Dim Sums: Agricultural Markets in China

Zhejiang Province is giving subsidies to ten business entities who grow rice in northeastern provinces. The Zhejiang Grain Bureau compiled a list that includes rice-milling companies, cooperatives and large-scale farmers who planted a combined total of 15,700 acres of short-grain rice in the northeast. According to the list, the production bases are in 14 villages in Jilin and Heilongjiang Provinces and most projects were set up in early 2012 or 2011. They are set to run for 5 to 20 years. This is a new initiative by Zhejiang--China's richest province but also short of farmland--to encourage large farming entities to grow grain in other provinces and transport it back to Zhejiang. Each company has a quota of rice and gets a subsidy of 100 yuan per metric ton for within-quota rice and 120 yuan/metric ton for over-quota rice. The subsidy appears to be to cover the costs of transporting the rice back to Zhejiang. The producers are expected to sell the rice themselves in Zhejiang. ...

According to a China Business News report earlier this month, Chinese officials are considering a boost in subsidies for soybeans, rapeseed, and peanuts to stimulate more production and ease upward pressure on cooking oil prices. The only subsidy for farmers growing oilseeds now is a payment of 10 yuan per mu (about $10 per acre) for using improved strains of seed. Sources told the China Business News reporter that two proposals are under discussion. The first is to raise the seed subsidy to 40 yuan per mu ($39 per acre) for soybeans, rapeseed and peanuts and give the subsidies to farmers nationwide instead of confining them to main production regions. A second proposal is to give farmers a subsidy based on the volume of soybeans they sell to reserve companies. Officials in the Ministries of Agriculture and Finance are reportedly in discussions about how to increase subsidies for oilseed producers. China's first direct subsidy program was a pilot program for soybean seeds be...

The buzz at this year's Canton Trade Fair is that China's food market is going upscale. Earlier this month,  Xinhua reporters talked with representatives of several Chinese companies about this remarkable transition. One Anhui food trader remarked that China now exports less canned fruit to America and imports more canned meat from Europe. Chinese consumers are in transition from just filling their stomachs to eating well. With export prices falling due to the slow economy overseas and a robust domestic market, Chinese food companies are turning their attention from exporting to importing and serving the domestic market. A manager from Jiangsu Grain and Oil Food Group said his company imported products valued at less than 1 million yuan 3 or 4 years ago, but this year they have over 50 million yuan of import business. In past years, China would export its best food products and leave the lowest-quality items for domestic consumers. Now that pattern is reversing, say the m...

On November 15, a “ 2012 International Forum on Agricultural Trade Policy ” was hosted in Beijing by the Chinese Ministry of Agriculture’s Agricultural Trade Promotion Center and the University of Foreign Economy and Trade. The scholars and officials speaking at the forum reflected the Ministry's bipolar attitude toward agricultural trade, alternately praising China's more-open trade regime while worrying about a rising tide of agricultural imports. The theme of the forum was "crisis and international trade." It was attended by 180 representatives from China and a number of foreign countries. The remarks by the Chinese speakers regurgitated themes advanced last year in a Farmers Daily article by Minister of Agriculture Han Changfu that assessed the impact of 10 years of WTO membership on agriculture in China. China's agricultural trade has grown rapidly and it is now the third-largest trader after the United States and European Union. Trade increased the supply...

Beef prices in China are rising skyward, but the high prices are not encouraging farmers to raise more cattle. According to the Ministry of Agriculture beef prices are up over 20 percent and many cities have beef prices exceeding 30 yuan/500g (about $4.30/lb.) The price of beef is double the price of pork and triple the price of chicken. Behind the rising beef prices is an exodus of farmers from the cattle industry. A farmer in Hebei Province named Shi has been raising cattle since 2003. He recalls a golden period during 2005-06 when you could earn 600 yuan per head when the price of a calf was 3.5 yuan/500g. But he says the cattle industry has been less lucrative since 2007 due to rising feed prices and better earning opportunities working off-farm. Mr. Shi says the price of a calf is now 15 yuan/500g and it costs 6000 yuan to buy one. Raising a calf half a year nets 2000 yuan per head after paying labor costs of 1000 yuan, feed cost of 4000 yuan plus electric...

Outgoing General Secretary Hu Jintao reiterated the mantra of transforming the mode of economic development in coming years in his address to the 18th Chinese Communist Party Congress . Hu's speech stressed that pushing forward with economic reforms and adhering to "scientific development" are necessary to strengthen the country, make people happy, and maintain social harmony. Hu's (China's) plans for the economy are ambitious. Hu calls for "urbanization," "industrialization," "informatization," and "agricultural modernization" in a coordinated and orderly manner. China is trying to engineer an industrial revolution in a couple of decades that took hundreds of years in western countries--without the social and political upheaval that accompanied the process in the West. Secretary Hu's economic program is all things to all people--a free marketeer and a statist. His program is virtually indistinguishable from those fl...

Chinese soybean meal prices have been falling since September, ending a brief boom in prices and "leaving only sighs behind" according to a Securities News article . In June, soymeal prices began rising rapidly, from about 3200 yuan/mt in May to a peak of 4800 yuan/mt in September. There was some concern about the effect of the rising price on meat prices and general inflation. One posting of an article on the topic was titled, " Crazy Soy Meal Affects Xi Jinping's Market Basket ." Since late September soy meal prices have fallen again. During the price boom, soybean processors in China were relying on soy meal for their profit margins, but now they're losing money on both soy oil and meal. Crushers' raw material costs are up due to high soybean prices--related to the drought impacts on the U.S. supply. Processors have not been able to raise soy oil prices due to behind-the-scenes pressure from China's National Development and Reform Commission ...

A Securities News article  sees China's overall corn crop this year up slightly from last year. This article sees expanded area in the northeast offset by damage from pests and typhoons while better weather in north China boosted production 3.2 percent from last year. Yet prices are relatively weak given the tight supply situation. In October, a Futures Daily reporter visited corn farmers in Liaoning Province, an area Securities News described as having been affected by typhoon damage, pests, rats and mold. The farmers seem to confirm that the crop had some problems this year but their main concern is rising costs. Zhao Wei, a farmer in Green Water Town north of Shengyang, mainly complained about the cost of renting land. Mr. Zhao has 15 mu (about 2 acres) of his own land and this year he rented 75 mu (about 12 acres) from neighbors to plant corn. The rent went up from 300-to-400 yuan/mu ($285-to-$380 per acre) last year to 500 yuan ($475 per acre) this year. Seed prices wen...