Dim Sums: Agricultural Markets in China

Chongqing City's Commerce News reports that Chinese dairy companies have been raising prices of milk products to cover higher costs due to tight milk supplies--another example of the sticker shock associated with "modern" agriculture in a crowded country. Last week, Chongqing resident Li Jiehong told a reporter he had noticed the price for a 950-ml carton of Tianyou brand milk had risen from 10 yuan to 12 yuan. He observed that prices had risen on quite a few milk products offered by different companies. The Chongqing Commerce News reporter visited several supermarkets and found that prices on many pure milk products had been increased from 3-to-20 percent. These simultaneous price increases by China's biggest domestic dairy companies come about six weeks after Chinese officials slapped fines on multinational dairy companies for raising prices. According to the New York Times , China's regulators were alarmed that prices for foreign-brand infant formula had r...

China's arid northwestern province of Gansu is having trouble restocking its wheat reserves in 2013 due to a combination of bad weather and structural adjustment of agriculture. There was little rain in the spring, but heavy rains came during the summer wheat harvest, causing a decline in wheat quality. With local grain supplies tight, grain officials were instructed to go door to door, set up buying points and other measures to procure grain. They also went to other provinces like Henan, Anhui, Shandong, and Xinjiang to buy wheat to fill their deficit. Gansu's summer grain (mainly wheat) production fell 13.4 percent, or 255,700 tonnes (see table below). Overall procurement was down 36,000 tonnes. Since production fell more than procurement, that suggests that less grain was kept on farms for consumption or storage. State-owned companies formulated procurement plans, disinfected storage bins, and mobilized trucks, scales, conveyer belts, testing and drying equipment for th...

At a conference this week, Economist Wu Jinglian warned that China could face a systemic crisis if leaders fail to move forward with institutional reforms at this fall's key "third plenum" meeting on economic matters. He calls for leaders to remove institutional barriers by clarifying property rights for land and curbing the power of government in resource allocation. Professor Wu voiced frustration that China has backtracked on market-oriented reforms during the last decade. At the "third plenum" of the 14th party congress in 1993, the leadership made an important push forward on market reforms and there was a lot of progress during the 1996-2000 five-year plan--presumably he's referring to the dismantling of many state-owned enterprises, privatizing urban real estate, and decontrolling prices and marketing. Wu Jinglian thinks reforms stalled during 2001-05. He says the government has actually gained more power over resource allocation while the role o...

In 2013, Chinese officials have been ordered to curb their eating and drinking at the public's expense. The impact on the food industry reveals the significant role of government consumption on an important service sector as the leaders try to install a consumer-driven service-oriented economy. The new leadership of China has responded to the Chinese public's irritation over officials' expenditure of public funds on eating and drinking, travel, and use of public automobiles, known as " three public consumptions " (三公消费). In 2010, 61 central government departments reported a total of 9.47 billion yuan (about $1.5 billion) for expenses on cars (6.2 billion), foreign trips (1.8 billion yuan) and official banquets (1.5 billion yuan). The National Bureau of Statistics estimated the per capita "three public" expenses at over 5000 yuan, slightly higher than per capita rural income that year. Beijing's municipal government found it owned over 60,000 cars. ...

China is struggling to supply its consumers with milk. Replacing small farmers with big farms has been the main strategy to address dairy industry problems, but this strategy is undermined by soaring costs. Meanwhile, the small farmers who formed the foundation of the industry are disgruntled over their weak position in the supply chain. According to a Xinhua News Agency report , a Mr. Wang in the Xuhui District of Shanghai complains that his local supermarket was often out of milk during the summer months. The article reports that milk supplies are tight during the hot summer months when temperatures exceed 35 degrees centigrade and milk output can fall by 40 percent. This summer's seasonal shortage draws attention to the structural shortage becoming more apparent as China's demand for milk outpaces its output. According to China Dairy Association statistics, China's dairy cow herd stayed steady at 14.4 million between 2011 and 2012 while milk output went up a modest 2...

A steady stream of reports from the grassroots level indicate that China's transition from small-scale subsistence farming to commercial agriculture is not going well. Officials from the Ministry of Agriculture's Office of Industry Policy and Law  recently made a field trip to a major wheat-producing area of Henan Province  and found that the new generation of commercial-scale farms face rising rents and other costs, cash flow difficulties, and don't get subsidies. Local officials say they're strapped for revenues and multiple programs for promoting investment in agriculture are uncoordinated and fail to reach the new-style commercial farm operations. Local officials in Henan say they are under pressure to maintain grain output and increase the incomes of farmers, but these two objectives conflict, giving them headaches. In Wei County--the province's leading grain-producing county--a number of townships have launched programs to encourage production of horticult...

According to China's Commerce Ministry , restaurants just barely made a profit in 2012. The profit margin was the worst for restaurants since 1991 (except for the unusual year in 2003 when everything closed during the SARS epidemic). Costs are up, sales growth is slowing and experts say China's food service industry is transitioning into a new, more competitive stage of development as the industry matures. Restaurant sales were up 13.6 percent last year, but the growth has been slowing for three years in a row. The growth rate was 3.3 percentage points slower than in 2011. Growth also slowed during the preceding two years but the slowdown was less than 1 percentage point during those years. Expenses grew 14.2 percent. A Ministry of Commerce spokesperson described it as an "unprecedented" grim situation. The slowdown is hitting both upscale and downscale eating places. A ramen noodle chain's sales grew just 3.7 percent during the first half of the year. Profits...

In a speech/essay in August 2013 , the head of one of China's leading commodity analysis groups argued that China's grain self-sufficiency status is not as grim as it seems because big imports in 2012 mostly went into warehouses to build up inventories. China doesn't "need" to import grain, said Shang Qiangmin, director of the China National Grain and Oils Information Center. Mr. Shang acknowledges that imports of "grain" by China's official definition--cereals, soybeans and potatoes--hit 80 million metric tons during 2012, including 14 mmt of cereals and 58 mmt of soybeans. This brings China's "grain" self-sufficiency rate down to 87.7 percent, well below the 95-percent threshold the Chinese government proclaimed as the minimum for "food security." Mr. Shang implies that this ratio is misleading because it is the ratio of imports to consumption that is important. Although there are no statistics on grain consumption, Mr. ...

The National Bureau of Statistics announced that early-season indica rice production totaled 34.073 million metric tons in 2013. That was an increase of 783,000 mt or 2.4% from 2012. Early rice is the rice crop that is planted early in the spring and harvested mid-summer, followed by another rice crop on the same land (called "late rice"). The early rice crop reflects the extent of double-cropping. This occurs only in a few southern provinces where it's warm enough to grow two crops of rice in the same field, one after another. Most of China's rice is single-cropped. In recent years Chinese officials became alarmed that farmers were giving up double-cropping, either switching to a single crop of rice or leaving their fields idle. Here's a 2011 post on measures used to boost early rice production. Last year, agricultural officials launched a big campaign to revive double-cropping by setting up specialized farms to grow seedlings and transplant them. Reflec...

Chinese authorities are reportedly debating the possibility of privatizing rural landholdings as  part of their broader program of moving into a new phase of development characterized by urbanization and a shift to commercialized agriculture. Giving rural people full ownership of their land and freedom to use it as they see fit seems like a logical path. However, digging deeper, one finds that land privatization is not a simple matter in the context of rural China's jury-rigged legal, political and social institutional set-up which is riddled with ambiguities and potential for exploitation and dangerous outcomes. China has many experimental initiatives underway with mechanisms for trading the rights to use land and securitize those rights to grant credit to farmers. Many of these integrate land consolidation with credit programs that extend short-term production loans to farmers secured by land use rights.Several areas in some of China's poorer regions--Ningxia, Chongqing, an...