Dim Sums: Agricultural Markets in China

Chinese authorities have announced a "provisional" minimum price for purchasing soybeans for government reserves. The price is 2 yuan per jin, or 4000 yuan per metric ton and applies to 3rd-grade domestic soybeans harvested in 2011 and purchased in Inner Mongolia and the three northeastern provinces (Heilongjiang, Jilin and Liaoning). The China Oils Net explains that the provisional price has been raised each of the last three years. The price set in late 2008 was 3700 yuan per metric ton. According to the China oils net, this price didn't give farmers enough profit so they were not enthusiastic about selling. However, the dim sums blog recalls that the problem in 2008 was that no one wanted to buy Chinese soybeans at support prices since imported soybeans were cheaper. The provisional support price was raised to 1.87 yuan/jin or 3740 yuan per metric ton beginning November 23, 2009. In 2010 the price was raised to 3800 yuan, but farmers didn't want to sell at ...

Commodity prices in China are still subject to the law of gravity. During the first eight months of this year Chinese officials worried about inflation ordered the biggest vegetable oil companies to keep a lid on prices  despite strong upward pressure on prices. When the unofficial price controls were lifted in August, prices rose. Now, just a few months later, vegetable oil prices are falling. The Shandong Commerce News reports that cooking oil prices in supermarkets are falling, some as much as 20 percent. Mr. Zhao, a shopper in a Jinan supermarket, noticed that cooking oil brands that were rising in price during August and September are now a lot cheaper. Various brands, including Jinlongyu, Hujihua, Longda, and Xiyan, all were running special promotions. The price on a four-liter bottle of Longda peanut oil was cut from 96.8 yuan to 79.9 yuan, a 17% discount. The reporter found that soybean and corn oils had the biggest price cuts. With the Jan. 1 New Year and the ...

The Ministry of Agriculture has issued an emergency notice on addressing the problem of unsellable napa cabbages . The program launches a "patriotic cabbage campaign" that involves twisting arms to make sure surplus cabbages get sold. This follows the successful "patriotic potato campaign" held in mid-October. Around the time of the National Day holiday (Oct. 1) there was a large volume of potatoes with no buyers in Inner Mongolia, Gansu, and Shaanxi Province. In order to reduce farmers' losses, the Ministries of Agriculture and Commerce called on city people in Beijing, Tianjin, Guangzhou, Nanjing and other big cities to buy potatoes from Inner Mongolia. "Some people began calling this the 'patriotic potato campaign.'" Following this great success, on November 24 the Ministry of Agriculture issued the new notice calling for measures to help farmers in Shandong and Hebei Provinces sell their unsold cabbages. The notice calls for each prov...

According to Futures Daily , Chinese corn prices have been falling due to pressure from the new harvest, weak demand and worries about the fallout from the European debt crisis. The futures price fell below 2200 yuan per metric ton (about $ 14.75   $8.75/bu) and is threatening to break through 2100. This year's record-breaking harvest, estimated at 184.5 million metric tons, has been coming on the market, putting seasonal downward pressure on prices. In northern China good weather encouraged farmers to sell, and the price fell 200-300 yuan/mt to 2160-2380 yuan. In the northeast the corn price is in the 2000-2050 yuan range. As prices start to fall, farmers become more eager to sell. Farmers tend to sell a lot of corn at the end of the year to raise money for the coming holidays. The market is worried about the effects of the European debt crisis, and whether the crisis will spread outside Europe to the United States. Demand has been weakened by the government's rec...

According to a preliminary announcement from China's Ministry of Finance , government spending on rural affairs will exceed 1 trillion yuan ($156 billion) for the first time next year. Only 140 billion yuan ($22 billion) of the total is for subsidies to farmers. The article says grain subsidies are now 100 yuan per mu (about $38.50 per acre) and it is estimated that costs of inputs (fertilizer, pesticide, plastic sheeting, fuel, etc.) are about 300 yuan. So, the article says, the government pays about one-third of the production cost. (This doesn't include the cost of labor and land.) This year the rhetoric has shifted from subsidies to farmers to subsidies to local governments and water projects.  Chinese authorities have recognized that local officials also need incentives to implement central government policies. The operative term appearing in the Chinese literature this year is "dual incentives" (两个积极性）for local government officials and for farmers. This ye...

In October, the State Council announced a grand scheme for Henan Province that is described as representing China's new model of economic and social development for the whole country. The Council's " ideas on support for speeding up construction of a central economic region in Henan Province " is an all-encompassing plan for coordinating the development of agriculture, industry, urbanization and even culture. The plan encompasses nearly every aspect of the economy and society, but the plan has a central theme of raising grain production by upgrading irrigation and other rural infrastructure, upgrading technology, agriculture-industry links and breaking down the barriers between the rural and urban economies. The plan emphasizes Henan Province's role as a major grain-producing region and its importance to national grain security. The plan aims to upgrade grain production capacity and mentions a goal of promoting the region's livestock production and process...

Liu Yonghao, the chairman of New Hope Group--China's largest feed company--was interviewed by 21st Century about how his company has benefited from China's WTO accession 10 years ago. Liu said New Hope was one of the biggest beneficiaries, citing WTO for providing his company with a stable channel for importing raw materials. New Hope's home base in Sichuan, the largest hog-producing province. Liu says the biggest challenge in producing feed is sourcing raw materials. In the early days, feed mills had to set up importing channels in Shenzhen to procure amino acids and vitamins that were not available domestically. When the government monopolized grain they had to collect ration tickets and devise other arrangements with farmers to get grain they could process into feed.  He recalls traveling all over the country during the 1980s trying to convince grain warehouses and oil-crushing mills to sell him corn and soymeal. As a Sichuan native, he spent much of his time ...

Chinese officials in a far-flung outpost of Inner Mongolia have initiated a plan to entice cow-herders to move their cattle into new dairy-farming communities. This seems to be another expression of Chinese officialdom's vision of creating a "modern" agriculture that adapts the industrialized concentrated western model to a crowded Chinese countryside. This year officials in Inner Mongolia’s Hulunber Banner, Old Barag Town plan are planning a dairy cattle resettlement project . The plan for building demonstration "dairy communities" (奶牛养殖示范小区) was formulated in 2010 with planned investment of 76.6 million yuan (about $12 million). An initial set of five barns with related equipment with capacity to hold 500 cattle were constructed in June. Eleven barns, each holding 100 cows, are scheduled to be completed by the end of November. Herders who move their cattle into the communities this year will be given free housing, free water and electricity and cattle bedd...

China's "Renewable Energy Plan" for the 12th five-year plan period aims to increase ethanol production by 1.2 million metric tons (mmt) to reach 3 mmt by 2015. The propaganda coming out now indicates a push to meet that goal by stepping up non-grain ethanol production. An article from the "industry research net" posted on several websites several days ago pronounces that it's already clear that China must "take the nongrain ethanol road." The article cited remarks by Premier Wen Jiabao at last month's China-Southeast Asia exposition which attributed recent rises in corn and wheat prices to international market influences but nevertheless called for control of corn-based processing. That presumably includes ethanol. The article then cites a foreign scientist who extols the advantages of non-grain biofuels and lists vague "breakthroughs" made recently in the four grain-based ethanol plants authorized in 2004. The Jilin Ethanol Co. has ...

Chinese pork prices have been at record-high levels this year, but now they've started to fall. The Ministry of Commerce price-monitoring system reported that retail pork prices fell seven weeks in a row beginning in mid-September. By the first week of November, the average pork price had fallen 5.4%. A reporter for Southern Rural News investigated the reasons for falling pork price s by interviewing farmers, feed producers and others in the hog industry. There is no clear reason for the decline, and, as usual, it's a complicated story. The reporter said there is lots of talk of disease problems, but he found that mortality rates are not higher than normal and disease outbreaks are too limited to cause a national decline in prices. At best, he says, disease is the catalyst setting off price declines, not the fundamental cause. The supply of piglets was exceedingly tight earlier in the year. The main reason was an outbreak of diarrhea that affected piglets. It began last Decemb...

China's imports of pork have surged during the last few months, prompted by high domestic prices. China’s imports of pork and related products during January-September reached 870,000 mt, an increase of 44.6% from last year. Is China at a tipping point where it becomes a permanent pork importer? An article last week in the Southern Daily reported the views of some industry analysts who are grappling with fundamental changes in China's pork industry. Some say imports of "foreign pork" could be a normal occurrence in coming years. The consensus among analysts is that high prices reflect a shortage of pork in China, and "that shortage is very big," according to one prominent pork analyst, Feng Yuhui. Analysts have observed that China's pork imports tend to surge during periods of high domestic prices. Imports spiked during 2008, the last time prices were at record-high levels, and fell off during 2010 when Chinese prices were low. Analysts say this cycle...

According to the China Youth Daily , as many as 100 animal quarantine personnel in a county of Inner Mongolia were infected with brucellosis, a serious disease that can be transmitted from animals to humans. The incident occurred about six months ago during a campaign to test sheep for the disease. Animal quarantine personnel were drawing blood from hundreds of sheep all day long, using only rudimentary tools and no protective clothing. The workers said they were issued one pair of gloves and mask per day and they had to keep using the same ones if the gloves broke while drawing blood. In April, quite a few of the personnel began experiencing pain in their backs and legs and joint discomfort, dizziness and other symptoms. The county animal husbandry bureau confirmed through testing that several persons were infected with brucellosis. The China Youth Daily asked the head of the local animal husbandry bureau whether the multiple cases of brucellosis among workers were related to the test...

A speech given at a veterinary conference in August zeroes in on a key constraint to productivity in China's hog industry: Chinese sows don't produce enough piglets. According to the speaker U.S. sows produce an average of 24.35 pigs per year, far higher than the average of about 15 for Chinese sows. In Denmark the average is over 27. The key to improving productivity and reducing costs is to increase the number of pigs per sow. The speaker observes that U.S. farms have high costs of facilities and labor that they have to spread over larger numbers of pigs to bring down unit costs. The breakeven number of pigs per sow for U.S. farms, he says, is 19. He reports that two big American companies increased the number of finished hogs produced while cutting back on the number of sows. According to the speaker, the breeds and feeds (corn-soy meal) are similar in the U.S. and China, so why should Chinese sows be less productive? He says the big problem is weaker disease control and pr...