Dim Sums: Agricultural Markets in China

Not everything is getting more expensive in China. The bottom has fallen out of the banana market. At their peak in Februrary, bananas in Hainan Province sold for 7.6 yuan per kg. Since the beginning of June, bananas have been in severe oversupply in Hainan and the price is now 0.25 to 0.60 yuan per kg. A reporter drove out to Chengmai county on Hainan Island and saw large banana groves nearly ready for harvest, but no evidence of trucks to buy the fruit. A farmer told the reporter that the bananas will rot if no one comes to buy them in the next 10 days or so. Another farmer said he contracted 1000 mu (about 165 acres) to grow bananas, of which 220 mu are ready for harvest. He rents the land for 450 yuan per mu [about $420 per acre, double what grain land rents for in much of inland China, but about average for fruit and vegetable land] and his total costs are 6700 yuan. He has to sell at 1 yuan per kg to cover his costs, so at current prices he will lose 0.7 yuan on every kilogram h...

Smuggling is a long-established business in southern China, with its porous coastline, a nose for cash, and disregard for authorities far away. Smuggling of food products banned by authorities or assessed with steep duties thrives, but authorities have been trying to crack down over the last couple of years. On June 20, Guangxi Province's customs, quarantine and inspection authority and provincial antismuggling office jointly announced the seizure of 700 metric tons of smuggled frozen animal products . Customs investigators found that the suspects had set up a trading company in 2008 that mainly did business trading chicken and duck meat. They contacted suppliers through the Internet, set the volume, price and products and had shipments delivered to the Vietnamese port of Haiphong. The goods were shipped from there to Mong Cai, a city on the coast at the border of Guangxi and Vietnam. From there, goods were shipped up the Beilun River into China, then loaded onto vans and finally c...

During the 1990s, the "farmers' burden" became a major source of rural discontent after the central government began concentrating funding on cities and rural officials acquired a taste for fancy cars, office buildings and banquets. The cancellation of the "agricultural tax," slaughter tax, and taxes on special agricultural products during 2004-06 was widely trumpeted as relieving the "farmers' burden," but the problem hasn't really gone away. Last week, seven government departments jointly issued an order to crack down on fees and assessments to prevent the farmers' burden from rebounding. Among the departments were the Ministry of Agriculture, the State Council's Dispute Resolution Office, and National Development and Reform Commission. The Ministries of Finance and Education were also sponsors since one of the concerns is spending on education and other rural public works projects. A similar document was issued last year. In 2007 the...

Monopolizing local pork markets seems to be a favorite activity of Chinese gangsters. This month, a court in Guangzhou held a hearing for 18 members of a "gang of tyrants" who allegedly monopolized the pork market in the Haizhu district of that city. They allegedly conspired with 14 local suppliers of "safe pork" to sell underground pork to hotels. The gang set up a meat company with support from the head of the local commercial and industrial bureau. This venture allegedly evolved into a "triad-type" group, using force to keep other suppliers out of the market. A prominent example was the head of a meat company in Chongqing, known locally as "the butcher of Chongqing," who received a death sentence for using force to monopolize the pork market and fix the wholesale and retail prices. He won the 2005 "Outstanding Young Farmer Entrepreneur" award and was a member of his district's communist party committee. The "Butcher of Cho...

The Ministry of Agriculture announced six policies to address soaring pork prices. In August 2007, the last time pork prices shot up like this, the government also announced a series of subsidies and ordered banks to lend to farmers and pork processors. The big expansion of industry capacity that followed drove prices down to loss-making levels two years later. The policies announced this time are actually resolutions to implement already-existing programs and don't portray the sense of panic the government showed in 2007. These policies are being introduced by the Ministry of Ag, not the State Council. Maybe the government learned from its intervention mistake last time around. The first two measures are to pay out existing subsidies that were introduced in 2007--subsidies for fine breeds, "awards" to hog-surplus counties, building above-scale hog farms, and setting up "demonstration farms" that show surrounding farms how to do things right. The second measure...

Just about every company, bank, and organization in China is celebrating the communist party's 90th anniversary. An interesting celebration was held by Beijing's officially-sanctioned christian churches. On June 11, a festive "praise music concert" was held at the Century Theater in Beijing where all the praises were for the communist party. The meeting, described as full of cheering with a theme of "one heart, one direction," was attended by officials of Beijing's Religious Affairs Bureau, city communist party officials, pastors of Three-Self Patriotic Association churches, and 1700 believers. The chairman of the Beijing Three-self Patriotic Association gathered the pastors on stage and gave a brief speech that made it clear who (or what) they should worship. The chairman began, "For 90 years, the communist party has united all peoples and circles of society, never ceasing to give attention and support to Chinese christianity." He then reminde...

This chart showing cyclical movements in hog prices over the past decade was posted on the boyar.cn site to place the current rise in prices in historical context. The Chinese hog price has tended to rise and fall in 3-year cycles. Since July 2010, the hog price has been on the upswing for 12 months, reaching near 15 yuan at the chart's end in May 2011. The article describes the current cycle as having its own unique character of "inflation combustion" and insufficient supply driving prices upward. The 2004-06 cycle was also driven by inflationary pressures in its early stages, says the article, while that cycle's downturn was due to disease outbreaks--similar to 2010. The sharp rise in prices during 2006-08 was due to insufficient supply. The article suggests that the current upswing in price is similar and will take 2 years to play out. The article suggests that hog prices will continue rising until April or May of 2012 before beginning to fall. The article attribu...

Population statistics are among the dodgy numbers that the "dim sums" blog is named for. China's population census numbers released a few months ago revealed that the population was nearly half urban. This census was the first to count migrant workers where they live instead of where they are officially registered. Migrants were only counted if they lived in a place 6 months or more. So far, only a few numbers from the census have been released in brief communiques. An unofficial table of unknown origin posted on several web sites titled "2010 Census Data, Ranking of Cities by Population" reveals the difference these migrants make in China's urbanization. It's surprisingly difficult to find an accurate list of city populations. Two rankings, one based on 2008 data and another based on 2004 data posted on online bulletin boards give wildly differing results. "City" population figures often include outlying rural areas under the city's adm...

A good video from Al Jazeera's China correspondent on some food safety topics that have been covered on this blog -- fake beef made from pork and organic food cooperatives.

One of the blow-by-blow reports on the wheat harvest posted on the cngrain.com web site last month reports on quality issues and competition in the flour-milling industry in Bozhou, a city in western Anhui Province . Mr. Liu, the manager of a flour mill in Bozhou, says the supply of wheat is tight. The cost of buying wheat is high--1.05 yuan/jin--leaving little room for profit. He says they are buying wheat now, but being careful to make sure the wheat is good quality. Liu says the company is concerned about the quality of their flour and the quality of wheat is the key. In recent years his company set up a 2000 mu quality wheat seed base to supply farmers with seed. When the wheat is harvested they buy the wheat at a high price. This way maintain wheat quality, and guarantee a raw material supply. According to him, other large mills in the area all use this method. The company buys its wheat from traders who buy directly from the farmers. The traders supply them with good quality whe...

Trucks in Jinxiang County's garlic exchange. Last year at this time, soaring garlic prices were almost a national crisis in China. This year garlic prices are falling. On a Hangzhou web site , a reporter asks, "Have you noticed lately restaurants have been serving larger portions of garlic in dishes?" According to the article, last year when garlic was expensive, restaurants stopped serving garlic in stir-fried vegetable dishes and Sichuan-style restaurants substituted huajiao for garlic as a flavoring in hot pot. In Hangzhou restaurants garlic is now back in the stir-fry. A restaurant boss said garlic prices started going down in April. A vegetable vendor in a Hangzhou market said, “Last year, at its peak, the retail price was 7 or 8 yuan per jin. In March it started falling. Now it’s about 4 yuan.” According to the Zhejiang price net, Hangzhou’s average wholesale price in late March was 5.35 yuan per jin, but on June 1 it was 2.8 yuan. The retail market price peaked at...

China continues its agricultural subsidy binge by announcing a new animal-grazing subsidy program. The grassland protection compensation mechanism was announced in May and it is set to cover 1 billion mu of grassland in 8 provinces and autonomous regions and benefit 1 million members of animal-herding families. ( English Peoples Daily article is here .) As usual, details of the program are sparse and vague, but the main idea is to compensate herders for reducing the number of sheep/cattle they graze so that grasslands can recover from overgrazing. The program will herders give 6 yuan for each mu of pasture they are forbidden to graze animals on. There is a 10 yuan per mu subsidy for planting improved varieties of grass. There is also a 500 yuan payment to compensate herders for high costs of fuel and forage. There is also a subsidy for fine breeds of animals. Moreover, there will be awards to provinces that do "outstanding work" on improving pasture and raising incomes of he...

According to the report from a China Grain Net crop tour , Heilongjiang's crop area is undergoing a big adjustment this year. Soybean area is said to be down 25 percent this year, but area is up for all other major crops. Total grain planted area is expected to reach 204.46 million mu, up 1.3 million mu from last year. Corn: 84.14 million mu, up 5.67 million mu (up 7.2%) Rice: 48.51 million mu, up 3.89 million mu (up 8.7%) Wheat: 6.02 million mu, up .35 million mu (up 6.4%) Potatoes: 4.86 million mu, up 1.26 million mu (up 35%) The article attributes the change to prices of different commodities rising to differing degrees. While grains bring relatively low profits, farmers are accustomed to planting grain [so they keep doing it by inertia]. Spring planting was done early this year. After harvest last year, 126 million mu of the province's land underwent some kind of soil preparation, including 63 million mu of sub-soil preparation. This is part of a government campaign to rai...

Some state-owned grain companies are grinding to a halt as the government's own policy bank tightens its lending standards. This illustrates the planned-economy role of banks as ATMs for state enterprises. If China's banks become real banks that make loans based on risk and repayment prospects, the remnants of the centrally-planned economy (still lumbering along on life-support from the "banks") will come crashing down. The state grain-procurement bureaucracy was reformed/privatized during the last decade, but business as usual continued to a large extent for the state-owned grain companies. The key to the survival of these companies was a stream of cheap cash from the Agricultural Development Bank of China (ADBC). The bank now appears to be tightening credit standards. An article from Guizhou Province reports that only four of the province's state-owned grain enterprises have gotten loans from the ADBC, and the loans are only 5% of what they "need." Non...

Pork prices have been climbing for months and accelerated in May. Pork prices are now 40%-45% higher than a year ago (when they were depressed) and are now near or at the historical high reached in 2008. Most reports indicate the high prices are due to short supplies--similar to the situation in 2007--and (also like 2007) there is no single factor creating the shortage. The surge in prices has its roots in 2010, but there are some indications that the March "lean meat powder" scandal has helped drive prices even higher. An article from Shanxi Province says that the region has a short supply of hogs. According to interviews with hog-producing companies, the short supply can be traced back to a period of declining prices and serious losses during late 2009 and the first half of 2010 which induced many farms to sell their hogs and quit the business. In addition, the article cites the effects of "disease no. 5" (a euphemism for foot and mouth disease) which killed ma...