Dim Sums: Agricultural Markets in China

An article making the rounds of Chinese web sites this month describes the phenomenon of idle farm land. Driving through rural Hunan Province, the reporter sees farmers hard at work in their fields transplanting rice. However, Zhou Dapo's fields are still asleep, several mu of paddy land covered in weeds. Similar idle fields are evident nearby. Mr. Zhou is a longtime resident of Spring Lake Village near Changsha. He spends most of his time in the city working, but he took several days off to come home to buy fertilizer. Traditionally, Hunan farmers plant two crops of rice each year, but Zhou is preparing to plant a single crop this year. Mr. Zhou explains that these days it's cheaper to buy rice than grow it yourself. Last year, two rice crops on 1 mu brought about 650 kg of rice worth about 1700 yuan. After paying for seeds, fertilizer, pesticides, planting and harvesting, the net income is about 800 yuan. If you count the labor and management, you make nothing. Many of Zhou...

Fields in Henan crowded with combine harvesters, hopefully not crashing into one another. This was probably a carefully orchestrated photo-op. The Ministry of Agriculture has been aggressively promoting mechanization of agriculture. Today's China Grain News web site praises the organization of interregional wheat-harvest teams now at work in Henan Province. Minister of Agriculture Han Changfu calls them China's "Number One Sickle" at a ceremony launching the "battle" for the summer grain harvest. The ceremony to kick off the wheat harvest was held at 10 am on May 30 in Tanghe County of Henan Province, a major wheat-producing area. After the ceremony the wheat combines took off into the fields. The awe-struck reporter gushes over the line of combines busily harvesting the golden wheat fields. The article reports that there are 490,000 combine harvesters working on the wheat and rice harvests this year, 20,000 more than last year. They expect the number of int...

In a short article in Value China , an author named Zhang Xujing shares some valuable management tips that highlight common problems in Chinese management that anyone doing business with China should be aware of. Dim sums has a hypothesis that "no problem" problem is at the heart of China's food safety dilemma. Zhang Xujing observes that managers often go to the factory or wherever production takes place to see what's happening on the ground. When the manager asks employees how things are going, the inevitable answer is "no problem" (in Chinese, "mei you wen ti"). Zhang insists that "no problem" is not an acceptable answer. He outlines two scenarios to explain his point. The first scenario is when an employee says "no problem" when in fact there is a problem. Managers often ascribe this to employees' dishonesty, but it also arises from a management organization that gives employees incentive to cover up problems. An employee...

Several days ago, the New York Times ran an article about Chinese investments in Brazilian soybean projects . The dim sums blog got curious and read a little on what the Chinese press says about this investment. Dimsums read up on a $2.4 billion deal struck by Chongqing Grain Group in April with officials of the state of Bahia , one of at least two China-Brazil projects agreed to so far. The Chongqing project, set to begin construction this month, included construction of a soybean crushing plant, a soybean warehouse and a fertilizer factory. It is expected to employ 1,000 local people (presumably Brazilians). Soybeans are to come from an area covering 200,000 hectares. More background about the project is given in an August 2010, article in the Chinese press announcing that the deal was in its final stages of approval by the National Development and Planning Commission. The company behind this project--the Chongqing Grain Group--appears to be a company descended from the grain and ed...

In April a nationwide check on grain inventories was ordered. I have found results from surveys of onfarm grain inventories from a random selection of local price bureaus online, but there is no compilation of national or even provincial data. There is not much about grain reserves either. Dimsums blog reviewed nine reports from counties in Shandong, Liaoning, Gansu, Jiangsu, Hubei, Henan, and Jiangxi. The reports are based on reports from samples that range from 9 farms to hundreds, and they include average grain inventories held by farm households as of April 1, 2011, production and sales of grain over the past year. It is impossible to generalize the results. The average grain inventory varied from 26 kg in Nanchang City of Jiangxi to over 2700 kg in Shanghe County in Shandong. Attitudes about holding grain are clearly in a state of flux. In Nanchang the report says local people have gotten used to selling their rice as soon as it's harvested. In some other places they say the f...

The new wheat crop in Henan Province's Xinxiang City A team from China Grain Net conducting a wheat tour last week reported that the crop appeared to be in pretty good condition. Last December and January there were histrionics about the wheat region being hit by the worst drought in 50 years, but it looks like the crop will be as big or bigger than last year as long as weather is OK between now and the harvest. A farmer named Ma in northern Henan's Xinxiang City told the inspection team : “now the weather is pretty good, it looks like this year’s harvest will not be bad at all!” Ma's fields, totaling 7 mu (a little over 1 acre), are in the northern plain of Henan, near the Yellow River. In this area, access to irrigation is pretty good, and Ma's crop was irrigated twice to stave off the effects of the drought. Spraying pesticide on the wheat crop in Xinxiang At Hengyang City, a grain warehouse boss estimated that this year's local wheat crop would be about 3.25 mmt...

Ma Jiantang, the head of China's National Bureau of Statistics, paid a visit to the rural survey statisticians in Gansu Province this month where he urged them to preserve truthfulness and correctness in statistics. These are the "sacred duties" of survey teams at each level. Ma Jiantang gets the "actuality" for Gansu's rural survey team and gives them some pointers on raising labor productivity. It only took 14 people to look at this patch of dirt. As most people know, the quality of China's statistics are highly questionable. The statistical system was set up under central planning and still bears the legacy of that era, when statistics were reported up from one level to the next. The national bureau has little control over local statisticians who often inflate numbers to make their province look good. Statistics were a means of validating the success of the leaders' policies, not a way to find out what's actually going on out there. Statisti...

A recent article about the hog industry highlights a quiet structural shift toward big farms that also signals a major change in the social and economic fabric of rural China. In Taihe County during the 1980s and 1990s, nearly all households raised hogs--some to sell and some for the family's own consumption. But now only a few households in each village raise hogs because it's hard to make money. The reporter cites a similar situation in Yunnan, Henan, and Anhui Provinces. An expert on the hog industry at Guangzhou's Zhongshan University attributes the disappearance of "backyard" hog farms to several fundamental changes in farming. "Backyard" farming is based on the small-scale farm structure and availability of slack labor. He says that the relaxation of constraints on land transfer has led to consolidation of land, and migration of young people to city jobs has eliminated the slack labor traditionally used for raising hogs. The shift from traditiona...

An article on the China Grain Net web site describes the Sinograin Company's efforts to implement the official strategy for modernizing Chinese agriculture in Hunan Province's rice industry . While the strategy could have been cobbled together in an MBA classroom, its basic elements bear great similarity to pre-1980s collective agriculture dressed up in industrial clothing. Is this a step forward toward a market economy or a disguised return to central planning? Sinograin is the Chinese government's company in charge of maintaining grain reserves. Its widespread network of subsidiary companies operate warehouses, purchasing stations, and grain mills in major grain-producing areas. Hunan is one of the top rice-producing provinces. Sinograin has a branch in Hunan with 38 local subsidiaries. Sinograin also controls the China Grain Net web site where the article appears. The article is basically advertising Sinograin's approach to encourage wider adoption since this is a ...

A blog post on the China Grain Net site points out that support price policies create a mismatch between the types of grain Chinese farmers are supplying and the types of grain that the market demands. When China was just worried about pumping out enough carbohydrates to feed the population, "grain" was a generic commodity. As the food system became more sophisticated, flour millers needed different kinds of wheat with varying degrees of gluten and protein to make instant noodles, breads, crackers, pasta, etc. Rice also has become differentiated--long grain, short grain, "fragrant," etc. Traditionally, policymakers focused on getting maximum volume of grain. The blogger points out that this tradition continues with the minimum support price polices for wheat and rice that have been in place since 2004 (it actually started in 2005 for wheat). The policy sets support prices for low-quality grains but does not offer premium prices for high-quality grains. Consequently...

These pigs graze on grass and wild fruit all day, listen to music, and their meat sells for 160 yuan per jin As China's food safety scandals rock the industry, entrepreneurs are jumping in to supply high-priced foods designed to win the confidence of health-conscious consumers looking for safety and certainty. A recent commentary on the new phenomenon of "sky-high pork," discusses some important changes in the Chinese food system. In past years, "green" and organic food came on the market at premium prices, but now a whole range of foods produced in various ways with safety and health benefits are available at sometimes outrageous prices. The article describes the experience of Ms. Liu who went to a shop to redeem a 500-yuan gift certificate and found she could only buy about 2 jin of hormone-free spare ribs and a couple of small kidneys for that amount. Other examples are pork from pigs fed "ecological" tea leaves and Chinese medicinal herbs. The aut...

In the fall of 2010 prices of nearly all agricultural commodities in China were surging upward. But now prices are starting to crash downward. One of the most prominent examples is given by an article about the apple market in Yantai of Shandong which describes the bursting of an "apple bubble." Describing the frenzy after last fall's harvest, the head of an apple association in Yantai said, "Seemingly overnight traders came from all over the country calling out for Yantai apples." The head of an apple company described it as "unbelievable," and prices reached levels he had never seen before in 20 years. Others described the prices as "outrageous." In the fall of 2010 it seemed inevitable that apple prices would keep rising. There was a general inflationary trend, and a drought in apple-growing areas of China's northwest had reduced the quality of the crop in that region. Everyone was getting into the apple business, including people who...

Apartments under construction at Anxi Village Villagers in Henan have issued a public appeal for help in their struggle against the seizure of their land for an apartment complex and thuggery of communist party officials. The incident opens a window on the exploitation and coercion used to allocate resources when the market mechanism is not allowed to operate. The incident took place in Anxi village, about 9 miles north of the county town of Jia County in Henan Province. The village has 180 people still living there, mostly old people and children, and just 67.8 mu of land (about 11 acres), not enough to meet basic food needs. According to the villagers' appeal , township officials devised a plan to build a complex of 5-story condominiums, supposedly as housing for villagers as part of the "new countryside" construction program. The developer of the project was the party secretary's nephew. Last March the town residents committee signed a rental contract that requisit...

Last week the preliminary results of China's 2010 population census were released by the National Bureau of Statistics. The population of the mainland was estimated at 1.34 billion, an increase of 74 million since 2000. China's population growth is slowing. The average annual rate of increase during 2000-10 was 0.58 percent, almost half the growth rate of about 1 percent between 1990 and 2000. China is urbanizing. The population was almost 50 percent urban. The urban population grew by 207 million from 2000 to 2010. The rural population dropped by 133 million. China is a country on the move. 221 million people (16.5 percent) were living in a city different from their legally-registered residence. Coastal provinces and several other border provinces sucked in people from the interior provinces. Guangdong Province is now the most populous region with 107 million people. In 2000 Guangdong was number 3, behind Henan and Shandong. Guangdong added nearly 18 million people during 200...