Dim Sums: Agricultural Markets in China

Chinese villagers have been renting out more of their farmland in recent years as officials encouarged liberalization of land markets. However, rents have been soaring and officials are concerned that land rental is discouraging production of grain which doesn't generate enough income to cover the high rents.  The latest alarm is sounded by Economic Observer's report on a land rental survey  conducted by Shandong Province agricultural officials. The report found that 19.6 percent of the province's farmland has been rented or transferred. The more alarming finding was that only 32 percent of land was planted in grain after it was rented out. That's less than half the 70 percent of the land  planted in grain before it was rented out. The rental rates for farmland in China have soared. Until the early 2000s, farmland was viewed as a liability since villagers had to pay tax on it. Many charged no rent, letting ...

A crackdown by agricultural authorities and police in Qingdao indicates that abuse of veterinary drugs in the production of poultry and other livestock is rampant in China. In May 2014, the Qingdao Bureau of Animal Husbandry and Veterinary Medicine launched a six-month campaign to shut down illegal veterinary drug manufacturers and clamp down on illegal use of pharmaceuticals in the raising of poultry and livestock. One of the focal points of the crackdown is the city of Pingdu, major poultry-producing area. It is probably no coincidence that Pingdu was also the focus of a 2012 scandal when it was discovered that a major supplier to Kentucky Fried Chicken restaurants was raising chickens on as many as 20 drugs and failing to obey required withdrawal requirements before slaughter. At the time, Chinese news media focused blame for this "quick chicken" scandal on KFC while the core problem of on-farm veterinary-drug abuse received little attention. Authorities are now cracki...

One of the Chinese communist party's great achievements during the last decade was to eliminate the "agricultural tax" and eliminate other taxes and fees on peasants. In an inspection of villages last fall, Chinese Ministry of Agriculture officials were alarmed to find a bevy of new fees and assessments being collected from rural residents. Officials warned local leaders to stop piling fees on farmers to prevent a revival of the "peasant burden" problem that caused widespread discontent during the 1990s. While it's easy to blame the resurgent taxes on greedy officials, it is unclear how all the new services and infrastructure mandated for the rural population are to be financed. During October and November 2013, China's State Council sent inspection teams to 77 villages in Heilongjiang, Shandong, and Anhui Provinces to check up on the taxation of villagers. They interviewed peasants and inspected accounts. On August 13, 2014 MOA issued a document repor...

Articles in two Chinese government-run newspapers warn that shrinking margins threaten to push rice mills out of business. The inferred implications of the articles are that mills need subsidies to stay in business and imported rice should be blocked to restore "order" to the market. Two remarkably similar articles on the dire situation facing China's rice mills appeared a month apart in newspapers that serve as Chinese communist party mouthpieces. An investigation of rice mills in Jiangxi Province appeared July 23 in Chongqing Daily . A second article appeared in Farmers Daily on August 13 , describing a very similar crisis facing rice mills in Liaoning Province. The two articles with different authors stated very similar findings from their "investigations" in opposite ends of the country: a major area for producing long-grain rice in the south, and a major medium-grain rice-producing area in the northeast. Their similarity suggests either the aut...

In January 2014, China's central communist leadership's "Number 1 Document" officially announced a plan to launch experimental target price subsidy pilots for soybeans in northeastern provinces and for cotton in Xinjiang "Autonomous" Region. This subsidy will calculate the difference between a "target" price and the market price, then pay farmers a subsidy to make up the difference. In April 2014 authorities announced the target prices: 19,800 yuan/metric ton for cotton and 4,800 yuan/metric ton for soybeans. However, no other details about have been announced. Which market price will be used to calculate the subsidy? How will the government verify the price and the amount planted/produced/sold by subsidy recipients? How and when will the payments be issued to producers? What happens if buyers prefer to purchase imported commodities? Today's Economic Observer notes that none of these details have been announced with the harvest of the cot...

China's inspection and quarantine authority issued a document ordering port officials to increase inspection and testing of imported corn, sorghum, and barley used for feed. While it purports to be a response to quality problems discovered in grain shipments, it is probably a disguised strategy to slow down imports that undermine officials' efforts to dispose of their huge, high-priced domestic grain stockpile. The document issued by the General Administration for Inspection and Quarantine (AQSIQ) was dated July 29, 2014 and comes eight months after officials began rejecting all corn shipments containing any trace of MIR 162, a genetically modified corn variety that China's Ministry of Agriculture has not approved for import. The document showed up on several web sites August 11, but doesn't seem to be on the AQSIQ site. The document observes that grain quality problems have become increasingly evident since imports of corn, sorghum, barley and other grains began i...

Chinese authorities are obsessed with stockpiling commodities to "stabilize" markets. However, their auctions of 2-to-3-year-old imported corn during July reveal their bad sense of timing: they imported corn during years of high prices and are selling it when global prices are low. This misjudgment is costing the Chinese treasury -- and corn users -- hundreds of millions, perhaps billions of dollars. During July 2014, Chinese grain officials auctioned a total of 2 million metric tons of imported U.S. corn. Demand for the corn was strong because there is no other source of U.S. corn due to the ban on a genetically-modified variety (MIR 162) that China's Ministry of Agriculture has not gotten around to approving. Another 500,000 metric tons of imported corn was due to be auctioned today. The auctioned corn was imported during 2011 and 2012--presumably by COFCO on behalf of grain reserve managers--and stored in various southern provinces. (COFCO ...

During 2014, Chinese customs authorities have been engaged in a "green wind" crackdown on smuggling of agricultural products. Authorities claim successes but new publicity includes warnings that the smuggling is a threat to food security, suggesting that they remain concerned. Chinese customs officials nab a truckload of smuggled rice In April this year, this blog reported on the "green wind" campaign against smuggling of agricultural products. In July, customs authorities launched a new publicity campaign that mostly warns about the seriousness of rice-smuggling along the border with Southeast Asian countries, linking it to food security and "pressure" on domestic industry. According to Legal Daily , the aggressive crackdown on smuggling in Guangxi Autonomous Region has pushed the smuggling trade to Yunnan Province. The Kunming customs authorities say they recently broke up two smuggling rings that have illegally brought in 60,000 metric tons of ...

Chinese authorities--having run out of space to store their corn glut--will pay 61 starch and alcohol processing plants to hold government reserves purchased from the 2014 crop. The new subsidy is a small piece of the Chinese Government's complex juggling act in a highly distorted domestic corn market. On July 24, 2014 the Ministry of Finance, National Development and Reform Commission, Grain Bureau, Agricultural Development Bank jointly issued a notice announcing subsidies for 61 northeastern corn-processing enterprises to hold corn purchased for the state's temporary reserve. The notice listed processing companies eligible for the subsidy in the three provinces where the largest volume of surplus corn has been purchased: Inner Mongolia, Heilongjiang and Jilin. The notice did not provide any details about the amount of the subsidy or how it will be paid. Chinese authorities reportedly purchased 70 million metric tons of corn from the 2013-harvested crop for the "temp...