Dim Sums: Agricultural Markets in China

On May 29, China's National Bureau of Statistics (NBS) released estimates showing rapid growth in average wages for private employers and non-private employers (state-owned companies). Annual wages paid by private employers increased by 18.3% in 2011 to reach 24,556 yuan. Manufacturing wages were up 20.1%. Annual wages paid by non-private employers (government and state-owed enterprises) increased 14.3% in 2011 to reach 42,452 yuan. By far, the highest wages reported were in non-private financial services (state-owned banks) at 91,364 yuan and non-private information and computer services 70,619 yuan. These numbers are not adjusted for inflation. The China CPI number of 5.4% for 2011 is often offered as the measure of inflation but there is wide variation in price increases depending on which index one looks at. So it's hard to say exactly what inflation is in China.  Wage growth numbers shown above were more than three times faster than reported CPI inflation. Howev...

As the wheat harvest approaches the Economic Observer last week discussed the prospects for the government to buy wheat at the minimum price this year . Last September the National Development and Reform Commission (NDRC) announced that this year's minimum price for wheat would be 1.02 yuan/500g. That was a relatively large .09 yuan increase from last year. On May 23 NDRC issued an announcement of this year's minimum price purchase program. In early April, the government auctioned grade 3 wheat from reserves at 2040 yuan/mt (1.02 y/500g), the same as this year’s minimum. The market wheat price rose slightly in April, and the current price is at about 1.04-1.08 yuan. Some in the industry were speculating that the minimum price would be boosted higher to 1.04 yuan since the market price is well above the 1.02 yuan minimum, but there was no change. Wheat was not purchased at the minimum price last year. Reserves are believed to be down to about 20 million metric tons, consis...

China has quietly been building up probably the world's largest agricultural insurance program over the last five years. The program was rolled out on an experimental basis in 2007 and was hastily launched as a package of pork industry policies in 2007 when the industry was shaken by widespread disease outbreaks. China's subsidies for agricultural insurance are now the equivalent of $ 1.5 billion. Chinese officials have been pushing the idea of agricultural insurance since the 1990s as part of a broader development of modern agriculture and transitioning from the traditional "depending on the weather to eat" to risk management. While risk management is a critical problem for Chinese agriculture and insurance is a good idea on paper, the implementation is difficult. Like many of China's agricultural policies, the agricultural insurance program is implemented by giving subsidies to profit-seeking companies as part of their "social responsibility." Like m...

The May 21 Peoples Daily attempted to comfort citizens troubled by continual fluctuations in food prices. Pork prices have been in free-fall since January of this year. This follows a big build-up of hog inventories last fall when pork prices soared to record highs--prices are falling as the new pigs come on the market. At the same time vegetable prices have been on the upswing due to unusually cool weather in the north, drought in the southwest and cloudy weather in the southeast that has slowed the usual surge in spring vegetable supplies. With falling pork prices and rising vegetable prices, citizens are talking about the unusual situation where, in some places it's cheaper to eat pork than vegetables. Fluctuations in agricultural and food prices have been a subject of public attention in recent years. Since 2010, prices of garlic, ginger, mung beans, apples and sugar all soared to historical highs only to crash later. Early this year onions rose to 10 yuan per jin. Chinese...

In April every  year local price bureaus conduct surveys of grain inventories on farms and sales over the past year. The surveys are based on small samples of farm households--about a dozen per county--who keep records of expenses, production and sales. Reports from a few random provinces and counties are published online. A review of a handful of these reports shows that it is virtually impossible to draw any general conclusions about what's going on in Chinese grain production. Average grain inventories held by Chinese farms ranged from under 400 kg in Changping (Shandong) to 2837 kg in Baoji (Henan). These are inventories held as of April 1, before the summer harvest. If we take a rough median of 500 kg per farm and multiply it by 200 million rural households, the total would be 100 million metric tons held on farms. Inventories went up overall but there was a lot of variation. In Anhui Province rice inventories went up but wheat and corn inventories went down. In Nanyang, H...

AQSIQ, China's border inspection and quarantine agency, announced that four shipments of U.S. pork were rejected during March because ractopamine was detected in the meat. The shipments totaled 103 metric tons of frozen pork, pig feet, and hindquarters. They arrived at ports of Zhuhai, Xiamen, and Tianjin. The timing of the announcement is interesting, coming at a time when authorities have been looking for ways to pull Chinese pork prices out of their downward trend. Articles in the Chinese news media describe the rejections in a manner that sows fears of imported pork in the minds of Chinese consumers. Pigs flying into China. Their capes read "lean meat powder."  The person drops a flag reading "welcome." (Source: Xinhua ) First, some background: The catch-all term "lean meat powder" (瘦肉精)　is commonly used in Chinese to refer to about half-dozen different pharmaceutical beta agonists that can be given to pigs to channel the energy from feed ...

China's agriculture has entered a  period of "three highs" : high costs, high prices, high subsidies, according to a policy advisor interviewed by the 21st Century Business Herald . The advisor, Huang Shouhong, vice chairman of the State Council Research Office, warned that China's agriculture risks being marginalized during the current rapid urbanization and industrialization. The process is pushing the costs of land and labor higher and prices of raw materials are rising too. This raises the price of agricultural products and leads to rising subsidies. A recent report from the Chinese Academy of Social Sciences examined the pressure from rising raw materials prices and projected a 13-percent increase in prices this year. The report said upward cost pressure and rising living costs for rural people create a vicious cycle of rising costs and prices. Huang is alarmed by the growing trade deficit in agricultural products. In 2004, China's agricultural exports...

The Farmers Daily published an essay calling for faster and broader reform of the collective ownership of rural assets. The author is a researcher at the Beijing Municipal Rural Economy Research Center. The essay is similar to Premier Wen Jiabao's promise at last December's rural work meeting that rural peoples' property rights will be protected. Since the 1950s China has been divided up into urban and rural territory. The article explains that rural assets include farmland, forests, land occupied by houses, land for construction use, village-owned enterprises, and public facilities. These assets are owned by village collective organizations. The essay describes the ambiguous ownership as joint ownership in which shares are not assigned to individuals. The essay cites the "household responsibility system" established in the early 1980s as a significant first-round reform of the collective system. Individual members of collectives were given rights to operate l...