Dim Sums: Agricultural Markets in China

An official of China's Ministry of Environmental Protection dared to think clearly about environmental and energy issues. Recognizing that both coal and grain production require large amounts of water, the official recommended that China could scale back grain production in Shanxi, Shaanxi, Inner Mongolia and Xinjiang to free up water for coal production. Instead, China could import more grain from overseas, the official suggested. The daring proposal was made by an environmental assessment inspector  at the "2014 China international energy summit" held in Beijing July 28-30. The official was inspired to think the "forbidden thought" of importing grain when he visited Italy and found farmers protesting outside the parliament over the cancellation of a plan to export grain that had collapsed because they couldn't find a market. The environmental official notes that many people in China say the country should never import grain. But he doesn't see w...

China seems to be stoking food safety hysteria to undermine the dominant position of multinational fast food chains. The news media reports of use of chicken past its use-by date by Shanghai Husi (福喜) focus attention on the fast food chains it supplied such as McDonalds, KFC and Burger King, deflecting attention from pervasive problems in the broader domestic food supply. China's latest food safety scandal broke on July 20 when Dragon TV network aired hidden camera footage showing alleged use of meat past its use-by date at a Husi Company plant. The scandal was prompted by broader concerns about meat safety, but the media's focus on multinational food service chains is allowing other perpetrators to stay out of the spotlight of scrutiny. Virtually none of the media coverage acknowledges that the TV footage appeared five days after the China Food and Drug Administration ordered local authorities nationwide to carry out a special campaign to crack d...

A Chinese expert acknowledged the declining international competitiveness of his country's agricultural sector and advocated an emphasis on family farms and improvement of rainfed agriculture as critical steps to improve productivity and cut costs. Dang Guoyang is a prominent researcher at the Rural Development Institute at China's Academy of Social Sciences. In an interview with Peoples Daily , Professor Dang observes that China's agricultural output has expanded at a remarkable pace since "reform and opening" (after 1978), but he is concerned that China's agricultural sector's international competitiveness has declined. Production costs are higher than those in developed countries, and Dang insists that this lack of competitiveness will affect Chinese agriculture's long-term development. Ironically, the first problem Dang cites is high labor costs in Chinese agriculture. While daily wages paid by U.S. farms are 5 times higher than in China, U.S. ...

In a pattern being duplicated for many major commodities, Chinese authorities have been giving farmers subsidies and price supports to grow rice that can't be sold. Now authorities are having to subsidize construction of warehouses to store the subsidized rice. According to Outlook (瞭望), a government-supported news magazine , rice-growing regions in southern China claim they don't have enough space to store the new rice crop. A big crop of early-season rice is expected this month. With abundant supplies of rice already in storage and downward pressure on prices from imported rice, officials anticipate that they will have to purchase significant volumes of the new rice crop and store it in reserves to prevent prices from falling. The main early-rice provinces--Jiangxi, Hunan, and Hubei--still have a lot of early-season rice stored from last year, so there is not enough space for this year's anticipated purchases. Hunan's early-season rice harvest is estimated at abou...

China National Oils Cereals and Foodstuffs Corporation (COFCO) has been fingered by the Communist Party's Central Discipline Commission as one of several corrupt government/business units in its 2014 report . The terse report accused COFCO of spending public funds on golf and other luxury items, a violation of Secretary Xi Jinping's "eight rules" which ordered government officials to cut back on excessive banqueting, travel, and car purchases. COFCO is China's largest agribusiness company and the largest importer of corn, so the agricultural implications of the censure of COFCO may be worth speculating about. Over the last two years, the discipline commission has singled out local officials in a number of provinces, a mining company in Inner Mongolia, Fudan University, and the Ministry of Science and Technology for censure and possible legal action. COFCO seems to be this year's example of profligacy and lack of oversight over state-owned enterprises...

Chinese authorities are auctioning off old imported corn from their "temporary reserve" stockpile. The corn--bought from the U.S. several years ago--is attracting attention because of its price and quality. China began importing significant volumes of corn in 2010, but a lot of it was locked away in warehouses to bolster reserves. The 1.57 million metric tons (mmt) imported in 2010 mostly went into state reserves but has already been sold off and replaced. The nearly 1.7 mmt imported in 2011 at a cost of over 2200 yuan/metric ton also was placed in reserves and is now up for auction. The price is said to be about 300 yuan/metric ton less than domestic corn and similar to the price of imported sorghum. The imported corn is said to be attracting interest mainly from feed mills. Much of China's domestic corn supply is stockpiled in northeastern provinces. It can't be sold because its sale price has to exceed the price paid for the corn. New imports of corn and DDGS ...

China's Minister of Agriculture warned of five big problems facing agriculture that can't be underestimated. Minister Han Changfu issued the warning in remarks at a July 2, 2014 conference on the rural economy. First, he warned that weather forecasts indicate a risk of droughts and floods this summer that could prevent another big harvest. He urged local officials to take early preventive measures to ensure another big harvest. Minster Han also worried that downward pressure on agricultural prices this year threatens to weaken farmers' production incentives. Grain inventories are at their highest-ever level, warned Han. What he failed to mention is that the declining trend in prices is due to the big increases in grain output last fall and the recently-completed big wheat harvest. With a glut of grain of historical proportions, markets tend to push prices down to discourage adding to the excess supply. Falling prices are ruled out because that would restrain growth ...