Dim Sums: Agricultural Markets in China

Following the scandal over excessive use of pharmaceuticals in chicken-raising there is a lot of introspection in China's chicken industry. One of the items up for consideration is the "company + base + farmer" industry chain model which has been the foundation for China's "agricultural industrializtion." The poultry industry is the leading proponent of this model in which a company relies on thousands of small-scale farmers in a "production base" to supply chickens. The company supplies farmers with chicks, feed, pharmaceuticals, and tells them what to do. The company promises to buy the full-grown chickens at a reasonable price. This model is said to be in accord with "Chinese characteristics" since it incorporates large numbers of small-scale farmers, increases their income and involves them in modern agricultural supply chains. A "win-win." One article questioned the high risk associated with the "company + farmer...

Caijing magazine reports that Chinese officials are contemplating major "breakthroughs" in grain policies in 2013 to cope with a likely scenario of lower global grain prices vis-a-vis domestic Chinese prices. China's strategy for encouraging grain production has been to boost subsidies and price supports to give farmers steady net returns. The increase in domestic grain prices didn't affect grain trade too much as long as global prices were also elevated--due to the U.S. drought during 2011 and 2012. However, this year many analysts are anticipating record harvests in several major countries which may drive world prices lower during the second half of 2013, if not earlier. With Chinese prices still on an upward trajectory and world prices falling, imports will be attractively priced for Chinese mills and other consumers of grains, leading to a possible "flood" of imports. Grain imports already increased sharply during 2012. One top rural policy advisor ...

Chinese new year is a time for culture clashes and introspection as China's urban elite visit their rapidly-changing rural home towns. One Beijing blogger posted an essay, " Who Sold Out My Nostalgia ," despairing over his village's exchange of work in the fields, trees and ponds for piles of cash, concrete buildings and empty leisure time. The blogger arrived in his home town for the new year and found none of the animals, fields, trees and ponds he remembers from his childhood in the village over 20 years ago. The village is now little different from the endless concrete buildings, factory yards and broad streets that cover Beijing. Construction project outside Beijing that covers five former villages. "The villagers are still here, but the village is not," writes the blogger. His family and friends had their land occupied by high-rises and factories. They received big wads of cash -- as much as 1 million yuan -- in compensation for their demolis...

A new type of subsidy for "large farms" being tested in five trial provinces represents a new direction in China's approach to farm subsidies. The "large farm" subsidy marks a departure from the rural entitlement subsidies introduced in 2004 to a subsidy aimed at transforming the nature of farming. This subsidy is paid to farmers who plant grain on at least 300 mu (49 acres) of land in Shandong, and 500 mu in Heilongjiang ,  500 mu in Jiangxi (1000 mu for cooperatives planting rice) and 1000 mu in Liaoning Province. While these are still a relatively small farms by standards in other countries, it's far bigger than the average land holding in most Chinese villages of 4-to-6 mu. The provinces seem to be getting 100 million yuan each from the central government to fund the large farm subsidies this year, probably matched by local funds. Heilongjiang says it is spending 200 million yuan on the subsidy pilot. The "large farm" subsidy focuses on he...

Authorities in China closed 26 percent of hog slaughterhouses last yea r, according to a teleconference held by 9 different government departments on January 17, 2013. Each locality was required to check up on the qualifications of hog slaughter facilities from December 2011 through November 2012 and over 5000 were closed. This blog has been reporting on this campaign over the past year (see posts from January and  July 2012 ) According to the announcement, the number of slaughter facilities was reduced from 19,938 to 14,720, a 26.2-percent reduction. Most of the closed slaughter facilities were small ones, which were reduced in number from 14,019 to 10,135, a reduction of 27.7 percent. The number of "designated hog slaughter facilities" also was reduced from 5,919 to 4,585, a reduction of 22.5 percent. The objective was to speed up the consolidation of the sector by eliminating slaughter facilities with outdated equipment, reducing excess capacity and address chronic fo...

In 2011 China introduced a price floor policy that was intended to "stabilize" the cotton industry. Instead, it may have sown the seeds of the industry's demise. This blog has reported on the cotton fiasco several times over the past year: the mountain of cotton last December , tangled cotton policy in October , and the surge in cotton reserve purchases in 2011 . Authorities bought about half of the 2011 cotton crop and have bought about 80 percent of the 2012 crop to stockpile in reserves. The domestic cotton price is about 60 percent higher than the international price. Auctions of stockpiled cotton from past years were held in January but less than half of it found buyers. Textile companies are using imported cotton, chemical fiber, imported yarn, are short of cash, or shutting down for an extended period ahead of the Chinese new year holiday. China's price floor policy was intended to "stabilize" the industry by giving cotton producers and textile en...

There is a propaganda barrage on this year's "Number 1 document" in Chinese news media this week. Most of the new initiatives are continuations of trends that have been reported here, but there are a few new details. The February 4 Peoples Daily offers a collection of readings to hammer home the importance of the document's policies, including one article, " Agricultural Subsidies Will No Longer Be Sprinkled Like Sesame Seeds and Salt " which asserts that subsidies will now be linked to actual area planted in crops and focused on major production areas and large-scale farms. It also reiterates the importance of subsidizing governments in agricultural production regions. After China joined the WTO in 2001 officials implemented a system of subsidies that sprinkled subsidies like salt over the countryside. Anyone who had a land holding could get a 10-yuan subsidy for each mu of land he held. In most places the land-holder got the subsidy regardless of what ...

The Hohhot Daily recently described the difficult transition to "modern" dairy farming currently underway in China. The country's dairy industry was jump-started in earlier decades by recruiting small farmers who saw dairy cattle as a road to riches. But today's dairy cattle have become susceptible to disease and need high quality feed, putting producers under intense cost pressure. Many small-scale producers are giving up their dairy cattle for an urban wage while the industry tries to boost commercial-scale farms. 50-year-old Wang Zhanwei smiles wistfully as he recalls the 1980s when he first took up dairy farming in Inner Mongolia. At that time every farmer's dream was to have a dairy cow, and two cows were enough to support of family. The price was only 0.2 yuan per 500g, but life was happy and comfortable. Wang sighs as he recalls the increase in production costs in recent years. As costs rose faster than the milk price, many farmers sold or killed off t...