Dim Sums: Agricultural Markets in China

China's National Bureau of Statistics (NBS) held a meeting on December 26 to study the communist party's rural work plan for 2014 and to push forward an anti-corruption campaign. The director of the bureau is calling for needed changes to improve the reliability and quality of Chinese statistics, but the politicization of NBS will prevent it from ever being a transparent window for assessing China's economy and society. The problem starts with the director of the bureau. Ma Jiantang is identified first as the bureau's communist party secretary and secondarily as its director. On December 26, he  presided over a meeting of the bureau's communist party organization department  where he conveyed the highlights of the central party committee's rural work meeting. China's statistics bureau is fundamentally an arm of the communist party and its mission is to preserve communist party rule, as will be revealed below. Mr. Ma exhorted NBS party leaders to improve ...

According to a news report , Sinograin--China's State-owned grain reserve corporation--purchased 100 million metric tons of grains and vegetable oils during the first 11 months of 2013. That total was reported to be equal to 32.6 percent of grain purchased by all enterprises, the highest proportion in recent years (the percentage excludes grain used on farms). The report attributed the high proportion purchased by the reserve corporation to an effort to support farmers income and maintain production incentives. Authorities have stockpiled grains and oils to support prices this year following a big domestic harvest, with soft demand and global prices plunging for most grains and oilseeds. The purchases include the following: 36.36 mmt in policy-style purchases under minimum price and temporary reserve programs to "stabilize market supply" 12.7 mmt in interprovincial transfers of grain (mainly from the northeast to southern provinces), reported to be the largest amoun...

China's Inspection and Quarantine authority has issued a bulletin ordering its local bureaus to test for the presence of genetically modified material in imported distillers dried grains with solubles (DDGS) and related corn and oilseed processing by-products. Shipments containing unapproved GM material are to be returned or destroyed. This issue has already severely disrupted corn trade over the past month and will now likely disrupt trade in DDGS, a substitute for corn and protein meals that has been gaining in popularity among Chinese feed mills. The December 24 bulletin notified local inspection and quarantine bureaus that the Shanghai bureau had detected MIR162, a GM corn variety that China has not approved for import, in a shipment of DDGS. Local bureaus were ordered to abandon existing safety risk monitoring plans and begin testing samples of all shipments of corn byproducts for unapproved genetically modified material. Shipments that are found to contain unapproved mater...

Despite being a relatively primitive part of the Chinese economy, the country's agricultural sector is tied in to global financial markets. An example is the surprising correlation between Chinese gold and corn prices shown in the chart below.  Note: Cash prices from China National Bureau of Statistics, Ministry of Agriculture, and gold.org.   Chinese gold and corn prices have generally been on the rise since 2000. The link became more clear during 2009-11 when both prices rose at a robust pace. China's gold price peaked in 2008 and fell after the onset of the global financial crisis that year. Chinese corn prices fell later in 2008, along with nearly all other farm prices. Since then, monetary authorities in China, the U.S. and elsewhere have been in expansionary mode, and from 2009 to 2011 there was a steady run-up in both gold and corn prices. The Chinese gold price rose 118 percent from its low point in December 2008 to its peak in September 2011. Chinese corn pri...

The Heilongjiang Provincial Statistics Bureau has released statistics showing that 2013 grain production rose in large part by replacing low-yield soybeans with high-yield corn. Heilongjiang is a key province. According to National Bureau of Statistics data , Heilongjiang accounted for about 10 percent of China's grain production and area planted in grain during 2013. According to the new report, the province's grain output reached 60 million metric tons and rose 4.2 percent during 2013. The Heilongjiang report says the province's grain output rose a cumulative 73 percent from 2007 to 2013. The report brags that Heilongjiang surpassed Henan in 2011 and is now clearly the leading grain-producing province. Heilongjiang's area planted in grain rose only 0.4 percent. This slight change hides big increases in rice and corn area offset by declines in area planted to soybeans, wheat, and other grains. Soybean area fell 8.8 percent. Its decline of 234,000 hectares nearly m...

China's dairy companies are having trouble getting raw milk supplies. They are competing for milk and bidding up the price. According to the Ministry of Agriculture, the average raw milk price is up 18.9 percent since last year. Average price of raw milk, December 2011-November 2013.  Source: China Ministry of Agriculture In August, Chinese officials hit multinational dairy companies with fines for allegedly fixing prices, but since then domestic companies have been raising prices. An article in the Liaowang weekly reported that the major Chinese companies announced increases in dairy product prices for the end of December. In some supermarkets, dairy products are sold out. Also in August, officials banned imports of milk powder from New Zealand and Australia over a botulism scare. Many Chinese companies had been importing cheaper powder to manufacture milk but now they have to find domestic milk. (Interestingly, in January a China Ministry of Agriculture task force had...

A district in Hangzhou's plan to reduce the number of pigs is a bellwether of the vision for undoing the traditional intermingling of people and animals in China. Environmental awareness is one of the factors behind the change, but the result is ironically an expansion of the CAFO model, anathema to most environmentalists in western countries. Last week, officials in Xiaoshan (萧山) announced a plan to eliminate 60 percent of the district's hogs by 2017. This will be achieved by closing down farms raising less than 5000 head and limiting the number raised on farms allowed to continue operating. Building new farms or expanding farms will be forbidden. The program's principles were stated as: "reduce quantity, raise quality; supervise the entire system; ecological security." The objective is to stabilize the number of pigs at 450,000. As Chinese cities sprawl outward, urban enclaves of housing complexes, industrial parks and university campuses spring up alongsid...

Would you like your flour leaded or unleaded? Would you like a tumor with that rice? China's soil and water are heavily polluted with heavy metals that are absorbed into grain and vegetables. Chinese officials' insistence that its people eat grains grown in the country may expose them to a heightened risk of tumors and birth defects from ingesting pollutants contained in grains and vegetables. The dimsums blog has posted reports on heavy metal contamination , " dead soil ," " cadmium rice ," the secret soil survey , and the Ministry of Agriculture's  admission that agricultural pollution is "relatively serious ." Today dimsums summarizes " Crisis and Response in the Food Chain ," a well-documented article posted on a web site of the Development Research Center, a think tank that advises China's State Council on economic and social issues. The article cites a "harsh reality" of contemporary China: a high incidence ...

China's rejection of corn shipments from the United States this month supports domestic corn prices by forcing Chinese feed mills to buy domestic corn instead, according to an analysis by China Grain News . Is it a coincidence that these rejections happened during the same week China announced a subsidy designed to induce companies to buy corn in the northeastern provinces? On November 29, border inspection officials in Shenzhen rejected a 60,000-mt shipment of U.S. corn because it contained a GMO corn variety that has not been approved by China's Ministry of Agriculture for import. More shipments were rejected in the following days at Shenzhen and ports in Fujian and Shandong Provinces. The total rejected was over 120,000 metric tons. The shipments were turned away and will have to be sent elsewhere, probably at a discounted price with big losses for sellers. The rejections have cast a pall over the market. All the 500,000-700,000 mt of imported corn expected to arrive this ...

Smuggling of rice into China has exploded in the last two years since Chinese prices are higher than those in Vietnam and Myanmar. On November 27, Chinese news media reported that 26 accused smugglers are on trial in the Peoples Intermediate Court of Nanning, the capital of Guangxi Zhuang Autonomous region, apparently a signal that authorities are cracking down. Two men were accused of abusing regulations that allow residents in border areas to buy up to 50 kg of imported rice for their own use tariff-free. The two allegedly collected the names of more than 1000 border residents to purchase Vietnamese rice which they sold in a wholesale market in Nanning. Another method was to bring rice over the border undetected, using small trails that are not monitored by authorities. Some are accused of smuggling 10,000 or more metric tons of rice; the largest amount is 77,000 mt. The earliest cases occurred in January 2012. This is a reversal from 2008 when rice was being smuggled out of C...

Prices for japonica rice in Jiangsu Province are falling despite the fact that officials have begun price support purchases for this crop, another reflection of China's grain glut. A large-scale rice grower named Xue Lianchun was happy to sell his rice at 148 yuan/50kg, slightly below the support price of 150 yuan. He was happy because he anticipates that prices are about to fall further. Xue wasn't able to sell at the support price because moisture levels in his rice exceeded the standards. He felt fortunate to get close to the support price for his soggy rice. He says the price has already fallen to 146 yuan. The boss of a local rice mill in Jiangsu says the price of rice has been falling for about 10 days. He attributes it the government's subsidy to transport rice out of the northeast. Companies are now getting a subsidy to buy rice from northeastern provinces and ship it to Shanghai or other places, but there is no such subsidy for rice from Jiangsu. The influx of...

China's farm subsidy program targets local officials as well as farmers. Since 2005, top grain-producing counties have been eligible for subsidy "award" payments for the county treasury. The payments generally amount to 7-to-10 million yuan (about US$1-to-1.6 million). Initially this was a payment to fill in financial holes in poor agricultural counties, but later officials added criteria that include the amount of grain produced, commercial sales, and planted area to motivate local officials to boost production. There is an extra payment for the top "super" grain counties. More grain output increases the chances of getting these payments. An article from the China Management Net , "The Flip Side of Ten Straight Increases in Grain Production: Pollution and Imports," implicates this county subsidy for motivating local officials to push out soybeans in favor of corn mono-cropping. According a Ministry of Agriculture report quoted by the article, ...

A November 27,2013 Daily Business News article offered more clues on China's intent to transition from market-distorting price supports to direct subsidies  which has been grinding through the rumor mill since last year. The article included quotes from several of the government's mouthpieces on farm policy who indicated that trial target-price subsidies for cottons and soybeans would begin in 2014 with plans to eliminate "temporary reserve" price supports on an unspecified timetable. The article seemed to suggest that minimum price policies for rice and wheat would continue. Prospects for corn policy were not specified. The article described the price support policies as having seriously distorted prices and caused confusion in their implementation. Cotton was offered as the clearest example of distorted prices, as domestic cotton prices were described as decoupled from the world market and inflicting losses on textile companies. A well-known cotton analyst fr...

China is trying to move grain out of its northeastern provinces by offering companies from other provinces a subsidy to ship it home. On November 27, the Ministry of Finance, National Development and Reform Commission, National Administration of Grain, and Agricultural Development Bank of China jointly issued regulations on the subsidy program . The subsidy is 140 yuan per metric ton for newly-harvested corn or japonica rice produced in three northeastern provinces--Jilin, Liaoning, and Heilongjiang--during 2013. Companies from any other province can get the subsidy if they buy the grain at the government's support price for the grains and ship back to their province. The subsidy recipients must submit documents showing plans for storing, processing, and selling the grain in their home province. They also have to submit receipts showing their purchase of the grain and payment for transportation. The program runs through May 31, 2014 for rice and June 30 for corn. The subsidy i...

Suddenly, China has a surplus of grain and authorities are struggling to prevent prices from falling. China's grain imports are surging despite the big harvest because Chinese prices exceed world prices. Futures Daily recently pronounced that the arrival of China's new rice crop on the market is dragging down prices. The article estimates that China produced 11 mmt more rice than it will consume this year. Yet China is set to import 2-to-3-mmt of rice this year to surpass Nigeria as the world's leading importer. Customs statistics through October show China has imported over 1.8 mmt of rice in 2013, slightly behind the 2012 pace when it imported 2.6 mmt. These numbers don't include undocumented border trade which may push the annual total to 3 mmt. China has had another big corn crop but demand is not robust. The hog and poultry sectors are recovering from a deep downturn earlier in 2013 and processors of starch and alcohol are operating at about half of their capa...

In past centuries the Han Chinese ethnic group settled the valleys of southern China, pushing weaker ethnic groups into the marginal lands on mountains and hills where they scratch out a living. Now Chinese authorities with a new appreciation for the environment are moving minority peoples off the mountainsides to urban enclaves, purportedly to rescue Chinese hillbillies from poverty and ease pressure on the environment. Guizhou Province has announced a nine-year plan to move 2 million people off mountains and hills into urban enclaves and industrial districts. Mountains and hills cover 95 percent of the province and it has 10 million people. The description of the program complains that the plots of mountainous land cannot be formed into contiguous areas for commercial farming. Most of those being moved are members of the Miao (also known as Hmong elsewhere in Asia) ethnicity. This year, Guizhou has moved 59,000 families. The 70,500 mu of land they formerly occupied has been ...

The documents from this month's "third plenum" of China's 18th communist party central committee included many adventurous reforms. Chinese leaders propose to finally dismantle 1950's-era economic barriers between rural and urban sectors and give rural people stronger property rights. The document seems to lay out a vision for clearing small-holders off the land and facilitating their entry to urban life, with a new generation of larger-scale farmers filling the vacuum. However, the documents don't offer much detail on how this might be carried out. The character "农" appears 51 times in one section of the 20,000-character "decision" on the third plenum. The plenum's focus on cities and companies echoes the 1990s "Shanghai" leadership of Zhu Rongji and Jiang Zemin which gifted urban citizens with real estate wealth, reformed State-owned enterprises and gained WTO accession. The third plenum prominently features the principle ...

China's National Development and Reform Commission announced that the 2013-14 support price for soybeans in the northeastern provinces would be set at the same level as last year, 4600 yuan per metric ton. The November 15 announcement is a departure from past years' practice of raising the minimum price each year to help farmers cover rising costs. According to one grain analyst from an official think tank, "With international prices falling, the government did not raise the soybean price this year." Chicago soybean futures prices have fallen 6.8 percent since August. As it is, Chinese soybean prices are said to be 10 percent higher than "American soybean prices," encouraging more imports. Chinese authorities had announced increases in minimum prices for wheat, rice, and corn this year. Many had expected an increase in the soybean support price to 4,700-4,800 yuan. China's soybean production has fallen three years in a row. China's National ...

Many local authorities in China are trying to stamp out the practice of feeding restaurant waste to pigs. The practice illustrates the tension between biosecurity and utilization of food waste while the campaign against it illustrates the vagueness and arbitrary nature of law enforcement in China. This week, an article on a reporter's discovery of swill-fed pigs on the outskirts of a city in Shandong Province was widely posted on Chinese news sites. The reporter found a villager on the outskirts of Zibo City who raises about 100 pigs on garbage from restaurants. The reporter said he was kicked out of the farmer's home but he found another villager nearby also swill-feeding pigs. The farmer visits a restaurant daily to pick up waste on his 3-wheeled motorbike. He pays a varying price depending on the quality of the slop, but it can amount to thousands of yuan paid to the restaurant annually. He generally buys a piglet for 700 yuan and spends 900 yuan on slop to raise it to ...

Statistics from China's Feed Industry Association show that the country's output of manufactured animal feed plunged by 8.7 percent during the first three quarters of 2013 compared with same period last year. The feed and livestock sectors were hit by a series of unfavorable incidents during the first half of 2013: The "quick chicken" incident late in 2012 revealed that many chicken producers were abusing pharmaceuticals, discouraging poultry consumption. In March an outbreak of avian influenza prompted closure of poultry markets, slaughter of birds and scared consumers from eating poultry. Pigs were in over-supply after a big build-up of inventories in 2012, putting downward pressure on hog prices after spring festival.  The discovery of thousands of dead pigs floating in Shanghai's Huangpu River in Feb-March discouraged pork consumption and prompted a crackdown on small pig farms.  Periodic reports of sale of meat from diseased pigs also cut into consu...

By all accounts, China has had a good fall grain harvest but prices are down and farmers are holding on to their grain. The "voice of China" broadcast reports that grain prices are down all over China. A farmer named Liu in northern Jiangsu Province harvested 2500 kg from his five mu of land (less than an acre) but "has no joy from his harvest." Traders offered 1.25 yuan per jin and he wasn't satisfied even with the government's support price of 1.35 yuan. He drove into town on November 1 to try his luck at private grain depots but came back disappointed. With expenses rising each year, farmers need an ever-higher price to cover their costs but prices are down this year. In Henan Province, most farmers have wire corn cribs in their yards filled with newly-harvested corn cobs. Very little has been sold because the price is just 1.07 yuan or so. Farmer Liu Xinzhong planted 900 mu (about 150 acres) of corn and harvested 1300 jin per mu. He pays rent of 5...

Prices for vegetable oil in China are being cut during a seasonal lull in demand and the market impact of plentiful global oilseed supplies are transmitted to China. China's Daily Business News reports that major cooking oil brands are preparing their second round of major price cuts  and promotions for 2013 (the first was in May). The wholesale price for Jinlongyu (Arawana) brand of soybean oil has been cut 1.15 percent to 172 yuan for a case of four 5-liter bottles. Jinlongyu peanut oil is being cut 2.33 percent to 430 yuan per case. News media in five different provinces report that cooking oil prices are falling. A Guangzhou news site reports larger cuts in retail prices. Jinlongyu soybean oil is being cut from 78 yuan to 68 yuan per bottle, a 12.8-percent reduction. Eagle brand peanut oil is being cut from 105 to 95 yuan, a 10-percent reduction. An oilseeds analyst consulted by Daily Business News attributed the decline to a glut of soybeans and peanuts comi...

Greasing a billion woks and filling them with pork is not easy, especially if you want some rice to go with the meal.  An analysis published in Economic Times last month reveals that China's low barriers to agricultural imports have allowed the country's population to increase its level of food consumption--especially intake of fats and animal protein--to unusually high levels for a low-income country. The study's author argues that reversing the country's reliance on imports of soybeans and vegetable oils would hurt consumers more than it would help producers by raising prices and reducing food intake. His main point is that the country needs to view "food security" in a more "rational and scientific" manner. Cheng Guoqiang, the author of "Causes and Consequences of Our Country's Increase in Agricultural Imports," is a leading authority on China's agricultural trade and a senior economist in the State Council's Development R...