Dim Sums: Agricultural Markets in China

As reported earlier this week, China's Ministry of Agriculture is sending teams of officials out to villages this month to conduct surveys. Today the Ministry reports on Minister Han Changfu's survey of a village in Guizhou Province during February 24-27. The article explains that the Ministry has a strategy of matching up each departmental official with a village, farmer cooperative or agricultural company. The official is supposed to form a long-term relationship with his counterpart so that he/she will fully understand the rural situation. While this is an admirable strategy, Han's visit is clearly a scripted propaganda exercise intended to boost the spirits of disgruntled villagers and prod local officials to implement agricultural policies. Minister Han's village is Songshan village in Guizhou's Weining County. Han visited Songshan on his survey. As soon as he got out of the car, he walked into the fields where villagers were working and began chatting ab...

A corn inspection tour by the China Grain Net reports that this year's corn harvest in Shandong and Hebei Provinces is afflicted with high rates of mold growth due to wet weather. (Mold releases mycotoxins that can cause digestive problems in livestock consuming feed that contains moldy grain.) Due to the high incidence of mold in the region, feed companies in Shandong and Hebei are being cautious about buying local corn. The survey team says about 50% of this year's corn has been sold by farmers in Binzhou and Liaocheng of Shandong and less than 20% in Handan, Hebei Province. Feed mills are instead buying corn from the northeastern provinces where the corn is drier. This means demand for northeastern corn is unusually high, pushing prices up there while prices in Shandong-Hebei are weak. Thus, the usual price relationship is inverted--prices in the northeast are higher than in Shandong-Hebei. The survey team visited a number of feed mills and industrial processors of co...

The Ministry of Agriculture is organizing survey teams of officials who will fan out into villages to drum up enthusiasm among farmers for planting crops, give them guidance, find out about new problems, trends and innovations and report back about farmers' concerns and requests. The survey team campaign is not new (there was a similar campaign last year) but the motivation seems to reflect persistent worries that grain production is not keeping up with demand. Officials want to boost production to head off rises in grain prices. Another motivation seems to be an urgency to head off rural unrest by disseminating propaganda about government policies and gathering intelligence on what's happening in the countryside. According to the Ministry of Agriculture's web site , the "hundred township, 10,000-farmer survey team" ( 百乡万户调查组 ) campaign will organized 123 officials and technicians into 30 teams that will spend a month visiting farmers in their homes in 27 provin...

A researcher from China's National Weather Center warns that low precipitation this spring could affect crop production in some parts of China. Yunnan school children collect drinking water in drought-affected area.   The most serious drought situation is in parts of Yunnan and Sichuan provinces in southwest China. There has been serious drought in this area for three years and dry conditions persist this year. Many reservoirs in the region are dry. According to a news report , 3 million people and 1.6 million livestock in the region are affected to varying degrees by lack of drinking water. Nationwide precipitation is expected to be low during March-May. Concerns about drought conditions are focused on regions in northeastern China (Inner Mongolia is singled out), north China (the Huang-Huai River region, including Hebei Province), and the Yangtze-Han-River plain (central Hubei Province). The dry conditions come at a critical growing period for the winter wheat crop and...

An article from Securities Times  voices the growing worries in China about food security. Despite record increases in grain production, the article worries about the growing "imbalance" between supply and demand. The article notes that China is heavily dependent on imports of soybeans and foreign trade in corn, wheat, and rice is shifting from net export to net import status. The writer worries that grain is becoming another commodity that China has to import, following petroleum, steel, and minerals. Food security is an overriding policy objective in China. The article quotes the chief economist of the Ministry of Agriculture who said that maintaining basic self-sufficiency in grains is the fundamental principle for developing modern agriculture. China's eighth-straight increase in grain production was confirmed by preliminary agricultural statistics in the 2011 national statistical communiqué  issued Feb 22 by the National Bureau of Statistics. Grain ...

The "hard to sell" (卖难) phenomenon has been a topic of discussion in Chinese agriculture since at least the 1980s. "Hard to sell" describes a mismatch between supply and demand or poor agricultural market infrastructure that leaves farmers unable to sell what they produce. The "hard to sell" phenomenon was the basic problem addressed by Xi Jinping's thesis and the problem has been serious enough recently that several paragraphs in this year's "Number 1 Document" were devoted to agricultural marketing improvements. A recent article posted on a "san nong" (agriculture, rural people and rural areas) web site provides a good analysis of the "hard to sell" problem . The article is written by Chu Guoliang, a faculty member at the communist party school of Xiangtan, a region of Hunan Province. Based on his observations in villages, Chu identifies three types of "hard to sell": When farmers overproduce by ...

Several days ago, the dimsums blog posted news about a scheme to mortgage land rights in Chongqing. Today's post  describes a critique of these land transfer and mortgage schemes by Chen Baifeng, a young professor at South Central University of Finance and Politics. The issues are fundamental to the social and economic system of rural China. Who owns the land in rural China? Who will farm and how will the profits be distributed? Can traditional village society adapt to commercial farming? The critique is aimed at another model region, Zaozhuang Municipality in southern Shandong Province. Zaozhuang has launched a number of innovative schemes in the last several years that include township land transfer systems, mortgage loans secured by property rights and land cooperatives. Delegations from rural areas all over China have come to inspect Zaozhuang's system and many have gone home to imitate it. Such schemes are widely used in Shandong. Chen notes that such schemes get a lot...

China's Ministry of Agriculture announced feed testing results for 2011 . The report says that quality of feed continued its trend of improvement in 2011. However, the report highlighted continuing problems with failure of compound feed and premixes to meet stated protein content. The results show that illegal substances like clenbuterol and melamine were detected in only a few samples, but the report notes that these illegal additives remain a "hidden danger." Of 18,032 samples tested, 95.5 percent were found compliant with standards. The lowest compliance rates were found for premixes, especially for trace elements and vitamins. The Ministry posted seven lists of companies whose feed failed tests. The first list contains 68 samples of various kinds of feeds in which heavy metals, aflatoxins and salmonella were detected. Other lists include companies supplying uncompliant fish meal, additives that failed to include vitamins stated on labels, companies supplying uncom...

During calendar year 2011, Chinese customs statistics showed that soybean imports totaled 52.64 mmt, down 2.16 mmt from 2010. An article in No. 1 Financial News published in January offers some explanations for the decrease in imports. One Chinese market analyst explains that the Chinese government's informal price controls during much of 2011 combined with rising raw material prices to decrease profits from soybean crushing. Many companies cut back on operations and this slowed their demand for soybeans. The article cites third-quarter 2011 results released by one big company which showed profits down 58% in 2011. A second analyst argues that China's soybean imports were unusually large during 2010. This, he attributes to a ban on Argentine soy oil imports during 2010 which removed 1.4 mmt of oil from the Chinese market. He estimates that this required 7 mmt of soybeans to replace the missing Argentine oil. Thus, the 2010 number was a blip and it's not surprising imp...

The Chongqing Grain Group has announced a project to invest in grain production in Argentina. The Chongqing conglomerate has set up a company called "Golden Hope Agriculture Corporation" ( 金希望农业股份公司)  in Argentina with plans to engage in soybean, corn, and cotton production. The company also plans to grow rapeseed in Canada and Australia, high-quality rice in Cambodia and palm oil in Malaysia. Other investments by Chongqing Grain Group: In 2010, it first invested in 200,000 hectares of soybean production in Brazil.  Also in 2010, the company set up a 13,000 hectare rapeseed production base in Canada and planned a 200,000 mt/year oil-processing facility. In early 2011 the company launched a processing, storage and port investment project in Brazil. The first shipment of soybeans from the Brazil project was made in September 2011.

A Xinhua News Service article describes Chongqing municipality's campaign to give mortgage loans to rural peasants secured by their use rights to their farmland, houses, and forest land.  There have been experiments with this type of mortgage lending since at least 2008. Some of the experiments were sponsored by the Peoples Bank of China, others by local officials like the mayor of Zaozhuang City in Shandong. The Chinese leadership seems to be cautiously gearing up this type of lending--perhaps propelled by the Wukan confrontation in December 2011--but this does not appear to have full endorsement by central authorities yet.  Rural mortgage lending seems to be another step forward in the Chinese version of "socialist market economy" in which nearly everything is allocated by markets, sometimes in adventurous ways, but always in a controlled, ordered manner. The fundamental idea of the "three rights" is to carve up the rights to rural property, separating...

Xi Jinping is the vice president and presumed next president of China but little is known about him. In this post the dimsums blog offers its contribution to the genre of Xi Jinping-ology by conveying Xi's decade-old views on agricultural markets. Ten years ago Xi Jinping wrote a thesis, "Tentative Study of Agricultural Marketization" (中国农村市场化研究) for a Doctor of Law degree at Tsinghua University in Beijing, a top breeding-ground for Chinese officials. The dimsums blogger has spent several hours poring over the 200-plus page tome to see what it reveals about Dr. Xi. The thesis is remarkably close to what China has been doing lately in agricultural policy, suggesting that Xi (or the person who actually wrote the thesis) has a major say in policy or is at least in agreement with what's being done. There is nothing adventurous, controversial (or insightful) in the thesis. It seems to be the work of a wonkish technocrat who is not prone to talk out of turn or wander from...

On July 31, Wen Jiabao addressed a meeting of the State Council where he discussed six points for government work this year . The main themes included worries about how the slow world economy is affecting China, keeping the funding spigot turned on, ensuring supplies of basic commodities like food and housing to keep the masses happy. Wen said this is an important year for implementing the new five-year plan, it's the final year for the current leadership, and the task of reform and development is arduous. He said the government needs to get the views of the common people and make sure decisions are based on the interests of the masses and based on the actual situation. Wen said impacts and pressure from the world financial crisis had become evident over the past year and China now faces an important period of strategic opportunity with many favorable conditions for sustaining relatively fast economic growth. Wen: "We must inspire the people, mobilize the people, strengthe...

China's new plan for agricultural trade promotion advocates more support for overseas marketing, more systematic use of safeguards to protect domestic industries, better information and other services, financial support for exporters and a more active role in international trade negotiations. The plan for agricultural trade promotion (2011-2020) was released by the Ministry of Agriculture December 29, 2011. The plan emphasizes the importance of international trade for creating jobs, raising farmers' income and guaranteeing the supply of important commodities to the domestic market. It also worries that large volumes of imports are putting downward pressure on prices for some Chinese commodities. The plan voices concerns that rising costs in China are eroding international competitiveness and it worries that exports have low value-added, are sold in small batches and often face quality barriers overseas. The plan calls for promoting exports more actively, exports with higher ...

Since 2004, China's central authorities have annually issued a "Number 1 Document" stating rural policy priorities for the year. These documents state general policy directions for agriculture with few specifics. Each one tends to emphasize a different theme. This year's "Number 1 Document" covers a lot of different topics and doesn't seem to contain anything new, but its chief emphasis is on technology and "innovation." Innovation ( 创新 ) is a word thrown around a lot in China but it's not clear what it means. The document's title is (loosely translated), "Ideas on Pushing Forward Agricultural Science and Technology Innovation to Continue Increasing Agricultural Production Capacity." Minister of Agriculture Han Changfu, commenting on the document, said that agricultural science and technology is indispensable, noting that S&T accounted for 54.5% of growth in agricultural output. The document starts off by emphasizing p...