Dim Sums: Agricultural Markets in China

Earlier this month, Liu Yonghao, founder of China's largest animal feed company, complained that large volumes of meat are smuggled into China . Liu, also a member of the China Peoples Political Consultative Committee, made his comments while in Beijing for this month's annual political meetings. Liu said that most people don't know that chicken meat is the most-smuggled product--not computers, gold or jewelry. He described smuggling of pork and chicken as extremely "serious" with volumes amounting to several hundred thousand metric tons annually. Liu claims that the smuggling of meat is a threat to food safety and disease control and called for a strict crackdown on it. [The smuggling is not new and there has been publicity about crackdowns over the past couple of years. Last year the dimsums blog posted an article  with photos about a seizure of smuggled chicken feet and industry claims that smuggling was responsible for their low profits.] The article on Li...

This year's corn has a high incidence of mold in many parts of Shandong, Henan and Hebei Provinces, restricting the amount of decent-quality corn coming on the market. The moldy corn can't be used in most animal feed. According to the article, it is being used in poultry feed; since poultry have short lives the "death rate is low" from feeding them moldy corn. Alcohol and other industrial processors are able to use the low-quality corn but their profits and production are low right now. There is now a steep price discount for low-quality corn. A moldy corn sample from a warehouse in Hebei Province (source: China corn net ) As temperatures rise the mold problem will become a bigger constraint on the corn supply. The hog industry is in a down period now with many producers losing money but the hog price is expected to rebound in the spring, also pushing up feed demand. This will likely push prices upward. According to a China Grain Net article , in Guangxi fe...

A China Times ( 华夏时报 ) article from March 17 reported that farmers in the northeastern provinces are have held back a large proportion of their corn harvest on-farm, confident that prices will keep rising. A big snowfall in Heilongjiang last week left a big part of this year's corn harvest lying under the snow. According to the article, farmers have plenty of cash and are not in a hurry to sell. Ai Jingcai, a farmer who planted 100 mu of corn last year in Heilongjiang said, "I'm not worried about selling grain...The price has been changing the last couple of days; I can sell as much as I want." According to statistics, less than half of Jilin Province's corn harvest has been sold. In some regions farmers are holding 20% more corn this year than last year at the same time. The article reports that sales are slow all over the country. With prices high, people from all over the country are focusing on the northeast to procure their corn. With corn trickling on...

Beginning in 2004 China began giving small subsidy payments to grain farmers and also began to phase out taxes on farmers. The subsidies were designed to be "decoupled" payments that are not linked to the amount of grain produced. The "decoupled" status allowed them to be excluded from payments that count toward the limit  on farm support imposed on China as a WTO member. However, officials under pressure to boost grain output are frustrated that the subsidies do not induce farmers to plant grain. The tension over subsidies is highlighted by a recommendation for improving grain subsidies made by the Hunan delegation to the National Peoples' Congress  earlier this month. The delegation asserted that the grain subsidy needs "improvement" since the 15-yuan-per-mu subsidy is not nearly enough to offset the increased costs of raising two crops of rice. Farmers lose money growing two rice crops, "no doubt dampening their enthusiasm." ( Yesterday...

In February the Ministry of Agriculture launched a campaign to maintain the area planted in early rice. For decades Chinese authorities have struggled to get farmers to double-crop rice in eight provinces of southern China. This entails transplanting rice in early spring that is harvested in mid-summer, then followed by a late rice crop on the same land. Many farmers have been abandoning the early rice crop in favor of single-season rice that can be planted later. On February 29, the Ministry of Agriculture announced an early-rice-transplanting aid program for Jiangxi, Hunan, Guangdong, Guangxi provinces. The special fund allocation of 100 million yuan from the central government finances subsidies for large farms, specialized transplanting businesses, and farmer cooperatives for buying seed trays, plastic structures and other equipment with a subsidy of 800 yuan per mu for plastic greenhouses where seedlings are grown and 40 yuan for fields. A Jiangxi news program shows a...

A news report from Shandong TV warns consumers that cooked chicken could come from chickens that died of disease. According to the report a "Mr. Liu and several friends" ended up in the hospital after eating diseased chicken. According to the report, when there is a disease outbreak farmers lose a lot of chickens despite trying to treat the disease with medications. Instead of destroying the dead chickens, farmers sell them to rogue traders in order to cut their losses. The reporter was told, "Wherever there are chicken farms, you will find traders who come looking for dead chickens." The reporter went to a farming area. The farmers told him there were no sick chickens in their coops because they had sold them to traders who came asking for dead chickens. The reporter met with several traders. He visited the biggest trader who operated out of the courtyard of a small village house. The reporter saw a freezer filled with dead chickens that had been bought that...

Livestock bureau officials in Jiaozhou, a prefecture of Shandong Province, announced that they will conduct a big crackdown on "lean meat powders" for the March 15, "Protection of Consumer Interests Day." The campaign was publicized in the news, presumably as an assurance to consumers. No doubt it also sent a signal to farmers and dealers to keep their clenbuterol out of sight until the campaign is over. Jiaozhou inspectors carry out a special inspection (source: Zhu-e net forum). "Lean meat powder" is a general term for a class of beta agonists that channel energy into making muscle instead of fat. They are banned for use as feed additives in China. Clenbuterol is the most common "lean meat powder" but there are about a dozen others as well. "Lean meat powders" created a scandal in March 2011 when a Chinese Central TV broadcast revealed that use was rampant in northern Henan Province. A Jiaozhou official explained to a reporte...

Two recent postings on online bulletin boards warn farmers that pig disease are becoming more complex and difficult to deal with. China is in a transitional phase from "backyard" production using local breeds to an industrialized system where large numbers of pigs are concentrated in factory-like conditions. Many producers are still using traditional practices in the industrialized modes and this creates dangerous disease vulnerabilities. A farmer posted this photo on an Internet forum looking for help with a skin disease. One posting, " Hog farm epidemic situation is grim;stronger prevention is urgent ," appeared on many web sites last week but it appears to have been written in 2008. The article points out ways that diseases have become more widespread and difficult to treat. The writer warns that a pattern has emerged where diseases cause high death rates, then subside before making a resurgence. The writer says that highly pathogenic blue ear disease (PRRS...

A string of news articles on the pork industry in the city of Shenzhen exemplify the struggle between big "safe" companies and small, cheap "unsafe" processors. Illegal slaughter and marketing of pork is surprisingly resilient. It remains rampant even in one of China's richest cities a year after massive public and government attention was focused on pork sector problems a year ago when CCTV revealed the widespread use of "lean meat powders." Last month, a Shenzhen news site reported that the daily volume of hogs processed by the city's legal slaughterhouses was down 30%-40% this year because so many pigs are being slaughtered by illegal underground butchers. At one facility that has capacity to process 3000 hogs a day production is just 1300 or so. At another, production is about 60% of the usual volume. Managers complain that they have spent a lot of money renting the land, installing exhaust systems, high-pressure water systems and mechanized e...

One of the world's leading steelmakers, Wuhan Steel Group, recently announced plans to build a 10,000-head pig farm as part of a strategy of company diversification. A common saying in the company lately is, " Making steel is not as good as selling pork.” Energy and raw materials are rising and steel prices are down. Last year Chinese steel companies made a profit of 2.5%, far below the average of 6.5% for industrial enterprises.  Steel is cheaper than pork. The price of steel is said to average 4.7 yuan per kg, far less than the 26 yuan price of pork. The company's chairman, Deng Qilin, says the decision to build a pig farm is not done on a whim. It is part of a broader restructuring plan to diversify the company away from its focus on steel. Deng says the cost of steel production is going up while the demand for downstream products like cars is down. The company makes a profit of about 2 billion yuan annually producing 300-400-million tons of steel. Deng says the ...

Chinese communist party members are getting spiritual and moral guidance by studying the life of a man who was the paragon of morality and died at an early age even as he served people with no thought of his own interests. That's right, Lei Feng, a mythical soldier-hero manufactured by Mao in the early 1960s as a model for "serving the people," is back again...resurrected from the dead, as it were. The campaign comes at a time when confidence in the party is fragile, a path-breaking village election was just held in Wukan village, and the country is doing some soul-searching after the "Little Yue-yue" incident last October when a 2-year-old was run over by two vehicles and ignored by passers-by. Lei Feng is invoked as a kind of substitute deity/saint in a society run by atheists who have no moral compass. Ministry of Agriculture Lei Feng campaign (Source: Ministry of Agriculture Press Office). On March 5, the Ministry of Agriculture's Administrati...

An article from a Shanghai feed industry analysis group provides a panorama on the history of China's feed manufacturing industry and describes its future direction . The article sees rapid consolidation in the industry, growing reliance on imported feed resources and a strategy of pushing upstream into livestock production to solidify the market for feed products and create new profit centers as margins on feed shrink. The article describes the history of the Chinese feed industry in stages that are linked with the evolution of the livestock industry. In the 1980s, farmers began producing livestock and poultry as a commercial activity and there were thousands of small feed mills to supply them. Most livestock farmers were small, scattered "backyard" producers who had access to abundant feed resources in the form of grains, brans, crop stalks, vines, potatoes, etc. but they needed proteins and micronutrients. In the early years, feed mills produced largely concentrates ...