Normally, corn is cheapest in China's northeastern provinces. Traders buy in the northeast and ship it to high-price locations in the south. But now the usual geographic price pattern has been reversed as stockpiling policies support prices in the northeast and avian influenza erodes feed demand in the south.
Price quotes for February 25, 2014 say the sale price for corn is about 2350 yuan/mt at ports in northeast China, and 2330 yuan in Guangdong. The shipping charges have fallen from about 50 yuan to 45 yuan per metric ton, so shipping corn seems to be a money-losing activity. Corn is still flowing south because the government is giving traders a 140-yuan per ton subsidy to ship corn out of the northeast.
China's Futures Daily reports that Sinograin, China's grain reserve management company, has bought up over 40 million metric tons (mmt) of corn for the "temporary reserve" in the northeast since the fall harvest. This is more than expected and more than last year's 30 mmt of purchases. A corn trader in Dalian estimates that Sinograin may be sitting on 50 mmt of corn, including the corn left over from last year's purchases and still unsold. The stockpiling is carried out when the market price falls below the floor price which is about $8.90 per bushel in Jilin Province this year, about double the U.S. corn price.
In southern China, the recurrence of avian influenza halted the poultry industry's recovery from the AI-induced downturn in 2013. In Guangzhou, poultry wholesale markets and poultry sales in retail markets have been shut down for the second half of February. Poultry sales are said to be off 30% in Guangzhou. Wen's Group, the biggest poultry producer, called an emergency meeting where they recommended euthanizing chicks and storing up meat to reduce the amount going into the market. Some poultry producers have cut their feed use by half.
Corn inventories at Guangdong ports are said to be 1.1 mmt, up from 400,000 mt in December. Some ships bringing corn from the northeast can't be unloaded because there is no storage space. The price for corn at Guangdong ports fell from 2470-2490 yuan/mt in early December to 2330-2340 yuan/mt February 20.
Tuesday, February 25, 2014
Tuesday, February 18, 2014
China: Fat and Undernourished
A commentary in Farmer's Daily on China's food and nutrition plan for 2014-2020 raises concerns about wide disparities in nutrition. The country has cities filled with unhealthy fat people who coexist with malnourished people in poverty-stricken villages.
The Ministry of Health reported that 30.6% of adults over age 18 were overweight during 2010 and 12% were obese. This can lead to hypertension, diabetes, and lypsidemia. These diseases are spreading to younger and younger age groups. Some 260 million people were diagnosed with chronic disease, 19% of the population.
Excessive calorie intake combined with low physical activity were reported as the major reasons for the increased number of overweight people. The commentary suggests that change in the dietary structure, reducing excessive food intake, and more physical activity are needed to control weight gain. The commentator calls for better guidance on nutrition. There are too many tempting foods in the market, says the commentator, and too much consumption of meat and oils.
The plan sets targeted daily calorie intake at 2200-2300 kcal/day with half of calories coming from cereal grains and no more than 30% from fats. The target for protein intake is 78 g/day. The plan includes a wide variety of measures that include improving the quality of agricultural products and improving nutrition of pregnant women, children and elderly people.
The commentator says people need guidance to reduce their intake of calories, fats, and salt. He recommends returning to traditional Chinese diets and a concept similar to the old USDA "food pyramid" that emphasizes a plant-based diet with meats in a supplemental role.
Obesity is mainly an urban phenomenon. In rural regions with a harsh environment many people are undernourished. In 2011, it was reported that 128 million Chinese people were under the 2100-kcal/day poverty line. Poor nutrition is considered to be a regional phenomenon, concentrated in rural regions where people are poor and cannot grow enough nutritious food.
The commentary recommends several approaches to addressing malnourishment. One is to ensure rural people have land to grow food. Another is to address the poverty problem by promoting industries that might lift people out of poverty. The commentator calls for integrated approaches and community participation.
Farmers Daily also reports that a pilot project to improve nutrition for poor children was started in October 2012. Two-year-old children in 100 pilot counties are provided with a package containing protein-rich food, vitamins, iron, calcium, and zinc. Children receive instruction on nutrition and health. The project was expanded to 300 counties and spending was boosted from 100 million yuan to 300 million yuan.
The Ministry of Health reported that 30.6% of adults over age 18 were overweight during 2010 and 12% were obese. This can lead to hypertension, diabetes, and lypsidemia. These diseases are spreading to younger and younger age groups. Some 260 million people were diagnosed with chronic disease, 19% of the population.
Excessive calorie intake combined with low physical activity were reported as the major reasons for the increased number of overweight people. The commentary suggests that change in the dietary structure, reducing excessive food intake, and more physical activity are needed to control weight gain. The commentator calls for better guidance on nutrition. There are too many tempting foods in the market, says the commentator, and too much consumption of meat and oils.
The plan sets targeted daily calorie intake at 2200-2300 kcal/day with half of calories coming from cereal grains and no more than 30% from fats. The target for protein intake is 78 g/day. The plan includes a wide variety of measures that include improving the quality of agricultural products and improving nutrition of pregnant women, children and elderly people.
The commentator says people need guidance to reduce their intake of calories, fats, and salt. He recommends returning to traditional Chinese diets and a concept similar to the old USDA "food pyramid" that emphasizes a plant-based diet with meats in a supplemental role.
Obesity is mainly an urban phenomenon. In rural regions with a harsh environment many people are undernourished. In 2011, it was reported that 128 million Chinese people were under the 2100-kcal/day poverty line. Poor nutrition is considered to be a regional phenomenon, concentrated in rural regions where people are poor and cannot grow enough nutritious food.
The commentary recommends several approaches to addressing malnourishment. One is to ensure rural people have land to grow food. Another is to address the poverty problem by promoting industries that might lift people out of poverty. The commentator calls for integrated approaches and community participation.
Farmers Daily also reports that a pilot project to improve nutrition for poor children was started in October 2012. Two-year-old children in 100 pilot counties are provided with a package containing protein-rich food, vitamins, iron, calcium, and zinc. Children receive instruction on nutrition and health. The project was expanded to 300 counties and spending was boosted from 100 million yuan to 300 million yuan.
Saturday, February 15, 2014
Subsidies Reduce Idle Land
Sichuan officials have announced that their pilot program to link grain subsidies to actual planting of grain has induced farmers to stop leaving land unplanted. They describe this as a transformation of the subsidy's nature from a "big rice bowl" to a production incentive.
This appears to be more propaganda designed to send a signal to local officials nationwide that they should link subsidy payments to the amount of grain planted. A year ago, there was a general pronouncement that grain subsidies should be linked to production to give farmers stronger incentives. Last month (January 2014) China's Ministry of Finance urged local officials to link grain subsidies to production, effectively ending the "decoupled" nature of the subsidy.
The latest article reports results of a pilot program to couple subsidies to grain-planting in twelve Sichuan counties announced a year ago. A graphic accompanying the article explains that the pilot program gives subsidies to farmers who actually plant grain, in contrast to the existing method (in Sichuan) that gives subsidies to every family that contracts land from the village whether they plant anything or not.
The article offers the example of a 70-year-old farmer who not only planted his own 5 mu land holding (6 mu would be an acre) but also planted grain on his brother's 5 mu after hearing about the new subsidy. In the past, his brother would have gotten a subsidy for his land whether he planted anything or not. Many villagers left to work elsewhere, collected the subsidy and left their land idle. The township's statistics indicated that only 3 percent of the cropland was left idle this year, down 10 percent from before.
Officials claim that the new subsidy method lured some villagers to come back from city jobs to farm. One man named Xu said the subsidy of 1000 yuan for his family's 7 mu was enough to induce him to quit his job in the county town and resume farming. He estimates that he nets 7000 yuan from growing rice and corn on his 7 mu of land and the subsidy boosts his earnings to 8000 yuan. The 1000-yuan subsidy for 7 mu works out to the equivalent of $140 per acre and 14 percent of the gross value of the crops.
The article also mentions the subsidies create a lot of trouble for officials and farmers. Officials have to collect information on how much each farmer plants at each of two main planting times. No mention of how they will verify the information is true. The subsidy is just for planting the crop, not for harvesting it. A farmer could throw seeds on the ground, collect the subsidy and leave to work in town.
Has anyone really thought this through? You're paying subsidies to induce people to stay in their village and grow rice instead of working elsewhere where they could earn more money (at a job that presumably is not subsidized). The rice the Sichuan farmers are producing can probably be bought 10-percent cheaper from Vietnam, plus you're paying a 14-percent subsidy to grow it. How is "food security" achieved by paying an extra 25-percent for grain just because it's grown within your country's borders?
This appears to be more propaganda designed to send a signal to local officials nationwide that they should link subsidy payments to the amount of grain planted. A year ago, there was a general pronouncement that grain subsidies should be linked to production to give farmers stronger incentives. Last month (January 2014) China's Ministry of Finance urged local officials to link grain subsidies to production, effectively ending the "decoupled" nature of the subsidy.
The latest article reports results of a pilot program to couple subsidies to grain-planting in twelve Sichuan counties announced a year ago. A graphic accompanying the article explains that the pilot program gives subsidies to farmers who actually plant grain, in contrast to the existing method (in Sichuan) that gives subsidies to every family that contracts land from the village whether they plant anything or not.
The article offers the example of a 70-year-old farmer who not only planted his own 5 mu land holding (6 mu would be an acre) but also planted grain on his brother's 5 mu after hearing about the new subsidy. In the past, his brother would have gotten a subsidy for his land whether he planted anything or not. Many villagers left to work elsewhere, collected the subsidy and left their land idle. The township's statistics indicated that only 3 percent of the cropland was left idle this year, down 10 percent from before.
Officials claim that the new subsidy method lured some villagers to come back from city jobs to farm. One man named Xu said the subsidy of 1000 yuan for his family's 7 mu was enough to induce him to quit his job in the county town and resume farming. He estimates that he nets 7000 yuan from growing rice and corn on his 7 mu of land and the subsidy boosts his earnings to 8000 yuan. The 1000-yuan subsidy for 7 mu works out to the equivalent of $140 per acre and 14 percent of the gross value of the crops.
The article also mentions the subsidies create a lot of trouble for officials and farmers. Officials have to collect information on how much each farmer plants at each of two main planting times. No mention of how they will verify the information is true. The subsidy is just for planting the crop, not for harvesting it. A farmer could throw seeds on the ground, collect the subsidy and leave to work in town.
Has anyone really thought this through? You're paying subsidies to induce people to stay in their village and grow rice instead of working elsewhere where they could earn more money (at a job that presumably is not subsidized). The rice the Sichuan farmers are producing can probably be bought 10-percent cheaper from Vietnam, plus you're paying a 14-percent subsidy to grow it. How is "food security" achieved by paying an extra 25-percent for grain just because it's grown within your country's borders?
Graphic appearing in Sichuan Daily explains how the pilot subsidy program
differs from the standard subsidy method.
Tuesday, February 11, 2014
High-Interest Loans Widespread in China
Concerns are spreading about the potential risk of high-interest underground loans in China.
Companies and families unable to get bank credit must turn to underground channels to get capital. Some companies pay off bank loans when they come due by taking out underground loans at interest rates two to three times the bank interest rate. Underground lenders are eager to give out the loans because they pay much higher interest rates than bank savings accounts. According to one financial expert, some Chinese companies have quit their primary business and devote themselves to making high-interest loans.
The underground lending industry got its start in Wenzhou, Zhejiang Province and other areas in Zhejiang and Jiangsu Provinces. Now it has spread throughout the country. A report issued by Southwest Financial University in 2013 estimated that private lending totals 8.6 trillion yuan--about US$ 1.4 trillion. They estimated that 44% of the loans were for purchase of real estate, about 34% for business and farming, and the remainder for cars, education and other uses. They estimated average financial assets of about 61,439 yuan per family and average debts just slightly lower at 60,959 yuan.
Equity markets in China are undeveloped. They are reserved largely for big state-owned companies and other big companies with good government connections. Only 8.8% of Chinese families buy stocks (12% in eastern regions and 3-4% in central and western provinces.) Small and medium companies rely on their own funds or informal borrowing to raise capital. One survey found that bank loans are predominantly short-term in duration, so they come due before company investments yield a payoff. The Southwest Financial University survey found that poor families were more likely to engage in high-interest borrowing.
A meeting of Anhui Province's Peoples Congress expressed concern about the spread of high-interest lending from neighboring provinces into Anhui and the lack of supervision. A recent article investigating conditions in Henan Province's countryside found that high-interest borrowing is widespread in some villages. In January, there was news about numerous small businesses facing financial pressure from high-interest loans in Chengwu County in Shandong. In Loudi, a small city in Hunan, a company boss was found dead after either falling or jumping off a building, and dozens of creditors descended on the company to collect high-interest loans. The company began as a rice mill in 1993 and had diversified into pomegranates and was trying to become a player in the publicity business for high-tech companies.
Government officials are among the underground lenders. Operators of grain and cotton depots have access to large volumes of funds that could be lent out at high interest rates. Some have been exposed; others likely remain undiscovered. With prices of many agricultural commodities flat or falling, these operators are ripe for trouble. A similar situation occurred in the late 1990s, the last time farm commodity prices fell.
The 2014 "number 1 document" included many ideas to jump-start rural financial services. One reason may have been to fill the void of legal financial intermediaries in rural areas and contain the explosion of unregulated underground financing. Underground lending has been big for years and it has been spreading. As long as the economy was humming, most loans got paid off. But now business has slowed down and disputes over unpaid loans are becoming more common.
Companies and families unable to get bank credit must turn to underground channels to get capital. Some companies pay off bank loans when they come due by taking out underground loans at interest rates two to three times the bank interest rate. Underground lenders are eager to give out the loans because they pay much higher interest rates than bank savings accounts. According to one financial expert, some Chinese companies have quit their primary business and devote themselves to making high-interest loans.
The underground lending industry got its start in Wenzhou, Zhejiang Province and other areas in Zhejiang and Jiangsu Provinces. Now it has spread throughout the country. A report issued by Southwest Financial University in 2013 estimated that private lending totals 8.6 trillion yuan--about US$ 1.4 trillion. They estimated that 44% of the loans were for purchase of real estate, about 34% for business and farming, and the remainder for cars, education and other uses. They estimated average financial assets of about 61,439 yuan per family and average debts just slightly lower at 60,959 yuan.
Equity markets in China are undeveloped. They are reserved largely for big state-owned companies and other big companies with good government connections. Only 8.8% of Chinese families buy stocks (12% in eastern regions and 3-4% in central and western provinces.) Small and medium companies rely on their own funds or informal borrowing to raise capital. One survey found that bank loans are predominantly short-term in duration, so they come due before company investments yield a payoff. The Southwest Financial University survey found that poor families were more likely to engage in high-interest borrowing.
A meeting of Anhui Province's Peoples Congress expressed concern about the spread of high-interest lending from neighboring provinces into Anhui and the lack of supervision. A recent article investigating conditions in Henan Province's countryside found that high-interest borrowing is widespread in some villages. In January, there was news about numerous small businesses facing financial pressure from high-interest loans in Chengwu County in Shandong. In Loudi, a small city in Hunan, a company boss was found dead after either falling or jumping off a building, and dozens of creditors descended on the company to collect high-interest loans. The company began as a rice mill in 1993 and had diversified into pomegranates and was trying to become a player in the publicity business for high-tech companies.
Government officials are among the underground lenders. Operators of grain and cotton depots have access to large volumes of funds that could be lent out at high interest rates. Some have been exposed; others likely remain undiscovered. With prices of many agricultural commodities flat or falling, these operators are ripe for trouble. A similar situation occurred in the late 1990s, the last time farm commodity prices fell.
The 2014 "number 1 document" included many ideas to jump-start rural financial services. One reason may have been to fill the void of legal financial intermediaries in rural areas and contain the explosion of unregulated underground financing. Underground lending has been big for years and it has been spreading. As long as the economy was humming, most loans got paid off. But now business has slowed down and disputes over unpaid loans are becoming more common.
Thursday, February 6, 2014
China's Tight Beef Supply Boosts Prices
An Economic Daily report says tight beef supplies in China and rising consumption add up to heated competition for cattle and rising prices. Imported beef is now relatively cheap and filling the gap between supply and demand.
In the second week of January 2014, the average price of beef in 480 markets monitored by the Ministry of Agriculture was up 16.2 percent from a year earlier. The price has gone up 346 percent since 2000, "reflecting the country's bleak beef supply" said the paper.
A beef industry official said consumption of beef in China has been rising 2.3 percent per year [that would be a third of the rate of income growth and less than a fourth of the GDP growth rate] while supply of beef has dropped from 7.12 million metric tons (mmt) in 2010 to 6.62 mmt in 2012 [official statistics say beef output grew marginally from 6.5 to 6.6 mmt during those years]. The official says the drop in cattle numbers in traditional beef-producing areas has been especially prominent.
A beef industry scientist told Economic Daily that China's beef consumption has room for growth. Its per capita beef consumption is 50 percent below the world average. He estimates that beef production would have to double to bring per capita consumption up to Japan's level.
Industry experts cite low returns to raising beef cattle as the fundamental problem. Traditionally, most beef came from cattle used as draft animals, but mechanization of farming has reduced this traditional source of supply. Now raising cattle for beef is a specialized operation in which heifers give birth to calves that are fattened to market weight. Compared with slaughtering spent draft animals, this is a long process with high costs and a long wait to realize modest returns, estimated at 2000 yuan (about US$ 330) per head. Most production is on very small-scale operations: 57 percent of cattle come from farms raising 10 or fewer head. Farmers raising just a few cattle per year can't achieve economies of scale. Even larger-scale farms have crude facilities and management.
Other constraints cited include the government's grassland protection policy which calls for reducing animal numbers to restore grasslands and soaring labor costs. The article says heifer numbers have been declining since the 10th five-year plan (2000-2005).
With tight supplies of cattle, meat companies have to scour the countryside to fill slaughter facilities. The competition for scarce cattle drives up costs which causes under-utilized slaughter facilities to lose money. Economic Daily reports that slaughter capacity utilization ranged from 42 percent in the central plains (this usually means Henan Province), to 33 percent in the northeast and just 19 percent in the northwest. Like farming, slaughter is also predominantly done by small facilities. China has an estimated 2000 beef slaughter facilities and only 206 have over 6000-head capacity; none have a capacity of 300,000 head.
This highly-dispersed industry layout contrasts with the long-established interregional movement of cattle in the U.S. industry and highly concentrated feedlot-finishing and slaughter of cattle. Also in contrast to the United States, feedlot-fattening of Chinese cattle on corn is much less common. The hot competition for cattle and low returns also work against improvement in the quality of beef. Slaughter facilities have to take whatever animals they can get.
Imported beef has a clear price advantage as domestic prices rise. In 2013, some companies imported frozen beef at just 36 yuan/kg, lower than domestic fresh beef prices. In one large supermarket in Beijing, the Economic Daily reporter found Australian beef shoulder was just 60 yuan/kg, lower than the 63.5 yuan/kg average reported by MOA's market-monitoring.
Imports surged during 2013. The volume in the first four months surpassed the total for all of 2012. Frozen beef imports for the calendar year 2013 reported by Chinese customs statistics reached 283,000 metric tons, a more than four-fold increase from 2012.
Chinese industry experts react with the usual knee-jerk reaction of recommending government subsidies to encourage larger-scale beef farming, including subsidies for heifers, subsidized insurance and beef cattle risk funds. However, the article also mentions that all levels of government had increased their support for the beef industry without reversing the declining trend in heifers.
In the second week of January 2014, the average price of beef in 480 markets monitored by the Ministry of Agriculture was up 16.2 percent from a year earlier. The price has gone up 346 percent since 2000, "reflecting the country's bleak beef supply" said the paper.
Graphic from Economic Daily: "Beef price rise reflects beef cattle supply situation"
A beef industry official said consumption of beef in China has been rising 2.3 percent per year [that would be a third of the rate of income growth and less than a fourth of the GDP growth rate] while supply of beef has dropped from 7.12 million metric tons (mmt) in 2010 to 6.62 mmt in 2012 [official statistics say beef output grew marginally from 6.5 to 6.6 mmt during those years]. The official says the drop in cattle numbers in traditional beef-producing areas has been especially prominent.
A beef industry scientist told Economic Daily that China's beef consumption has room for growth. Its per capita beef consumption is 50 percent below the world average. He estimates that beef production would have to double to bring per capita consumption up to Japan's level.
Industry experts cite low returns to raising beef cattle as the fundamental problem. Traditionally, most beef came from cattle used as draft animals, but mechanization of farming has reduced this traditional source of supply. Now raising cattle for beef is a specialized operation in which heifers give birth to calves that are fattened to market weight. Compared with slaughtering spent draft animals, this is a long process with high costs and a long wait to realize modest returns, estimated at 2000 yuan (about US$ 330) per head. Most production is on very small-scale operations: 57 percent of cattle come from farms raising 10 or fewer head. Farmers raising just a few cattle per year can't achieve economies of scale. Even larger-scale farms have crude facilities and management.
Other constraints cited include the government's grassland protection policy which calls for reducing animal numbers to restore grasslands and soaring labor costs. The article says heifer numbers have been declining since the 10th five-year plan (2000-2005).
With tight supplies of cattle, meat companies have to scour the countryside to fill slaughter facilities. The competition for scarce cattle drives up costs which causes under-utilized slaughter facilities to lose money. Economic Daily reports that slaughter capacity utilization ranged from 42 percent in the central plains (this usually means Henan Province), to 33 percent in the northeast and just 19 percent in the northwest. Like farming, slaughter is also predominantly done by small facilities. China has an estimated 2000 beef slaughter facilities and only 206 have over 6000-head capacity; none have a capacity of 300,000 head.
This highly-dispersed industry layout contrasts with the long-established interregional movement of cattle in the U.S. industry and highly concentrated feedlot-finishing and slaughter of cattle. Also in contrast to the United States, feedlot-fattening of Chinese cattle on corn is much less common. The hot competition for cattle and low returns also work against improvement in the quality of beef. Slaughter facilities have to take whatever animals they can get.
Imported beef has a clear price advantage as domestic prices rise. In 2013, some companies imported frozen beef at just 36 yuan/kg, lower than domestic fresh beef prices. In one large supermarket in Beijing, the Economic Daily reporter found Australian beef shoulder was just 60 yuan/kg, lower than the 63.5 yuan/kg average reported by MOA's market-monitoring.
Imports surged during 2013. The volume in the first four months surpassed the total for all of 2012. Frozen beef imports for the calendar year 2013 reported by Chinese customs statistics reached 283,000 metric tons, a more than four-fold increase from 2012.
Source: Chinese customs statistics analyzed by dimsums.
Wednesday, February 5, 2014
A Record Wheat Harvest? Or Not?
According to a grain industry news article, a netizen in China read reports that the wheat harvest was record-high in 2013, but when he called home his family members said production was actually down from last year. Did China have a big wheat harvest or not?
The National Bureau of Statistics said wheat output hit 131.9 mmt, up 1.5 percent from the previous year. Some analysts say the big harvest doesn't square with the facts. Wheat prices have risen about 4 percent since last summer's harvest, yet demand is weak. Flour prices have risen more slowly than wheat prices. Animal feed use of wheat is down this year. With weak demand and a record output, how can the price be rising?
Analysts also question the NBS reports of increasing area sown to wheat. They see large tracts of farmland being used to build roads, rail lines, and housing estates. Local authorities reclaim new land to replace the land lost to urbanization but the new land's quality is poor. One sarcastic industry analyst said he learned in his econometrics class that NBS statistics show that urbanizing vast tracts of land has no effect on the amount of cropland and doesn't affect grain output at all.
Moreover, conservation programs have been removing environmentally-fragile land from grain production.
There were also quality problems with the wheat in 2013. Hebei Province wheat quality testing reported that 69.8 percent of wheat was grade 3 or higher, down 28 percentage points from 2012. An industry person was quoted as saying the increase in Hebei's wheat output has no basis in fact.
Some private organizations (unnamed by the article) used satellite imagery to make their own estimates of the wheat crop. They estimated that wheat area fell by 0.5 percent and output was down 1.5 percent. They estimated output at 114 million metric tons, lower than the official estimate of 131.9 mmt.
Even the National Grain and Oils Information Center, a semi-governmental analysis group, revised their estimate of the wheat crop downward from 121.9 mmt to 120.6 mmt, said the article.
The data for some other commodities may be even more questionable. A rapeseed-processing company in Hunan keeps close tabs on rapeseed output in the 150-km radius surrounding their facility. In Li County, the official rapeseed area is reported as 663,000 mu, but the company thinks it's actually 527,000 mu. In Taoyuan County the actual area is a little more than one-fourth of the reported total and in Hubei's Jianli County, the actual rapeseed area is believed to be less than half the reported total.
According to the article, a Japanese publication recently ran an editorial urging China to start its economic reforms by reporting reliable data. Grain market analysts complained to the reporter that most analysis lacks any basis since there is no truthful data.
Some private organizations have begun collecting their own data, says the article. However, the government insists that NBS is the official source of statistics and officials sometimes say that private surveys are illegal.
The National Bureau of Statistics said wheat output hit 131.9 mmt, up 1.5 percent from the previous year. Some analysts say the big harvest doesn't square with the facts. Wheat prices have risen about 4 percent since last summer's harvest, yet demand is weak. Flour prices have risen more slowly than wheat prices. Animal feed use of wheat is down this year. With weak demand and a record output, how can the price be rising?
Analysts also question the NBS reports of increasing area sown to wheat. They see large tracts of farmland being used to build roads, rail lines, and housing estates. Local authorities reclaim new land to replace the land lost to urbanization but the new land's quality is poor. One sarcastic industry analyst said he learned in his econometrics class that NBS statistics show that urbanizing vast tracts of land has no effect on the amount of cropland and doesn't affect grain output at all.
Moreover, conservation programs have been removing environmentally-fragile land from grain production.
There were also quality problems with the wheat in 2013. Hebei Province wheat quality testing reported that 69.8 percent of wheat was grade 3 or higher, down 28 percentage points from 2012. An industry person was quoted as saying the increase in Hebei's wheat output has no basis in fact.
Some private organizations (unnamed by the article) used satellite imagery to make their own estimates of the wheat crop. They estimated that wheat area fell by 0.5 percent and output was down 1.5 percent. They estimated output at 114 million metric tons, lower than the official estimate of 131.9 mmt.
Even the National Grain and Oils Information Center, a semi-governmental analysis group, revised their estimate of the wheat crop downward from 121.9 mmt to 120.6 mmt, said the article.
The data for some other commodities may be even more questionable. A rapeseed-processing company in Hunan keeps close tabs on rapeseed output in the 150-km radius surrounding their facility. In Li County, the official rapeseed area is reported as 663,000 mu, but the company thinks it's actually 527,000 mu. In Taoyuan County the actual area is a little more than one-fourth of the reported total and in Hubei's Jianli County, the actual rapeseed area is believed to be less than half the reported total.
According to the article, a Japanese publication recently ran an editorial urging China to start its economic reforms by reporting reliable data. Grain market analysts complained to the reporter that most analysis lacks any basis since there is no truthful data.
Some private organizations have begun collecting their own data, says the article. However, the government insists that NBS is the official source of statistics and officials sometimes say that private surveys are illegal.
Carving Up Land Rights to Grab Land
China's new leaders have decreed that they will consolidate its patchwork of fragmented subsistence farms by walking a tightrope on land reform. While they say they intend to retain families as the main operators of farms, officials are devising schemes to clear traditional farmers off the land to make way for high-tech agribusiness companies.
Land-trading has been booming over the last five years due to big out-migration and a decree in 2008 that local officials should explore ways of encouraging land-transfer. In November 2013, the Ministry of Agriculture found that 26 percent of China's farmland had been subleased, swapped, or otherwise transferred, up from about 7 percent five years earlier. They say China now has 2.87 million farms of 50 mu (8 acres) or larger. That's much larger than the average land-holding of about 7 mu (1+ acre).
The Ministry of Agriculture is eager to push land-transfer further and facilitate mortgages based on income streams attached to land. However, they don't want to cut the strings tying rural families to their land-holding, so they are going to preserve collective ownership of land. In order to accomplish land-consolidation without privatizing ownership of land, they are expounding on obscure legal theories of land tenure that separate the right of ownership from the right to income from the land.
Land comes with a bundle of rights--ownership, rights to income or products derived from the land, to use it, rights to dispose of it, mortgage it (not to mention the rights to minerals under it or the space over it). The Ministry of Agriculture explains that the rights to land will now be divisible. The right of ownership will remain with the (vaguely defined) village collective. Village families will still have contract rights to their land. The right to operate or earn income from the land is a separate right that can be traded, while the ownership of land cannot. The income stream from a portion of village land can be rented out, pooled with other villagers' shares, or borrowed against. In effect, the income stream from a piece of land is like a security traded on Wall Street.
A Renmin University Professor explains that the contracting rights and operation rights attached to village land had been mostly one-and-the-same since reform and opening (i.e. 1978). But now, he says, villagers will be able to reassign their operation rights to land to other people, and they can get the rights back later if they want to. According to the professor, many villagers were hesitant to rent out their land in the past because they worried they might not get it back. But now--after clarifying their land rights--they will be more willing to rent out their land rights. Villagers will also be able to obtain mortgage loans secured by the stream of income from their operation rights.
The Ministry of Agriculture hopes that this will jolt Chinese agriculture out of its state of torpor. By prying land loose from the languorous clutches of aging peasants and consolidating it into modern high-tech farms they hope to achieve a quantum leap in productivity and ultimately food security. A Ministry of Agriculture official explains that 60-to-80 percent of farmers just produce food for their own consumption, and only a minority produce grain sold to commercial channels. Reform of the land system is a prerequisite to increasing the commercialization of farming, said the official.
Another priority of agricultural officials is to attract capital to invest in agriculture. A "land trust" pilot program about to launch in Suzhou City in northern Anhui Province (not the Suzhou in Jiangsu) is described as an important example of the new strategy. According to a description by Caixin, villagers' land will be converted into shares and the land will be turned into an agricultural development park. Citic Trust, a financial entity, will issue financial trust products with terms of 3 to 24 months to raise investment capital to develop the park and pay villagers for the land. Another company, Diyuan Modern Farming Investment Ltd Co., will manage the park and recruit companies engaged in "modern farming, water resource preservation, biofuels, Internet of things and agriculture-related research" to lease the land. A subsidiary of the German Bayer Group has been recruited to operate in the park, the first time a foreign-invested company has been allowed to rent farmland in China.
The villagers will receive dividends equal to the value of the land's wheat output (500 kg per mu x the government-set minimum price annually). The dividends may escalate if the rent paid by the companies is raised. The Ministry of Agriculture official describes the payment as guaranteeing villagers a basic living allowance. Villagers can also be hired to work in the park.
This arrangement sounds little different from the kind of land-grabs that officials have been undertaking for decades, except that the industrial park will be used for "agriculture." It's common for officials to compensate villagers for seizing their land with the value of grain it produces. Hiring villagers to work as security guards or janitors on the site is also a common part of the arrangement.
There's no indication that the villagers had any say in the deal. Exactly who or what is the "collective" that "owns" the land? This arrangement was surely brokered by county and provincial officials. It's unclear how the villagers would get their land back if greenhouses or biofuel refineries have been built on it.
The rent works out to about RMB 1250 per mu, about 2-to-3 times usual rents for cropland in grain-producing areas. The land will have to be used for high-value non-grain farming or processing in order to make money with a rent that high. "Internet of things" usually means automated greenhouses growing vegetables. Biofuel? Officials often complain that rented land is frequently converted to nongrain crops and it seems that will happen with this project. No contribution to food security likely here.
The types of ventures they mention seem highly speculative. For example, many biofuel projects collapse without big subsidies. What happens if the companies go bankrupt and can't keep paying the rent? It will take at least a year or two to get these companies up and running...how will Citic pay back their investors in 3 to 24 months?
Sounds like the same-old land-grab dressed up like a law professor...and another risky "Great Leap" into the unknown.
Land-trading has been booming over the last five years due to big out-migration and a decree in 2008 that local officials should explore ways of encouraging land-transfer. In November 2013, the Ministry of Agriculture found that 26 percent of China's farmland had been subleased, swapped, or otherwise transferred, up from about 7 percent five years earlier. They say China now has 2.87 million farms of 50 mu (8 acres) or larger. That's much larger than the average land-holding of about 7 mu (1+ acre).
The Ministry of Agriculture is eager to push land-transfer further and facilitate mortgages based on income streams attached to land. However, they don't want to cut the strings tying rural families to their land-holding, so they are going to preserve collective ownership of land. In order to accomplish land-consolidation without privatizing ownership of land, they are expounding on obscure legal theories of land tenure that separate the right of ownership from the right to income from the land.
Land comes with a bundle of rights--ownership, rights to income or products derived from the land, to use it, rights to dispose of it, mortgage it (not to mention the rights to minerals under it or the space over it). The Ministry of Agriculture explains that the rights to land will now be divisible. The right of ownership will remain with the (vaguely defined) village collective. Village families will still have contract rights to their land. The right to operate or earn income from the land is a separate right that can be traded, while the ownership of land cannot. The income stream from a portion of village land can be rented out, pooled with other villagers' shares, or borrowed against. In effect, the income stream from a piece of land is like a security traded on Wall Street.
A Renmin University Professor explains that the contracting rights and operation rights attached to village land had been mostly one-and-the-same since reform and opening (i.e. 1978). But now, he says, villagers will be able to reassign their operation rights to land to other people, and they can get the rights back later if they want to. According to the professor, many villagers were hesitant to rent out their land in the past because they worried they might not get it back. But now--after clarifying their land rights--they will be more willing to rent out their land rights. Villagers will also be able to obtain mortgage loans secured by the stream of income from their operation rights.
The Ministry of Agriculture hopes that this will jolt Chinese agriculture out of its state of torpor. By prying land loose from the languorous clutches of aging peasants and consolidating it into modern high-tech farms they hope to achieve a quantum leap in productivity and ultimately food security. A Ministry of Agriculture official explains that 60-to-80 percent of farmers just produce food for their own consumption, and only a minority produce grain sold to commercial channels. Reform of the land system is a prerequisite to increasing the commercialization of farming, said the official.
Another priority of agricultural officials is to attract capital to invest in agriculture. A "land trust" pilot program about to launch in Suzhou City in northern Anhui Province (not the Suzhou in Jiangsu) is described as an important example of the new strategy. According to a description by Caixin, villagers' land will be converted into shares and the land will be turned into an agricultural development park. Citic Trust, a financial entity, will issue financial trust products with terms of 3 to 24 months to raise investment capital to develop the park and pay villagers for the land. Another company, Diyuan Modern Farming Investment Ltd Co., will manage the park and recruit companies engaged in "modern farming, water resource preservation, biofuels, Internet of things and agriculture-related research" to lease the land. A subsidiary of the German Bayer Group has been recruited to operate in the park, the first time a foreign-invested company has been allowed to rent farmland in China.
The villagers will receive dividends equal to the value of the land's wheat output (500 kg per mu x the government-set minimum price annually). The dividends may escalate if the rent paid by the companies is raised. The Ministry of Agriculture official describes the payment as guaranteeing villagers a basic living allowance. Villagers can also be hired to work in the park.
This arrangement sounds little different from the kind of land-grabs that officials have been undertaking for decades, except that the industrial park will be used for "agriculture." It's common for officials to compensate villagers for seizing their land with the value of grain it produces. Hiring villagers to work as security guards or janitors on the site is also a common part of the arrangement.
There's no indication that the villagers had any say in the deal. Exactly who or what is the "collective" that "owns" the land? This arrangement was surely brokered by county and provincial officials. It's unclear how the villagers would get their land back if greenhouses or biofuel refineries have been built on it.
The rent works out to about RMB 1250 per mu, about 2-to-3 times usual rents for cropland in grain-producing areas. The land will have to be used for high-value non-grain farming or processing in order to make money with a rent that high. "Internet of things" usually means automated greenhouses growing vegetables. Biofuel? Officials often complain that rented land is frequently converted to nongrain crops and it seems that will happen with this project. No contribution to food security likely here.
The types of ventures they mention seem highly speculative. For example, many biofuel projects collapse without big subsidies. What happens if the companies go bankrupt and can't keep paying the rent? It will take at least a year or two to get these companies up and running...how will Citic pay back their investors in 3 to 24 months?
Sounds like the same-old land-grab dressed up like a law professor...and another risky "Great Leap" into the unknown.
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