Dim Sums: Agricultural Markets in China

The National Bureau of Statistics reported that rural household income rose faster than urban income in percentage terms during 2011. However, rural Chinese people remain poor in absolute and relative terms. Agriculture is now a minor source of income for rural households. "Rural" is no longer synonymous with "agriculture." The statistics are based on NBS's household surveys: 74,000 rural households and 66,000 urban households who fill out records of income and expenses over the course of the year. The average per capita rural household income was 6977 yuan in 2011, about $1090 per person per year or $3 per day. The average income was up 17.9% in nominal terms and 11.4% in real terms after deducting inflation. The increase was .5 percentage points faster than in 2010. Average (blue) and median (yellow) household income for rural (left) and urban (right) households in 2011. Urban household disposable income, meanwhile, averaged 21,810 yuan ($3,400) per p...

Chinese policy officials purchased huge volumes of cotton for reserves and subsidized loans for private purchases to support cotton prices during 2011.   A January 16 article explained that the ADBC--the government's policy bank for subsidizing commodity procurement--stepped up its purchases in the face of a decline in private funds for cotton purchase and downward pressure on cotton prices. As of the end of December 2011, ADBC had issued 66.2 billion yuan (over $10 billion) in loans that supported cotton purchases of 65.39 million dan (3.27 mmt). Both amounts were up more than 75% from the previous year. Subsidized loans from the Agricultural Development Bank of China (ADBC) financed 73% of China's cotton purchases in 2011. Most of the purchases were made in Xinjiang, the largest cotton-producing region which is about 2000 miles from most of the textile industry in eastern China. Xinjiang's subsidized cotton-purchase loans totaled 48.6 billion yuan, supporting p...

An article posted on a feed industry web site discusses barriers to capital moving into agricultural production in China. The article notes that China needs better control over the source of raw materials for the food supply chain--milk without melamine, pork without toxic additives, and rice without heavy metals. To gain more assurance of the quality and safety of foods, modernization, commercial-scale production, and traceability are needed, and these need capital investment. There is lots of money sloshing around in China looking for a place to invest, but relatively little is going into agricultural production. In particular, the article notes the barriers constraining "upstream" investments of feed companies in raising pigs and other animals. The article says that banks are hesitant to lend for projects involving "assets that wear fur": livestock and poultry production. While farms are said to be potential "gold mines," they are also fraught with...

A county in Heilongjiang Province recently published a lengthy description of its economic development plan based on pigs which opens a window on the quiet--but big--transformation of China's pork industry. It also reveals some of the organizational strategies common in China: a merger of communist party officials, big companies, farmer cooperatives, and dreams of organic riches from "green" food. Bayan pigs Bayan County is one of the leading grain-producing counties in China. But officials there are looking to change its status as a county of "farmers rich, financially-poor" by developing the pork industry in a big way. With its abundant grain supplies, officials want to turn the county into a "hog-grain capital" that produces a nationally-known brand of pork. The county's hog production grew from 400,000 head annually in 2002 to 3.2 million in 2011. The county's strategy involves elaborate coordination by officials that involves rur...

A number of localities in China have been publicizing government sales of pork from reserves ahead of the Chinese new year celebration. However, in Guangxi Province price controls have limited the supply. Hebei Province says they have sold 1,370,000 kg of subsidized pork. Shijiazhuang, the capital city, said they were selling 200,000 kg, Hengshui 150,000 kg, and other cities 100,000 kg. "benefit the people subsidized sale point" in a Shijiazhuang supermarket The sales in Shijiazhuang were scheduled to take place from January 13 to 17, 40,000 kg per day. The subsidized pork was sold at a 1-yuan per kg less than other pork. Sales took place at four outlets of the Beiguo  supermarket chain and six Carrefour stores in Shijiazhuang. In Xi'an City, authorities claim to have 3 million kg of pork reserves stored up, as well as 1 million kg of sugar, and 15 million kg of winter and spring vegetables (and 92,000 metric tons of petroleum products) in city reserves. Wh...

Mycotoxins--toxic substances secreted by mold--are the latest food safety concern hitting the news this month in China. Last month, aflatoxin was discovered in milk products manufactured (but not sold) by one of China's largest dairy companies. Earlier this month aflatoxin was found in peanut oil recalled by authorities in Guangdong Province. These incidents are just the tip of the iceberg of a much broader problem with mycotoxins in China. The discovery of aflatoxin in consumer products and the adjective "cancer-causing" got peoples' attention even though no one was actually harmed. Mycotoxins in moldy grain are a much broader problem that sometimes kills livestock but more often makes them less productive and less resistant to disease. Mycotoxins have been a major concern for the animal feed and livestock industries in China for some time. In 2009, feed millers in Guangdong Province attended a meeting to hear about a Shanghai company's mycotoxin detection ...

In his address to the December 2011 rural work meeting , Premier Wen Jiabao emphasized the importance of protecting rural peoples' property rights. He emphasized that rural people have rights to the income from their land whether they are living in their home village or have migrated to cities. He did NOT say farmers have ownership of their land, just that some unnamed authority should ensure that farmers are entitled to a share of the income stream flowing from their land. Wen said institutional disparities between rural and urban economies are one of the biggest issues to be addressed in China's economic development. He identified the gap in income between rural and urban residents as a major concern. The two institutions that keep that gap in place are the land-ownership system and the household registration system. In his address, Wen called for more tinkering without any fundamental change of the system. Wen seems to favor reform of the household registration system, p...

Last month Chinese authorities announced an audit of pork slaughter companies that will continue through July 31, 2012 . Local authorities have been instructed to check up on the qualifications of pork-slaughter enterprises and make sure they are not engaged in illegal behavior. Those who are don't meet the standards and fail to make improvements demanded by auditors will be shut down. The crackdown was announced in a noticed jointly issued by nine different ministries and bureaus which included commerce, industry, quarantine, food and drug, environmental protection, finance and health. The announcement said this "cleanup" audit is required to carry out the State Council's food safety work. This is a message to local officials that they should take this seriously. Local officials have been ordered to form coordinated teams to carry out the audit. Officials promise to set up a "black list" of companies caught in illegal behavior. They will explore settin...

An analysis of this year's corn cost of production survey results in Jilin Province grapples with the basic economics of small-scale grain production in China. The analysis is based on the provincial statistical bureau survey team's data collected from 200 farm households in four districts of Jilin Province. The analysis focuses on the importance of net returns for preserving incentives to produce corn. The report says that returns from growing corn have been relatively stable over the last several years despite rising production costs. This is possible because Chinese corn prices have been rising. The corn price rose 20% this year in Jilin. The analyst worries, however, that the incentives to plant corn are weak in comparison with off-farm work or planting higher-return crops. He says farmers who rely on planting grain are caught in a "low-level trap." Therefore, the analyst emphasizes the critical importance of the price-support policy which, he says, has bui...

A handful of local Chinese survey teams have released reports on this year's corn harvest. The results seem to confirm a big corn crop in China this year, but they also show escalating costs and prices. However, the reports are not nationally representative. There are 5 or 6 reports from Xinjiang but only one from the northeastern region. Most of these reports are based on small samples of farms, some as few as 9. The Hebei data are based on 411 farms spread over 45 counties. However, these numbers have some value as a check against the official statistics which come out months later and have been through a long process in which they may be massaged and distorted. The one provincial report issued is from Hebei  (a major corn-producing area but not the biggest one). The article describes corn as the "star" of agricultural commodities this year. Its production, planted area, price and profit were all up. In June Hebei's corn price surpassed the wheat price (an unusual...

According to an unnamed source quoted in a terse, widely-circulated news article , the Chinese government plans to boost reserves of a number of commodities and import more of others. According to the source, the government plans to buy up 6 mmt of paddy rice to add to reserves and will give subsidies to companies to hold more pork reserves. These reserves would most likely be obtained by buying commodities on the domestic market.  In the last two years companies buying rice for reserves have complained about having to compete with foreign companies who have gotten into the rice milling business and who pay higher prices. This announcement suggests that rice reserves are getting thin. Pork reserves are probably depleted too. There was some anecdotal evidence of meat companies who stopped buying hogs during the period of high prices in August-September and were selling off their inventories of pork.   The source also claims that the government plans to expand ...

Last week a Beijing reporter exposed the processing of dead chickens and other nasty practices that take place in slaughterhouses. The reporter conducted investigations and took video images in November and December at slaughterhouses in Tongzhou and Daxing, outlying districts of Beijing. One slaughterhouse worker told the reporter that the Tongzhou slaughterhouse routinely sent birds that arrived dead into the slaughterhouse and sold the meat to traders who knowingly buy dead chickens. He says most of the dead chickens are bought by hotels. Dead chickens with green spots and red skin found in a slaughterhouse. According to the article, nearly every load of chickens includes dead ones--sometimes a few, sometimes dozens. They may die of disease, suffocate or freeze to death during transport. Rather than incinerate them as regulations require, the slaughterhouse butchers the dead chickens and sells them at a discount. The worker said the slaughterhouse doesn't even have an...

China's National Development and Reform Commission released a revised list of industries in which investment by foreign companies will be limited. The new list adds a number of grain and oilseed-processing sectors. The previous list compiled in 2007 included soy and rapeseed oil processing. The new list expands the scope of ag-processing sectors covered by foreign investment limits to include rice-milling, wheat flour-milling, industrial corn processing, and processing of oils from peanuts, cottonseed, teaseed, sunflower, and palm kernels. The limits take effect January 30. According to China Grain Net, the limits are motivated by several concerns . Authorities have been alarmed by a rapid expansion of foreign-owned processing capacity in recent years. This led to excess capacity in some sectors. "Disorderly" competition in some industries led to fluctuations in prices of grains and oilseeds. China Grain Net says the limits on foreign investment are intended to increase...