Dim Sums: Agricultural Markets in China

Shuanghui Group, China's largest meat-processing company, was recently caught selling pork tainted with illegal feed additives. Ironically, in January 2009 Shuanghui was a key company in launching a "moral food company" campaign . This event came several months after the melamine crisis broke, so apparently it was aimed at restoring consumer confidence in food. The campaign was organized by the Central Civilization Office , a communist party propaganda organization. The Shuanghui site still has a special section devoted to the morality campaign . The Shuanghui "moral company" event consisted of a big meeting attended by company executives, the vice mayor of Luohe City (Shuanghui's home base), officials from the Agency for Quality Inspection and Quarantine, and civilization office officials. There was much pomp and pageantry. The main theme was Shuanghui Group's commitment to be a moral company of integrity. Shuanghui made "a solemn commitment" ...

The China Grain Net site carried an article about a feed conference held in Guangzhou where speakers fretted about industrial users competing with feed mills for a tight supply of corn. This article noted that industrial use of corn has grown despite the National Development and Reform Commission's 2006 order for a slowdown. After that, projects were canceled or scrapped and there has been no new capacity added. The NDRC order didn't stop the industry from expanding production. Demand rose sharply last year as food, pharmaceutical, paper, and textile industries grew in double digits. Exports of starch and other corn products also were up. In 2010, domestic processing consumption was about 45 mmt, accounting for 28% of corn consumption, beyond the planned target of 26%. An expert at the conference said demand for corn industrial products could easily grow 12%-15% annually, but the supply of corn will be a brake on the industry's growth. In the 12th five-year plan there are ...

On March 15, China Central Television’s “weekly quality and safety report” revealed the widespread use of “lean meat powder” in raising hogs in Henan Province. Here's the video . Chinese consumers have in recent years begun to prefer lean pork over the traditional fatty pork. When “lean meat powders” like clenbuterol, ractopamine, salbutamol, terbutaline sulfate, and dopamine hydrochloride are added to feed, the hog’s body devotes energy to building muscle instead of fat. The result is what is called in China a “healthy, beautiful pig,” muscular hogs that bring higher prices from traders and slaughterhouses. Industry people say the use of “lean meat powder” became a general practice, and some refer to it as the meat industry’s “melamine.” A muscular "lean meat powder" pig dares the wolf to eat him. Clenbuterol can cause anxiety, palpitations, dizziness, and even induce a coma. There were incidents in 2006 and 2009 when citizens of Shanghai and Guangzhou were sickened by ...

The Farmers Daily reports that officials in Jiangxi Province are fanning out across the province to make sure farmers plant lots of grain this spring. The top leadership has figured out that paying farmers a subsidy without regard to what they plant does not motivate them to produce more. So they have come up with an approach that incentivizes the vast rural bureaucracy instead. China's new approach to agricultural policy is to offer enticements to local officials to motivate them make sure grain-planting campaigns are carried out. The article offers a look at this new strategy in action. Jiangxi officials are promised more favorable evaluations, subsidies, and better chances at getting funds for special projects if they can meet goals for increasing early-season rice planting and total grain area. (This bodes ill for the accuracy of Jiangxi's agricultural statistics.) Following Spring Festival, the Jiangxi agricultural department sent out 8 survey teams of rural officials to e...

China's economy during the last decade has followed a strategy of "if you build it they will come," or "build now, ask questions later." This year's rural policy emphasis is on building things in the countryside, especially water projects. The government already has been increasing budgetary spending on rural construction and subsidies at a rapid rate. They are turning to the banks to pump more money into building the "new socialist countryside." Last month, the major banks were told to increase loans for various rural projects this year. Where do the banks get this money? The Agricultural Development Bank of China (ADBC) is turning to bond markets to raise 400 billion yuan this year for "new countryside" construction. This is 43 percent more than they raised last year. On March 10, the bank's vice chairman, Ding Jie, told Farmers Daily that this is a difficult time to raise funds. According to Ding, the central leadership required f...

According to the Farmers' Daily, agricultural exporters are encountering hard times . In one of a series of articles released by the Farmers Daily based on interviews with the big-wigs attending the National Peoples Congress in Beijing this week, several executives of Chinese agribusinesses offered their opinions on difficulties faced by agricultural exporters. According to the article, many agricultural exporting enterprises face the biggest difficulties in the last 10 years. Export competition is increasing, antidumping threats are increasing, costs are rising, currency appreciation is accelerating. Jiang Hongbin, chairman of Heilongjiang Province's Zhengda Shiye Ltd Co, said, “Really, at present our agricultural exporting enterprises face the accumulation of long-term pressures.” He cited the livestock industry's long-time mode of “low investment, low standard, low benefit” as a problem. But Jiang blames China's lack of subsidies for weak competitiveness in the world...

The National Development and Reform Commission and Ministry of Agriculture jointly released an emergency notice requiring agricultural and price monitoring departments to check up on seed prices and quality. The campaign is motivated by rising seed prices ahead of the spring planting period and abnormal weather events. The notice calls for setting up a seed market monitoring and reporting system. They are to make sure seed supply and demand are balanced in each region, watch the structure of seed varieties, marketing channels, and sale methods. The reports are supposed to be released to the public to guide farmers in "scientifically" choosing seeds. The emergency system will attempt to guide seed prices, adopting price controls when necessary, to prevent large increases in seed prices. Illegal speculators or hoarders will be severely punished.

On March 7, Zhang Ping, the head of the National Development and Reform Commission, held a press conference at the Great Hall of the People where he announced that China has 100 million metric tons of wheat in reserve. He said this is about enough for an entire year's consumption, and he assured everyone that this big stockpile gives them the ability to stabilize prices. Mr. Zhang assures everyone that his agency has the ability to keep prices stable. He said that most industrial commodities are in a state where supply exceeds demand. As for grain, he said, "Let me give you a number." The normal amount of grain reserves recommended by the UN's Food and Agriculture Organization is 17-18 percent of a year's consumption. Well, China has 40 percent, more than double the normal stock level. Forty percent works out to over 200 million metric tons. At a price of $200 per ton, that's over $40 billion-worth of grain sitting in storage.

This blog has posted a number of articles about crackdowns on "black dens" that butcher and sell meat from sick pigs. Last November a "black den" was discovered right in Beijing's Haidian District , showing that it is not a phenomenon restricted to small cities and rural areas. This one also includes lots of photos. The operator of the "black den" allegedly bought dead pigs for several yuan, butchered them and sold the meat to pork vendors, small restaurants and a few meat shops. A small van delivering pork allegedly from dead pigs. Freezers inside the "black den" hold pork allegedly from dead pigs.

Chinese agriculture departments and police are in the midst of a campaign to crack down on seed crooks: violators of intellectual property and those who manufacture or sell counterfeit or poor quality seed. The Ministry of Agriculture featured a rally held in a square in Wuwei City, Gansu Province . They announced that 30 metric tons of fake and poor quality corn seed was destroyed. This campaign was launched after the State Council announced a broader crackdown on intellectual property right violators and sellers of fake and poor quality goods. According to the article, fake seeds "flood the market", having serious effects on farmers' profits, causing confusion in the market, and seriously affecting the reputation of the communist party and the government. Since the campaign started, they have mobilized thousands of personnel to perform thousands of investigations and crackdowns. Forty producers of fake seeds have been shut down, 925,000 kg of fake seeds have been seized...

Organic food from China is a controversial issue. Last year one of the biggest organic certifiers pulled out of China when it was determined that its use of personnel from the Organic Food Development Center (OFDC) to certify government-owned companies constituted a conflict of interest. In 2008, a TV news segment questioned Whole Foods supermarkets' sale of organics sourced from China, and Whole Foods responded by cutting most of its China-sourced organics and put an explanation on its web site which claims that it's possible to produce organic food in China. Meanwhile, the popularity of organic food in China is growing, but Chinese organics are being undermined by the same problem with fakes experienced by every other industry in the country. China now has a growing segment of consumers willing to pay premium prices for safe, healthy, ecologically-friendly foods, but many hesitate to buy "organic" food because they don't have confidence in the certification. ...

Another article from cngrain.com frets about the competition between industrial processors and feed mills in procuring corn. The demand for corn from both types of users is continuing its rapid growth, putting pressure on corn prices. The traditional major use for corn is for livestock feed, and there are feed mills and livestock all over the country. During the early part of the 2000s the government promoted factories producing starch, sweeteners, lysine, alcohol, and other chemicals and pharmaceuticals made from corn. At the time China had a huge surplus of corn. Most of these industrial use projects are in Shandong and Jilin Provinces. The article worries that the industrial use is continuing the rapid pace set in 2009/10 while feed demand increases as well. According to the article, the industrial share of corn use, already high, is increasing. The government, having created the starch monster last decade when corn was in surplus, is now struggling to rein it in. The government ha...