Dim Sums: Agricultural Markets in China

China's National Bureau of Statistics (NBS) held a meeting on December 26 to study the communist party's rural work plan for 2014 and to push forward an anti-corruption campaign. The director of the bureau is calling for needed changes to improve the reliability and quality of Chinese statistics, but the politicization of NBS will prevent it from ever being a transparent window for assessing China's economy and society. The problem starts with the director of the bureau. Ma Jiantang is identified first as the bureau's communist party secretary and secondarily as its director. On December 26, he  presided over a meeting of the bureau's communist party organization department  where he conveyed the highlights of the central party committee's rural work meeting. China's statistics bureau is fundamentally an arm of the communist party and its mission is to preserve communist party rule, as will be revealed below. Mr. Ma exhorted NBS party leaders to improve ...

According to a news report , Sinograin--China's State-owned grain reserve corporation--purchased 100 million metric tons of grains and vegetable oils during the first 11 months of 2013. That total was reported to be equal to 32.6 percent of grain purchased by all enterprises, the highest proportion in recent years (the percentage excludes grain used on farms). The report attributed the high proportion purchased by the reserve corporation to an effort to support farmers income and maintain production incentives. Authorities have stockpiled grains and oils to support prices this year following a big domestic harvest, with soft demand and global prices plunging for most grains and oilseeds. The purchases include the following: 36.36 mmt in policy-style purchases under minimum price and temporary reserve programs to "stabilize market supply" 12.7 mmt in interprovincial transfers of grain (mainly from the northeast to southern provinces), reported to be the largest amoun...

China's Inspection and Quarantine authority has issued a bulletin ordering its local bureaus to test for the presence of genetically modified material in imported distillers dried grains with solubles (DDGS) and related corn and oilseed processing by-products. Shipments containing unapproved GM material are to be returned or destroyed. This issue has already severely disrupted corn trade over the past month and will now likely disrupt trade in DDGS, a substitute for corn and protein meals that has been gaining in popularity among Chinese feed mills. The December 24 bulletin notified local inspection and quarantine bureaus that the Shanghai bureau had detected MIR162, a GM corn variety that China has not approved for import, in a shipment of DDGS. Local bureaus were ordered to abandon existing safety risk monitoring plans and begin testing samples of all shipments of corn byproducts for unapproved genetically modified material. Shipments that are found to contain unapproved mater...

Despite being a relatively primitive part of the Chinese economy, the country's agricultural sector is tied in to global financial markets. An example is the surprising correlation between Chinese gold and corn prices shown in the chart below.  Note: Cash prices from China National Bureau of Statistics, Ministry of Agriculture, and gold.org.   Chinese gold and corn prices have generally been on the rise since 2000. The link became more clear during 2009-11 when both prices rose at a robust pace. China's gold price peaked in 2008 and fell after the onset of the global financial crisis that year. Chinese corn prices fell later in 2008, along with nearly all other farm prices. Since then, monetary authorities in China, the U.S. and elsewhere have been in expansionary mode, and from 2009 to 2011 there was a steady run-up in both gold and corn prices. The Chinese gold price rose 118 percent from its low point in December 2008 to its peak in September 2011. Chinese corn pri...

The Heilongjiang Provincial Statistics Bureau has released statistics showing that 2013 grain production rose in large part by replacing low-yield soybeans with high-yield corn. Heilongjiang is a key province. According to National Bureau of Statistics data , Heilongjiang accounted for about 10 percent of China's grain production and area planted in grain during 2013. According to the new report, the province's grain output reached 60 million metric tons and rose 4.2 percent during 2013. The Heilongjiang report says the province's grain output rose a cumulative 73 percent from 2007 to 2013. The report brags that Heilongjiang surpassed Henan in 2011 and is now clearly the leading grain-producing province. Heilongjiang's area planted in grain rose only 0.4 percent. This slight change hides big increases in rice and corn area offset by declines in area planted to soybeans, wheat, and other grains. Soybean area fell 8.8 percent. Its decline of 234,000 hectares nearly m...

China's dairy companies are having trouble getting raw milk supplies. They are competing for milk and bidding up the price. According to the Ministry of Agriculture, the average raw milk price is up 18.9 percent since last year. Average price of raw milk, December 2011-November 2013.  Source: China Ministry of Agriculture In August, Chinese officials hit multinational dairy companies with fines for allegedly fixing prices, but since then domestic companies have been raising prices. An article in the Liaowang weekly reported that the major Chinese companies announced increases in dairy product prices for the end of December. In some supermarkets, dairy products are sold out. Also in August, officials banned imports of milk powder from New Zealand and Australia over a botulism scare. Many Chinese companies had been importing cheaper powder to manufacture milk but now they have to find domestic milk. (Interestingly, in January a China Ministry of Agriculture task force had...

A district in Hangzhou's plan to reduce the number of pigs is a bellwether of the vision for undoing the traditional intermingling of people and animals in China. Environmental awareness is one of the factors behind the change, but the result is ironically an expansion of the CAFO model, anathema to most environmentalists in western countries. Last week, officials in Xiaoshan (萧山) announced a plan to eliminate 60 percent of the district's hogs by 2017. This will be achieved by closing down farms raising less than 5000 head and limiting the number raised on farms allowed to continue operating. Building new farms or expanding farms will be forbidden. The program's principles were stated as: "reduce quantity, raise quality; supervise the entire system; ecological security." The objective is to stabilize the number of pigs at 450,000. As Chinese cities sprawl outward, urban enclaves of housing complexes, industrial parks and university campuses spring up alongsid...

Would you like your flour leaded or unleaded? Would you like a tumor with that rice? China's soil and water are heavily polluted with heavy metals that are absorbed into grain and vegetables. Chinese officials' insistence that its people eat grains grown in the country may expose them to a heightened risk of tumors and birth defects from ingesting pollutants contained in grains and vegetables. The dimsums blog has posted reports on heavy metal contamination , " dead soil ," " cadmium rice ," the secret soil survey , and the Ministry of Agriculture's  admission that agricultural pollution is "relatively serious ." Today dimsums summarizes " Crisis and Response in the Food Chain ," a well-documented article posted on a web site of the Development Research Center, a think tank that advises China's State Council on economic and social issues. The article cites a "harsh reality" of contemporary China: a high incidence ...

China's rejection of corn shipments from the United States this month supports domestic corn prices by forcing Chinese feed mills to buy domestic corn instead, according to an analysis by China Grain News . Is it a coincidence that these rejections happened during the same week China announced a subsidy designed to induce companies to buy corn in the northeastern provinces? On November 29, border inspection officials in Shenzhen rejected a 60,000-mt shipment of U.S. corn because it contained a GMO corn variety that has not been approved by China's Ministry of Agriculture for import. More shipments were rejected in the following days at Shenzhen and ports in Fujian and Shandong Provinces. The total rejected was over 120,000 metric tons. The shipments were turned away and will have to be sent elsewhere, probably at a discounted price with big losses for sellers. The rejections have cast a pall over the market. All the 500,000-700,000 mt of imported corn expected to arrive this ...

Smuggling of rice into China has exploded in the last two years since Chinese prices are higher than those in Vietnam and Myanmar. On November 27, Chinese news media reported that 26 accused smugglers are on trial in the Peoples Intermediate Court of Nanning, the capital of Guangxi Zhuang Autonomous region, apparently a signal that authorities are cracking down. Two men were accused of abusing regulations that allow residents in border areas to buy up to 50 kg of imported rice for their own use tariff-free. The two allegedly collected the names of more than 1000 border residents to purchase Vietnamese rice which they sold in a wholesale market in Nanning. Another method was to bring rice over the border undetected, using small trails that are not monitored by authorities. Some are accused of smuggling 10,000 or more metric tons of rice; the largest amount is 77,000 mt. The earliest cases occurred in January 2012. This is a reversal from 2008 when rice was being smuggled out of C...

Prices for japonica rice in Jiangsu Province are falling despite the fact that officials have begun price support purchases for this crop, another reflection of China's grain glut. A large-scale rice grower named Xue Lianchun was happy to sell his rice at 148 yuan/50kg, slightly below the support price of 150 yuan. He was happy because he anticipates that prices are about to fall further. Xue wasn't able to sell at the support price because moisture levels in his rice exceeded the standards. He felt fortunate to get close to the support price for his soggy rice. He says the price has already fallen to 146 yuan. The boss of a local rice mill in Jiangsu says the price of rice has been falling for about 10 days. He attributes it the government's subsidy to transport rice out of the northeast. Companies are now getting a subsidy to buy rice from northeastern provinces and ship it to Shanghai or other places, but there is no such subsidy for rice from Jiangsu. The influx of...

China's farm subsidy program targets local officials as well as farmers. Since 2005, top grain-producing counties have been eligible for subsidy "award" payments for the county treasury. The payments generally amount to 7-to-10 million yuan (about US$1-to-1.6 million). Initially this was a payment to fill in financial holes in poor agricultural counties, but later officials added criteria that include the amount of grain produced, commercial sales, and planted area to motivate local officials to boost production. There is an extra payment for the top "super" grain counties. More grain output increases the chances of getting these payments. An article from the China Management Net , "The Flip Side of Ten Straight Increases in Grain Production: Pollution and Imports," implicates this county subsidy for motivating local officials to push out soybeans in favor of corn mono-cropping. According a Ministry of Agriculture report quoted by the article, ...

A November 27,2013 Daily Business News article offered more clues on China's intent to transition from market-distorting price supports to direct subsidies  which has been grinding through the rumor mill since last year. The article included quotes from several of the government's mouthpieces on farm policy who indicated that trial target-price subsidies for cottons and soybeans would begin in 2014 with plans to eliminate "temporary reserve" price supports on an unspecified timetable. The article seemed to suggest that minimum price policies for rice and wheat would continue. Prospects for corn policy were not specified. The article described the price support policies as having seriously distorted prices and caused confusion in their implementation. Cotton was offered as the clearest example of distorted prices, as domestic cotton prices were described as decoupled from the world market and inflicting losses on textile companies. A well-known cotton analyst fr...