Dim Sums: Agricultural Markets in China

In November 2012, heavy snow closed a highway outside Beijing. A township government sent workers out to deliver free boxes of rice to drivers stuck on the road. Most drivers were suspicious of the workers and refused the rice. Many would not even open their doors. This is one of many incidents reflecting the collapse of trust in Chinese society. With trickery and deception so common, China has become a giant "market for lemons." How can you have a healthy economy and society if every product is assumed to be defective or fake and every person offering a service is assumed to be duplicitous? A man steals what looks like a traditional Chinese coin,  making the Chinese character for "trust" collapse. In January 2013, the sociological research institute of the Chinese Academy of Social Sciences released a social attitudes survey that showed a declining degree of social trust. Over 70 percent of respondents do not trust strangers. Their trust in business opera...

Shanghai and Jiaxing Prefecture officials have been jointly trying to use information on dead pigs' ear tags to trace floating pigs back to their original owners. The vice mayor of Jiaxing says that 8 have been traced to their farmers who have been slapped with penalties of 3,000 yuan ($475). Reporters have been snooping around Jiaxing and finding out about where dead pigs came from . In 2010 Jiaxing authorities built pig-disposal pits in every village. These are large cement tanks that break down pig carcasses using anaerobic fermentation. Each one holds about 40 metric tons of pig carcasses. Pigs are heavy and it's troublesome to transport them to a disposal site. Farmers had to pay someone 80 yuan ($13) to haul a dead pig away, so it was cheaper and easier to put the pigs in a bag and dump them on a creek bank or by the side of a road late at night. One person said that if you drive on the expressway from Hangzhou to Shanghai with your car windows down you can smell the...

With sluggish demand, high moisture content in corn, and high costs of transporting grain, corn prices in the northeast have been weak. Sinograin--China's grain reserve management corporation--has been purchasing corn in northeastern provinces to prop up prices. Sinograin's Heilongjiang branch has bought 5.5 million metric tons of corn to support prices so far this season. In Jilin Province Sinograin had set up a research group that was making assessments of grain quality, market prices, farmers' selling expectations and processors' inclination to purchase corn.  In Inner Mongolia they have bought 1.78 mmt and opened additional depots to buy grain at support prices. Officials are worried that high moisture levels of the corn will cause the corn to get moldy. They are urging farmers to dry their corn themselves and making sure granaries don't end up holding rotten grain. In Heilongjiang, the Sinograin depots are offering special services to large grain farmers ...

There is a lot of discussion of how to consolidate Chinese farms, and many view "family farms" as the main model for the future. Chinese officials have been including this term in a lot of their strategy statements--including this year's "Number 1 Document"--but there is no definition of what a "family farm" is. Like many things in China, confusion abounds since there are conceptual and legal ambiguities regarding the "family farm." The concept in China is similar to the American concept but has to be understood in context of China's existing system. Moreover, a commercially-oriented "family farm" business is in a legal gray area since it does not fit into China's communist administrative structure that has separate lines of authority for peasants and industrial enterprises. The usual Chinese word for "farm" is nonghu (农户) but this actually means "rural household." "Nong" (农) can mean either...

A Chinese news site paired these two news items side by side: " Small and Medium Businesses Face "Five-Famine, Double-High, One-Low" Difficulty " COFCO Takes Over China Grain to Create Grain Business 'Super Aircraft Carrier'" " Small and Medium Businesses Face "Five-Famine, Double-High, One-Low" Difficulty  describes how small and medium businesses are often frozen out of access to essential resources for doing business. Chen Zemin, the chairman of a frozen food company, identifies five "famines" facing small and medium businesses in China. First, they have a hard time finding enough workers. Second, a money famine--they have a hard time getting financial capital and have to borrow at high rates. Third, land is hard to get and small companies are often left out of big projects. The fourth and fifth famines are electricity and water which are controlled or given out at favorable rates to some businesses. "Two high...

In a press conference this week , one of China's vice ministers of agriculture articulated the Ministry's nuanced approach to agricultural genetically-modified organisms. While agricultural officials are generally in favor of GMOs as a way of feeding the population, they approach them with caution. There are also strong anti-GMO opinions spreading in China and there's a strong sense of nationalism in much of the rhetoric. Vice Minister Chen Xiaohua called for developing GMO varieties as fast as possible while keeping tight control through careful safety monitoring and assessment. Chen said, "We must strengthen research, developing advanced varieties through national GMO projects as soon as possible." He added, at the same time China must "...pay a lot of attention to biosafety issues, setting clear regulations and procedures to guarantee the safety of genetically modifications." China's approach to GMOs has global implications since China is ...

The news that thousands of dead pigs are floating in Shanghai's Huangpu River is being carefully managed by Chinese officials. The news apparently was kept bottled up while the "two meetings" were being held in Beijing. The news was first reported in the newspaper of Jiaxing on March 4, but it did not hit major news media until March 11. The first message was that the water is still safe to drink. Now attention has turned to quelling any rumors of a pig disease epidemic. Vice Minister of Agriculture Chen Xiao emerged from the big meetings in Beijing to give answers on the dead pigs at a press conference . He explained that it's normal for pigs to die and the best you can do is keep the mortality rate to a minimum. Chen said statistics reported to the Ministry show that the animal disease situation has been stable with only three outbreaks of foot and mouth disease. Of course, he acknowledged that some small, backward farms don't use good practices and are vu...

Large numbers of dead pigs have been seen floating in Shanghai's Huangpu River since March 5. As of the afternoon of March 11, over 3,000 dead pigs had been collected from the river, raising concerns about the safety of drinking water among Shanghai residents. Workers promise to work from morning to night to clean the carcasses out of the river, and the water bureau is testing the water for E coli and other pathogens every four hours. Dead pigs in Shanghai River Dead pigs in waterways are not an uncommon occurrence in China. In 2010, a similar incident occurred in Hangzhou but less than 600 pigs were pulled out of the river. One Shanghai resident reported on a microblog, “This kind of thing has happened for many years; walking along the shore at low tide you can see many more dead pigs." Dead pigs in rivers are usually an indicator of a disease epidemic. Evidence of porcine circovirus type II was detected by the Shanghai animal disease prevention and control center...

One of China's top agricultural policy advisors acknowledged that China' big agricultural imports have become a permanent state of affairs, but he also portrayed China as a victim of an unfair global trade system. According to a brief Futures Daily report , Cheng Guoqiang, a senior agricultural economist with the Development Research Center, said earlier this week, "Eight years ago I predicted that China would become a net importer of agricultural products and eight years later my prediction unfortunately has come true. The agricultural trade deficit has increased faster than expected, from $4.64 in 2004 to $50 billion in 2012" [dimsums translation]. The Futures Daily notes that China became the world's largest importer of agricultural products in 2012. Cheng went on to surmise that the agricultural trade deficit is likely to persist. He cites the changing structure of demand and resource endowments but he also depicts China as a victim of globalization. Makin...

According to a December report from China's National Bureau of Statistics and the Bureau's Statistical Communique released in February , China produced more of every major commodity last year (except maybe soybeans). All the statistics are in the table below. Grain production was up 3.2 percent, the ninth consecutive increase. NBS says that expanded area planted in grain contributed 3.58 million tons and yield increases contributed 14.78 million tons to the increase in grain output. Corn production expanded 8 percent and became the leading crop produced in China. Corn's increase in planted area of 1.4 million hectares was mirrored by declines in soybeans (-712,000 hectares), cotton (-340,000 hectares) and wheat (-131,000 hectares). NBS doesn't mention it, but corn's expansion of area (4 percent) outpaced its increase in yield (3.5 percent). Thus, corn's output growth came mainly from expanding area. Meat production was up 5.4 percent. Most of that growth ...

We're used to hearing about soaring prices in China, but last week  the Futures Daily noted with surprise that corn prices have dropped below 1 yuan per 500g in the northeastern region. Corn demand has been sluggish, high moisture has created quality problems, and increases in rail and fuel costs have created some transport bottlenecks. Sinograin is carrying out "temporary reserve" purchases to prevent prices from going down too much. The Futures Daily reported that Jilin Tonghua was paying .86-.88 yuan/500g for third grade corn with 30% moisture 30% and 1.06-1.09 yuan/500g for 14% moisture. In north china and other regions the corn market purchase price is still increasing slightly. In Henan it was nearly 1.19 yuan/500g and higher in Shandong. Farmers have been hesitant to sell their corn since last fall's harvest since prices haven't met their expectations. According to Sinograin estimates , as of February 25 farmers in the northeast and north China plain...

There has been a lot of discussion of food security issues in China in recent months. In a January speech , Development Research Center vice director Han Jun noted that China's grain supply had become tighter despite nine consecutive increases in grain output and China's self-sufficiency rate had fallen to under 90 percent in 2012. "Grain" imports were 77 million metric tons last year. Soybeans accounted for most of the imports, totaling 58 mmt. Han pointed out that China was an exporter of soybeans until 1996 but it now imports 80 percent of the soybeans it consumes. Han attributed the increase in imports to rapid dietary change, limits on natural resources and lower prices overseas. He recalled reading a report that said China had experienced an unprecedented dietary change. Over 20 years, fresh water fish production increased five-fold, poultry meat four-fold and pork output doubled. With this kind of upgrade continuing into the future, Han thought that China w...

Chinese officialdom has been on a crusade against food waste over the past couple of months. There has been a campaign to upgrade grain storage facilities and logistics which translates to handing loans to state-owned companies and other operators who have the right connections. However, one of the chief perpetrators of the food waste problem is China's practice of holding massive inventories of grain in thousands of warehouses. A Xinhua News Agency article last month was part of the publicity campaign against food waste. Xinhua's reporter learned from the director of the State Administration of Grain that an alarming 35 million metric tons of grain is lost to waste after harvest--an annual loss that exceeds the volume of grain produced by Heilongjiang Province. The biggest source of losses identified by Xinhua is the half of grain that is held by farm households where an estimated 8 percent (20 mmt) is lost to insects and rats.  A second source of waste is the transportat...

In another move that typifies China's economic model of throwing vast amounts of money at state-owned companies, the China Development Bank has committed 30 billion yuan ($4.7 billion) to COFCO--China's flagship state-owned agribusiness company. The funding will span five years and will be used to pursue business in grain and oilseed industries, preserve national food security, and aid rural development. Back in 2011, the Agricultural Development Bank announced an identical-sounding 30-billion-yuan line of credit for COFCO. It's not clear whether COFCO already burned through the Ag Development Bank money and why it needs another massive line of credit from a different bank less than two years later. China Development Bank is a state-owned policy bank that makes loans for massive infrastructure projects and overseas investments for Chinese companies. COFCO started out as China's government entity for international trade in grains and oilseeds. China's 21st cent...