Dim Sums: Agricultural Markets in China

According to Futures Daily , industry rumors say that Chinese authorities may terminate their soybean price support by the end of 2013. The soybean price support, called a "temporary reserve", was first introduced in 2008 with a floor price of 1.85 yuan/500g and was raised each year to reach 2.3 yuan/500g for the 2012/13 market year. The program only operates in China's northeastern provinces. The policy is intended to increase returns to producers and encourage them to grow soybeans. However, it also makes domestic soybeans more expensive than imported soybeans. According to a soybean trader quoted in the Futures Daily article, the cost of domestic soybeans has been about 4200 yuan per metric ton, but processors using beans they have imported have a cost of less than 4000 yuan. He says soymeal and oil from coastal processors using imported soybeans is now being sold in domestic soybean-producing areas like Heilongjiang Province. Consequently, he says domestic soybean...

Yesterday, The Wall Street Journal reported on China's serious soil pollution problems and the government's refusal to release the results of a national soil survey six years after it was begun and two years after it was completed. In December 2012, Southern Weekend published a report  of its extensive investigation of the soil survey. The details of the soil survey reveal that Chinese officialdom, for all its talk about a "scientific outlook on development," clings to Chinese government tradition of reporting only statistics that show its policies in a good light and hiding any results that are embarrassing. Furthermore, the slapdash approach to implementing gigantic programs, infighting and chaotic organization make it virtually impossible to produce reliable statistics in China. For decades, officials have been cognizant of problems with soil contamination and potential for vegetables and rice to absorb the pollutants. The 2006 official Chinese government ann...

China's support for its livestock industry is ambitious and nuanced. The government's 2013 guidance for livestock work included an exhausting list of objectives: Ensure an adequate supply of livestock products Strictly monitor product safety Protect the environment using comprehensive measures Focus on pushing the industry's scale, standards, industrialization and information dissemination Strengthen dairy and feed quality and safety oversight Make a big push to protect the ecology of grasslands A March 2013 Farmers Daily article summarized the different policy support measures available to livestock farms. China has quite a few programs to support the livestock industry, but subsidies are relatively small--especially in comparison with grain subsidies--and most are designed to transform livestock production from a backyard extensive activity to an intensive industrialized mode of farming. 1. Subsidies for improved breeding stock (1.2 billion yuan, or $194 m...

China's Ministry of Agriculture announced that the country's state farm system will cultivate 3.5 million mu (575,000 acres) of farmland overseas by the end of 2013. That includes 3 million mu of grain and oilseeds, with production of 1 million metric tons. Another major overseas crop is natural rubber which was grown on 300,000 mu of overseas farms, including 50,000 mu of newly-acquired land.  By comparison, China has nearly 1.8 billion mu of domestic farmland. Its domestic grain, tuber and soybean output was 589 mmt last year and imports totaled 70 mmt. So this accounts for a tiny share of China's food supply so far. The article describes China's state farm system as the country's "national team" in agricultural production. Its output grew 10.8 percent last year (more than double the growth of overall agricultural output). It claims $4.4 billion of exports last year, up 11.8 percent. It claims to have a 12-million head inventory of pigs, up 13.6 per...

China's dairy production never really took off until dairy companies started recruiting small farmers in the hinterland to milk cows a few at a time. Until then, most dairy farms were on city outskirts  where feed was scarce and costs were high. But now, the Chinese industry appears to be reversing course to a large-scale farming model. Milk production in China never really took off until ultra-high temperature (UHT) technology permitted milk to be produced in the hinterland by millions of scattered herdsmen and transported to urban markets without spoiling.  That didn't end well, though. Scattered production and frenetic growth with thin margins and no control led to the melamine incident in 2008 which ground the industry's growth to a halt.  Following the melamine incident there has been a surge of investment in large-scale dairy farms that has reversed the strategy that created frenetic growth during the last decade. Government authorities have pushed processo...

On July 11, the Ministry of Finance issued 300 million yuan in funds to help the poultry industry recover from the downturn caused by avian influenza earlier this year. The funds are targeted for interest rate subsidies for short-term working capital loans for companies engaged in breeding poultry and processing of poultry meat and eggs. The purpose of the subsidies is to support and protect poultry production capacity, protect farmer profits, and help the poultry industry "weather the storm." This tranche of subsidies follows an earlier injection of 300 million yuan to subsidize purchases of grandparent breeding stock. That makes a cumulative total of 600 million yuan (nearly $100 million). The Ministry of Agriculture and other departments have implemented other measures to help the poultry industry recover from its depressed state during this year's avian influenza epidemic.

China has entered an era as a net importer of grain, according to a report circulating this month . During calendar year 2012, China's imports of grains totaled 70 million metric tons (mmt), the largest volume ever. Imports included 58.4 mmt of soybeans, 3.4 mmt of wheat, 5.1 mmt of corn, and 2.1 mmt of rice. For a number of years, Chinese officials have set a minimum threshold of 95-percent self-sufficiency in grain, which includes cereal grains, soybeans, and tubers. Soybeans and potatoes are included, anachronistically, because they were traditionally staple food grains. Given domestic grain output of 589 mmt in 2012, the self-sufficiency rate is being reported as 89.4 percent, well below the 95% threshold. Domestic production increased 3.2 percent--nearly 19 mmt--so the decline in self-sufficiency resulted from imports outpacing the increase in domestic output. A researcher quoted by the article said the decline in self-sufficiency shows that China's agriculture faces...

Are "statistics" and "information" the same thing? No, statistics can be--and often are--misleading and useless as information if they are reported in a mechanical fashion without interpretation. Today, the National Bureau of Statistics reported a 1.3 percent increase in 2013 wheat production , another big harvest that suggests optimism for China's self-sufficiency in grain. However, the report fails to mention a quality problem that will substantially reduce the volume of wheat available to flour mills. NBS attributed the increase in wheat output to a 1.5-percent increase in yields due to near-ideal growing conditions in most production areas, recovery from a rust problem that afflicted the crop in some regions last year, and a pesticide-spraying campaign. Area planted in wheat declined slightly, by 0.2 percent. China summer grain production, 2013 Item Wheat All summer grain Production mil mt 115.67 131.89 Ch...

On July 3, 2013, China's National Development and Reform Commission announced increased corn price supports for this fall's crop. The increase of 5-to-6 percent locks in high prices for Chinese corn this year while global prices are facing downward pressure due to an expected record U.S. corn crop. The "temporary reserve" program will operate--as usual--in China's three northeastern provinces and Inner Mongolia Autonomous Region. Support prices for corn are set at 1.13 yuan/500g for Liaoning and Inner Mongolia, 1.12 yuan/500g for Jilin, and 1.11  yuan/500g for Heilongjiang Province. The prices are .06 yuan higher than those set for the 2012/13 crop. The support price for Liaoning/Inner Mongolia is approximately $369 per metric ton or $9.36 per bushel at the current exchange rate. According to the USDA/AMS weekly grain report , the Chicago futures price for September corn is $5.25 per bushel and December corn is $4.91 per bushel. Reported prices for corn at ...

On July 2, 2013, China's Ministry of Agriculture issued an emergency notice to step up efforts to control the spread of army worms , a caterpillar that affects corn and other crops. A Jilin Province corn field in September 2012 where army worms  stripped lower leaves off the stalks. The corn cobs are left intact. Army worms appear during the hot summer months of July and August and strip the leaves off corn stalks.  In 2012, an unusually  large infestation  attacked large areas of China's corn crop. The 2013 emergency notice warned that many areas of northeast and north China and the Huang-Huai region have a high risk of infestation by second- and third-generation army worms. The notice warned that army worms tend to migrate as a group and an infestation can develop rapidly. Local officials were told to watch migratory patterns and to be on the lookout for hidden or unexpected army worm risks. Officials were urged to do a good job on weekly reporting of pes...

Liu Xiangji, a rice mill operator in Hunan Province's You County, claims he hasn't been able to sleep at night since cadmium was detected in his mill's rice. "What is cadmium? I really don't know." Liu is perplexed because his mill removes husks, polishes the rice and bags it; nothing is added to the rice in the process. So he doesn't understand how rice could have become contaminated. In contrast to many of China's other food safety incidents, there is no "black-hearted" behavior or clear culprits intentionally adding poisons in the "cadmium rice" incident. Instead, it stems from widespread pollution of the rice-growing environment due to both unchecked industrialization and abuse of agricultural chemicals by farmers. The cadmium contamination is blamed largely on waste from mining and metal-smelting industries that is carried to fields by irrigation water, deposited in the soil and then absorbed by crops. Polluting industries ...