Dim Sums: Agricultural Markets in China

We have a pet hamster at my house. No matter how much food you add to his bowl, it all disappears. This gives the impression that the hamster is consuming vast quantities of food. But when we clean out the cage we discover hoards of food. We then realize that much of the food going into his bowl is not eaten--it's hidden away under the wood shavings. Like the hamster, Chinese officials are compulsive food-hoarders. They stash so much grain away in warehouses that the country often imports grain when it is actually producing more than it needs. Last week, China's Academy of Agricultural Sciences (CAAS) released its first ten-year projections of commodity supply and demand for the next ten years. The main feature that emerges from the blizzard of numbers is hamster-like compulsive stockpiling of grain. CAAS projects that carry-in stocks of wheat, rice and corn will rise from 217 million metric tons in 2014 to a plateau of 300 mmt from 2019 to 2023. CAAS t...

Chinese officialdom is finally acknowledging soil contamination problems.  China's first soil contamination survey was released this week , revealing that 16 percent of all land monitored over eight years was polluted above accepted tolerances. The survey found that 19 percent of farmland of polluted. Results of China's 2005-13 soil contamination survey: Proportion of soil survey points with contamination above maximum tolerance 16.1% Of which:   Above tolerance limit but less than double 11.2%   Double-to-triple the tolerance 2.3%   Three-to-four times the tolerance 1.5%   Five times the tolerance 1.1% Source: Communique on soil contamination survey. The new-found environmental consciousness is apparently spurred by widespread concern about "cadmium rice" contamination that was publicized in 2013. In December, agricultural officials began to talk about pollution and environmental problems that make China's current level of produ...

A Chinese government think tank's report reveals that agriculture--historically the dominant activity in China--is fading in importance and faces some constraints on future growth. On April 11, the Chinese Academy of Social Sciences (CASS) released its "Green Book on the Rural Economy" giving an overview of rural and agricultural development based on the latest numbers from the National Bureau of Statistics (NBS). Summaries of topics covered have been released as news items in Chinese highlighting decelerating agricultural growth, weak agricultural investment mechanisms, a narrowing gap between rural and urban living standards, and a widening agricultural trade deficit in 2013. Agriculture's ("primary industry") share of Chinese GDP was 9.8% in 2013--under 10% for the first time and down from about a third of the economy in the early 1980s. With overall GDP growing 7-8% and agriculture growing 4-5%, agriculture's share has fallen over time. In 2013, ...

China's official strategy for addressing agricultural problems is to replace traditional peasant-style farming with an industrial-style model of standardized mass production. The transformation is taking place gradually, one link in the supply chain at a time. One key strategy is to standardize products by concentrating the supply of inputs like breeding stock and seedlings on large-scale factory-style operations, often with subsidies. An example is a 2-year-old campaign to promote concentrated seedling (集中育秧) farms as a strategy to promote double-cropping of rice. Dim sums blog reported on the initiation of this program in 2012  with a 100 million yuan fund supplemented by provincial funds. The program gives subsidies to centralized companies, cooperatives and large farms that grow large volumes of rice seedlings in greenhouses or plastic tunnels that are supplied to local farmers and transplanted--preferably with machines--in the early spring. This "early rice" is har...

Chinese authorities have been fretting about "food security" and grain self-sufficiency. Suddenly, the country has a massive glut of grain--nearly a fourth of this year's grain harvest has been stashed in reserves to support prices. In January, Chinese authorities reported that grain reserves were at a record-high level . They were out of storage space and using temporary structures and rented space to store the grain. During 2013, authorities purchased 82.5 million metric tons of grain through support-price programs, 24 percent of the 345 mmt total purchases. The support price purchases were up from 31 mmt in 2012. Authorities auctioned off 34.8 mmt of grain into the market and arranged interprovincial transfers of grain inventories totaling 13.5 mmt during 2013. In the first three months of 2014, authorities continued to buy corn and rice aggressively to support prices. As of April 5, purchases of corn for the "temporary reserve" to support prices reache...

Chinese hog prices have been plummeting for about four months--the latest downturn in a series of cyclical gyrations in China's bipolor hog market which is constantly flipping from surplus to shortage and back again. An interesting recent posting reveals the strategic behavior of Chinese hog producers trying to figure out how to navigate the hog cycle. The writer--apparently a farmer or industry analyst--has seen people writing in an online forum responding to the steep downturn in prices in two opposite ways. Some say they're bailing out of the business and selling off their sows. Others are asking whether it's a good time to get into the business. He speculates that the people selling off their sows have lost confidence, are losing money, piling up debts and ready to give up. People thinking about getting into the business think the cycle may be at its bottom, and expect a rebound in prices and profits later in the year. Ultimately, both groups of people are making a...

At the beginning of 2014, China's Customs authority launched a "Green Wind" campaign to crack down on smuggling of agricultural products. The campaign covers ports all over the country and products as diverse as rice, wheat, soybeans, peanuts, edible oils, sugar, cotton, starch, and meats. The campaign was described as part of a broader effort to curb the "momentum of large-scale smuggling" over the last several years. According to the article, the campaign has several motivations: to prevent loss of customs and tax revenue, prevent food sanitation and safety problems, and to maintain national food security. The concern is that smuggled products with low prices will depress Chinese prices and harm Chinese producers. The smuggling crackdown is described as a food security "firewall." A coordinated effort by authorities in three ports--Shandong Province's Qingdao and Rizhao and in Guangxi--intercepted 130,000 metric tons of smuggled peanuts and ...

Chinese agribusiness is "feast or famine" when it comes to financing. Companies like COFCO and WH Group (formerly Shuanghui International) have seemingly limitless financial resources to go on multi-billion-dollar spending sprees. But most of China's agribusiness companies--including those that sell on the global market--are strapped for cash. "Financing problem and countermeasures of agricultural products exporting industry," a January article in the Chinese publication International Financing --  available at this site  (with sleazy ads) -- summarizes the problems faced by Chinese agricultural-exporting enterprises in financing their businesses. The author observes that the hot growth in China's exports of agricultural products followng WTO accession in 2001 came to an abrupt halt after the global financial crisis in 2008-09, and has had difficulty recovering. The author notes that the macroeconomic environment has been difficult for ag-exporting co...

China is afraid of genetically modified crops because they might possibly somehow harm consumers someday. Vice Minister of Agriculture Niu Dun brags that China's restrictions on GMO-labeling are more strict than in other countries. Unlike other countries that permit 1%, 5%, or 10% GM-content without labeling, China requires foods to be labeled if there is any GM content whatsoever, even .00001%. Chinese people must be notified if they are eating a single modified gene because it might be dangerous. Last month, Vice Minister Niu snuck in a jab  in a news media interview , complaining that the United States had not given China enough information about a mysterious field of genetically modified wheat found in Oregon. All of China's wheat is non-GMO, so it's safe and environmentally benign, right? Let's look at how China grows its non-GMO wheat. Since 2012, China's main strategy for boosting wheat production has been to mobilize armies of farmers, tractors, air...