Shandong Province's agricultural exports surged by over 30% in 2010 to nearly $14 billion. Customs statistics from Shandong show exports of vegetables totaled $4 billion, and were up 75%. Garlic exports doubled in value to $2.2 billion, accounting for half of the vegetable total.
Shandong Province is by far the leading province in agricultural exports, so these statistics will reflect changes in national totals.
This surge in exports is remarkable given the concern about tight supplies and rising prices last year. It illustrates China's addiction to exports and a compartmentalization of the domestic and export markets. Standard economic theory would predict that short domestic supplies and rising prices would divert products from exports to the domestic market, yet China's exports soared despite bad weather, urban encroachment of farmland, and double-digit increases in labor and land costs.
Rising domestic vegetable prices and lack of vegetable supply in major cities became a big worry for Chinese officials last year (see last week's post on vegetable prices), yet vegetable exports were up 75%. Garlic was one of the most prominent commodities attracting concern about rising prices last summer, yet exports more than doubled.
Exports of other categories were up too. Shandong's seafood exports totaled $2.96 billion, up 17.8%; fresh and dried fruit and nuts $740 million, up 16.6%; fruit and vegetable juice $470 million, up 30.9%.
These statistics reflect the value of exports. Part of the increase reflects higher prices, but these big increases also reflect massive increases in volume. Domestic vegetable prices were up 20%-to-30%, so a 75%-increase in value implies a big increase in export volume in the neighborhood of 50%.
The Qingdao customs bureau ascribes the increase to rising vegetable prices and recovery of the world economy that boosted demand in Japan and Europe, the two biggest markets for Shandong's agricultural products. Shandong’s 2010 agricultural exports to Japan totaled $3.53 billion (up 24%), to EU $2.43 billion (up 18.6%), to Southeast Asia $1.93 billion (up 52.6%). Exports to the U.S. were up 25% to $1.38 billion. Last I checked, Japan's economy was still stagnant, Europe was having a financial crisis, and the U.S. economy has had only a sputtering recovery. Trade with Southeast Asia has been booming due to the new free trade agreement with ASEAN.
How do we reconcile the big increases in Chinese food prices and concerns about vegetable shortages with soaring exports? What we may be seeing here is a process of domestic prices (which have been extremely low until now) rising to align with global prices. Another important fact is that the value of agricultural raw materials only accounts for a small share of the value of these exports. Nearly all of these products have significant value added in processing, logistics, and margins for exporters. Big investments in processing plants drive these exports as much or more than the low cost of vegetables, fruit and fish.
Sure, it's efficient that China's agriculture is moving toward its comparative advantage in vegetables, fish and fruit. In an economist's perfect world, exports of these products would pay for imports of grain which is expensive in China. But Chinese officials don't want to let go of grains (see yesterday's post on the 5-year plan for grain).
Can China produce more of everything on a shrinking base of land, water, and organic matter in the soil? Keep in mind also that vegetables and fruits require much heavier doses of agricultural chemicals. Do we have an ecological train wreck in the making here?
Shandong Province is by far the leading province in agricultural exports, so these statistics will reflect changes in national totals.
This surge in exports is remarkable given the concern about tight supplies and rising prices last year. It illustrates China's addiction to exports and a compartmentalization of the domestic and export markets. Standard economic theory would predict that short domestic supplies and rising prices would divert products from exports to the domestic market, yet China's exports soared despite bad weather, urban encroachment of farmland, and double-digit increases in labor and land costs.
Rising domestic vegetable prices and lack of vegetable supply in major cities became a big worry for Chinese officials last year (see last week's post on vegetable prices), yet vegetable exports were up 75%. Garlic was one of the most prominent commodities attracting concern about rising prices last summer, yet exports more than doubled.
Exports of other categories were up too. Shandong's seafood exports totaled $2.96 billion, up 17.8%; fresh and dried fruit and nuts $740 million, up 16.6%; fruit and vegetable juice $470 million, up 30.9%.
These statistics reflect the value of exports. Part of the increase reflects higher prices, but these big increases also reflect massive increases in volume. Domestic vegetable prices were up 20%-to-30%, so a 75%-increase in value implies a big increase in export volume in the neighborhood of 50%.
The Qingdao customs bureau ascribes the increase to rising vegetable prices and recovery of the world economy that boosted demand in Japan and Europe, the two biggest markets for Shandong's agricultural products. Shandong’s 2010 agricultural exports to Japan totaled $3.53 billion (up 24%), to EU $2.43 billion (up 18.6%), to Southeast Asia $1.93 billion (up 52.6%). Exports to the U.S. were up 25% to $1.38 billion. Last I checked, Japan's economy was still stagnant, Europe was having a financial crisis, and the U.S. economy has had only a sputtering recovery. Trade with Southeast Asia has been booming due to the new free trade agreement with ASEAN.
How do we reconcile the big increases in Chinese food prices and concerns about vegetable shortages with soaring exports? What we may be seeing here is a process of domestic prices (which have been extremely low until now) rising to align with global prices. Another important fact is that the value of agricultural raw materials only accounts for a small share of the value of these exports. Nearly all of these products have significant value added in processing, logistics, and margins for exporters. Big investments in processing plants drive these exports as much or more than the low cost of vegetables, fruit and fish.
Sure, it's efficient that China's agriculture is moving toward its comparative advantage in vegetables, fish and fruit. In an economist's perfect world, exports of these products would pay for imports of grain which is expensive in China. But Chinese officials don't want to let go of grains (see yesterday's post on the 5-year plan for grain).
Can China produce more of everything on a shrinking base of land, water, and organic matter in the soil? Keep in mind also that vegetables and fruits require much heavier doses of agricultural chemicals. Do we have an ecological train wreck in the making here?
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