allow imports of Chinese poultry to the U.S. China conducted an antidumping investigation against imports of U.S. chicken into China as a tit-for-tat measure. China began the antidumping investigation about a year ago, accusing the U.S. of dumping poultry in China below the production cost. China's commerce ministry claimed that the imports were causing great harm to its industry. Countervaiing duties were assessed in February of this year. China's imports of U.S. poultry have mostly stopped since March of this year (see chart below). But imports from Brazil and Argentine immediately jumped to meet the demand in China. From January to August, China's imports of poultry from the United States dropped 355,000 metric tons, but imports from Brazil-...