Dim Sums: Agricultural Markets in China

The Wall Street Journal reported yesterday that many of China's overseas investments in mining assets have turned out to be expensive boondoggles. " China Rethinks Deals for Resources " uses the example of a huge $8-billion Australian mine that has never exported a single chunk of ore to illustrate a pattern of expensive, unproductive Chinese investments in mining assets around the world. According to the article, "China has plowed $226.1 billion into outbound mergers and acquisitions to grab a slice of global resources since 1995." The article says about a quarter of that investment was in mining. Several multi-billion dollar projects have been shelved lately. These projects have been hit by everything from soaring labor costs to a giant grinding mill that doesn't work, discovery that ore is laced with asbestos, and mines in the middle of nowhere with no infrastructure. According to a Chinese iron ore industry official quoted by WSJ, "The problems ...

Chinese pork prices have moved above their break-even level after 3-to-4 months of deep losses. But an industry commentary on August 24 suggests that another cyclical downturn may already be on the horizon because profits never last long in the Chinese pork sector.  Prices are constantly fluctuating in China's pork industry. High prices and profits stimulate expansion which drives profits down. Losses ensue, producers exit, and tight supplies force prices up again, starting the whole cycle over again. A build-up of capacity in 2012 (following high prices in 2011) led to a glut of pork in 2013. The generally slow economy, orders to cut back on official banqueting, and a brief bout of consumer disgust stimulated by thousands of dead pigs floating in Shanghai's Songjiang River curbed demand. The result was a dip in prices and steep losses from February through June this year. A farmer in Shandong said he lost 60 yuan (about $10) on every pig he raised from April to June....

A Chinese news magazine reported this week that 110 managers of grain depots in Henan Province have been ensnared in corruption probes. Operators of local grain warehouses routinely paid bribes to superiors who turned a blind eye to subsidies paid for nonexistent grain reserves and embezzlement of funds for warehouse construction. The behavior uncovered in the probes has been going on for years, and the revelations about these "big rats" in official media appear to be part of this year's broader crackdown on corrupt officials pushed by new President Xi Jinping. According to news magazine Liaowang, the investigation was kicked off in 2011 when the head of the Zhoukou, Henan branch of Sinograin--China's reserve management company--fled the country with more than 300 million yuan in pilfered funds. Investigations found a chain of corruption from local depots to the head of Sinograin's Henan Province branch. The general manager of the Henan had a mafia-type operati...

Chinese authorities appear to have accepted the fact that their country will be a corn importer for the foreseeable future. Now they're nervous about their reliance on the U.S. for nearly all of their corn imports, and they are trying to find competitors for the Americans. According to Rural Commercial News , Argentina's agriculture minister announced that a 60,000 metric ton shipment of corn from his country has been approved for import by Chinese authorities. The corn reportedly has been shipped to inland areas of China where it will be used for pig and poultry feed. According to "news," China is expected to buy 500,000 metric tons of Argentine corn this year. Grain analyst Chen Changxiu describes the prospect of Argentine shipments as signaling the end of American dominance of the Chinese corn import business. The article says Argentina is the second-largest corn exporter and the chief competitor of the United States. It says Argentina gives China an alternativ...

China's customs information network issued a statistical report on the rapid increase in China's corn imports . The report includes some tabulations of customs statistics showing a near monopoly of state-owned companies buying exclusively from the United States. State-owned enterprises are the predominant corn importers in China. During the first four months of 2013, SOEs have accounted for nearly all corn imported--over 1.4 million metric tons of corn. Other types of companies imported a little over 3000 metric tons combined. In 2010, SOEs accounted for two-thirds of imports. That year, private companies imported 35,000 mt while SOEs imported over 1 million metric tons. Foreign-invested companies imported 155,000 mt during 2010. (No data were reported for 2011 or 2012.) China corn imports by type of importer 2010 2013 (Jan-April) Import volume Share Import volume Share Type of enterprise 1000 tonnes Percent ...

The United States may have a record corn crop this year, a huge reversal of two years of tight supplies and high prices due to successive U.S. droughts. The prospect of cheap U.S. corn plus weak demand in China and widespread quality problems with Chinese corn are putting downward pressure on Chinese corn prices. As U.S. corn prices fall in anticipation of a big harvest, imports are becoming attractive to Chinese buyers. According to the cngrain.com weekly report on port corn prices, the price of U.S. corn reaching ports in southern China (the blue line in the chart below) is now 489 yuan/mt less than the domestic corn price in Guangdong Province. The calculation is based on August 2 quotes of $224/metric ton of U.S. no. 2 corn at Gulf ports for September delivery. That's RMB 1385/mt in Chinese currency, and RMB 1991/mt on arrival in China plus taxes. The price was RMB 919/mt lower than a year ago when U.S. prices were at very high levels. Chart from cngrain.com . Blue lin...

On August 8, 2013, Chinese authorities plan to auction 500,000 metric tons of northeastern soybean reserves. The soybean stockpiling plans for each season and the results of the auctions are regularly announced, but there are no complete official statistics. A July 23 Chinese microblog posting provides a chronology of the soybean stockpiling policy from 2008 to the present. The estimates have been organized in the table below: Estimated purchases and sales of Chinese soybean reserves Year Purchased Purchase Price Sold 1000 mt RMB/mt 1000 mt 2008-09 6,830 3,700 2009-10 2,760* 3,740 2,090 2010-11 3,080* 3,800 2,665 2011-12 3,140* 4,000 16 2012-13 810* 4,600 3,758 imported 2012 3,180 Total 19,800 8,529 *=unofficial estimates from a Chinese  microblog . Purchases are not always reported precisely and the microblogger has repor...