Dim Sums: Agricultural Markets in China

News media have been reporting tentative agreements between China and Ukraine in which the Ukraine would export corn to China and China would make investments in Ukraine. In early December, Xinhua announced that an agreement had been signed with COFCO to buy Ukrainian corn, but several days later  an official from a Ukrainian agribusiness company announced that "in principle" Ukrainian corn could enter China, but there seemed to be a hang-up on which Chinese company owned the import quota that would allow them to buy it. At least two meetings on agricultural investment were held during a Ukrainian agribusiness official's December visit to Beijing. One meeting held by the Chinese Animal Agriculture Association was convened specifically to discuss investment opportunities in Ukraine. A second meeting of Chinese business leaders on agricultural investment --both in China and overseas--was sponsored by a business magazine and included the Ukrainian official as well as Chi...

On December 18, China's central television network (CCTV) revealed that some farms use as many as 20 different drugs to raise chickens, and some use excessive doses or banned drugs. This incident again shines a light on pervasive food safety problems in China as the country adopts an industrialized food system. Laws, regulations, and certifications present on paper are routinely flouted and there is seemingly no effective mechanism that can assure final consumers that their food is safe to eat. The main revelation of the CCTV report was that farms in several locations of Shandong Province violated regulations that require farms to stop feeding drugs to chickens 7 days prior to slaughter. The chickens were delivered to local slaughterhouses of big poultry meat companies, Liuhe and Wintech, which supplied fast food chains like KFC and McDonalds. A cartoon from a Chinese commentary  mocking the use of drugs for raising chicken: "Chicken 'famine'" The farm...

According to the China's communist party leaders, private business needs to be able compete with state-owned businesses on equal footing in order to follow the road to socialism with Chinese characteristics. On November 8, General Secretary Hu Jintao gave a typically  long rambling "report" to the 18th party congress of the communist party which noted that China is still in an early stage of socialism and is now entering a new era of urbanization, industrialization, informationization, and modern agriculture. Secretary Hu observed that China faces many opportunities and challenges during this period when the world, China, and the party are encountering fundamental changes in conditions. He worried that China's development is still unbalanced, uncoordinated,  unsustainable. Among the problems he cited were weak innovation capabilities, irrational industry structure, a weak foundation for agriculture, and food safety problems. He scolded some cad...

China is creating a huge stockpile of cotton similar to the infamous "butter mountain" accumulated in the European Union during 1980s and earlier decades. Like the EU and U.S. during the 1980s and earlier, China has a minimum price for cotton that exceeds the market price. That means the government has to buy cotton to maintain the minimum price because private sector businesses can't make a profit buying cotton above the market price. Unlike the E.U. and U.S. price support regimes of earlier decades, China has committed to relatively low tariffs and China is a net importer of cotton. The E.U. and U.S. subsidized exports of their commodity mountains, distorting world markets and leading to the adoption of disciplines on domestic support in the Uruguay Round of GATT. China, however, is accumulating a mountain of domestic cotton AND importing huge quantities of cotton. This is the perverse three-tier market described on this blog in October. As of December 5, China...

The "Number 1 Document" will emphasize a transition to larger-scale farms next year, according to a reporter's posting on the Economy Reference News  microblog . The document will call for rural households to remain the primary operators of farms while encouraging innovations in arrangements that create large individual-operated farms, family farms, cooperatives, and contracting relationships between farmers and companies. However, commercial enterprises will be discouraged from renting large tracts of land from rural households or renting on a long-term basis in order to prevent them from converting land to non-grain or non-agricultural uses. The campaign for new farming arrangements is motivated by the massive outmigration of rural laborers, aging rural population, the emerging dominance of part-time farming and the conundrum of "who will farm"? Against this background, fostering new-style farms has become more "urgent." This is not a new strat...

In another sign of China's transition from a country of farmers to a consumer country, a city in Fujian Province is importing rice from seven countries  this year to keep a lid on prices. Xiamen is a prosperous port just across the straight from Taiwan. This year local grain companies have struck deals with Thailand, Vietnam, Pakistan, Uruguay, Burma, Cambodia and India to supply rice to the local market. Xiamen has imported 100,000 metric tons of rice in the first ten months of this year. There are four new countries supplying imports this year and India will begin exporting to Xiamen after procedures are completed. A representative from a local grain company explained that Xiamen relies on bringing in rice from elsewhere since it doesn't have a lot of local production. The purpose of the imports is to satisfy local demand and keep prices down. The imported rice from Vietnam and Pakistan costs about 2 yuan per 500g, about 40 percent less than Thai rice. The article says ...

An opinion piece circulating on China's Internet calls for China to give up its near-sacred goal of self-sufficiency in grain. For a long time Chinese government officials have stressed the importance of maintaining self-sufficiency in grain with rhetoric like, "The Chinese peoples' rice bowl must be firmly in their own hands." The 2008 medium and long-term plan for food security insisted that China must produce at least 95 percent of the grain it consumes. The Ministry of Agriculture reiterated the self-sufficiency goal in February of this year. The article places the self-sufficiency issue in historical context. It suggests that the insistence on self-sufficiency is based on China's history as an agricultural country with a large population. It refers to the huge famine in the early 1960s, referring to it as a "manmade disaster" (officials still refer to it as several years of "natural disaster"), as an event that influences the grain se...

China had another abundant grain harvest in 2012 that exceeded 589 million metric tons (mmt) according to estimates from the National Bureau of Statistics (NBS) released November 30. NBS estimates that production rose 3.2 percent during 2012, an increase they attribute to good weather and policies. The statistics are shown in a table below. Somehow, Chinese farmers found 694,000 hectares of land to expand the area planted in grain. Grain area increased by 0.6 percent and yield increased by 4.1 percent. NBS estimated that increases in yields contributed 14.78 mmt of additional grain output while expanded plantings contributed 3.58 mmt. A major development highlighted by the statistics is the emergence of corn as China's biggest crop in both area and output. Corn production is estimated at 208 mmt, surpassing rice output (204 mmt) for the first time. The increase in corn output came mainly from increase in area. Corn area rose 4.2 percent and yield grew 3.6 percent. Rice ar...