Dim Sums: Agricultural Markets in China

On September 27, the head of the China Ministry of Agriculture's policy and law office gave a mostly pessimistic overview of China's agricultural situation . The MOA official, Zhang Hongyu, announced that output of grain crops harvested in the summer was up 4.1 million metric tons and predicted another increase in overall grain output this year. But Zhang said that the general outlook for agriculture is not favorable due to uncertainty in the international economy and trends in the domestic economy. Zhang worried about a growing deficit in agricultural trade. He said China's agricultural trade deficit for 2011 was $34 billion on imports of $95 billion and exports of $61 billion. For the first seven months of 2012 the agricultural trade deficit was already $30 billion, nearly equal to the deficit for last year. Soybeans, cotton, edible oils and sugar remain the major imported commodities. However, grain imports are already at 6 million metric tons for 2012--about 2 milli...

There is an upward spiral of prices in China that is hard to stop due to the intertwining of different commodity prices, government policy and institutional constraints. A short article originating from a local grain bureau in Hubei Province calls for a big boost in the wheat support price of 12 to 15 percent. The article is apparently written to influence the decision on the wheat support price, which is typically announced in late September, ahead of fall wheat planting. Setting prices has always been difficult for Chinese officials and often has had unintended consequences. But the process is even more complex now. The writer of the article observes that the time for farmers to decide on their plantings of winter wheat is not far off and worries that farmers don’t have much motivation to plant wheat since profits have been low for several years. Rising wages and input costs make wheat production less attractive. The writer says that a survey of 200 farmers in Henan Prov...

According the Daily Business News, Farmers in Huajiaqiao Village in Jilin Province have experienced heavy losses to their corn crop from this year's army worm infestation, but they should not expect their crop insurance to give them any compensation because insect damage is not considered a "natural disaster." The article focuses on losses from the worst attack of army worms since 2001. Some farmers sprayed their plots with insecticide four times but still couldn't get rid of the caterpillars. They bought subsidized crop insurance at the beginning of the year, but the insurance excludes insect damage. The reasoning is that insect damage can be avoided (by spraying insecticide) so it is not a "natural disaster." Insurance only covers what we would call in English an "act of God" like hail, floods, wind, and frost. The problem is that farmers didn't know what they were buying when they paid for their crop insurance. No one in the village had...

The Chinese corn crop is impervious to all threats! The worst attack of army worms since 2001? Not a problem! Typhoons that blow over corn stalks? Bring it on! Flooded fields and disease? Got it covered! Chinese corn is invincible to all comers. The Americans may have to worry about drought, but nothing can stand in the way of a magnificent Chinese corn crop--not weather, bugs, microbes, or statisticians. Reports say that the third generation of army worms has matured and is attacking corn in broad areas of northern and northeastern China since late August and there is an alert about a fourth generation. The adult moths are said to be able to migrate over wide areas, flying hundreds of kilometers in a single night. But the caterpillars will certainly be wiped out by a massive fog of bug spray laid down by The Chinese Ministry of Agriculture. In August, the Minister of Agriculture personally went out to inspect the work on controlling army worms and proclaimed that monitoring and ...

According to a report in a financial newspaper , earnings per share by China Agri-Industries Holdings Co. for the first half of 2012 were down 68 percent from last year. This was the company's poorest earnings performance since 2008. The article attributes the relatively poor performance to excess capacity in soybean-crushing. China Agri-Industries is the Hong Kong-listed parent company of COFCO, the state-owned giant involved in all types of grain, oils, pork and other agribusiness ventures. Its gross earnings were up a robust 24 percent this year, but earnings per share were HK$ 12.43, down from HK$ 39.68 in 2011. The strong increase in gross income reflects a big expansion of oilseed-crushing capacity. The company added 2 million metric tons of capacity this year to reach a total of 10.38 mmt in the first half of 2012. Sales of vegetable oil were up more than 10 percent this year, reaching 1.38 mmt. Sales of rapeseed meal were up  63 percent, reaching 3.17 mmt. The article...

Chongqing Municipality has often trumpeted its program of moving villagers into new urbanized housing. (An example from last year here .) Building "social housing" for low-income people is one of the Chinese government's big initiatives. Last week, the Workers' Daily reported that some villagers refuse to move into their new houses because the construction is so shoddy. One villager told the Workers Daily reporter that last year the local government urged everyone to move to new buildings in the Yuanming "new village" and everyone was eager to do so. However, a year later the houses are nearly finished but prospective residents are unhappy with the poor quality of construction and refuse to take up residence in the new buildings. On August 23, the reporter went to visit the new development. From a distance it looked quite nice, but close-up the slap-dash construction was evident. There were bent beams, crooked columns, doorways out of alignment, cracks ...

A fish company in Shanghai has introduced a "service charge" on fish feed in the name of food safety that has outraged local farmers and feed dealers. The fee is another example of the complexities of introducing costly food safety controls in a highly competitive market. It also reflects a subtle trend toward monopolization of agricultural markets in the name of strengthening food safety. Beginning July 20, the Shanghai Ruihua Company began requiring fish feed dealers on Chongming Island to pay a fee of 2-yuan per bag. If a dealer doesn't pay, he is not allowed to sell feed on the Island. The company pitches this fee as a "service charge" to compensate them for the services they provide to farmers and feed dealers. One farmer angrily denounced it as a "protection fee" (presumably to protect the Ruihua Company). Most dealers and farmers refused to pay the fee. With so many food safety incidents in recent years, companies and governments are trying...