Dim Sums: Agricultural Markets in China

On October 24, Vice Premier Wang Yang finished out a speech on building irrigation facilities with some comments that reveal China's rural policy challenges. While there is a sense of urgency in his remarks, Wang exhorted everyone to calmly consider the future and--like a good socialist--make a new plan. English language news media picked up Wang's admonition to increase control of grain imports and crack down on smuggling to deal with record-high grain inventories, but other comments in the speech are interesting. The comments came at the end of  a speech on building irrigation facilities where he warned that rural reforms and development tasks are extremely arduou s. He exhorted every level of government and locality to do a good job on agricultural and rural work as they carried out irrigation and water management construction. Until now, China seemed to be address rural problems by spending more and raising prices, but that seems to have come to an end. Wa...

Chinese leaders have apparently deduced that dishonesty and lying are not conducive to a healthy society or economy. Authorities are moving forward with a plan to create a massive database that will enable authorities at all levels and locations to monitor, track down, and punish miscreants in government, companies, and courts of law. For example, it's hard to produce accurate statistics when everyone lies to the statisticians. To fix this, China's National Bureau of Statistics has published draft regulations designed to punish dishonest companies that report inaccurate information on statistical surveys. Companies that deliberately fabricate false data, make false reports, conceal data or otherwise violate the statistical law will be subject to criminal penalties. The Bureau will publicize the names, addresses and owners of dishonest companies on a web site. The information will be entered in a file that will be available t...

China's investment abroad in agriculture is picking up momentum, boosted by a big endorsement from the highest levels of Chinese officialdom this year. In August, the Ministry of Commerce announced that 300 Chinese companies had undertaken overseas investment in agricultural, forestry, and fishing projects in 46 countries and regions on all five continents in recent years. The article said officials are actively evaluating opportunities and formulating supportive policies for investment in crops, livestock, and seed industries. The pace of overseas investment in agriculture has picked up following the endorsement in a paragraph of the January 2014 "Number 1 Document" which called for accelerating the "go global" (literally, 走出去 or "go out") strategy as a way to "rationally utilize international markets." The Commerce Ministry cites the document's endorsement and emphasizes that the 300 investors are utilizing overseas markets and res...

On October 16, 2014, China's National Development and Reform Commission announced that next year's minimum price for wheat will be held steady at this year's level. Many people in the Chinese wheat market expected the minimum price to be raised as it has been for the last seven years. Market commentaries in Futures Daily and in  China Grain Net  believe the non-change in the minimum wheat price is a reflection of current market conditions  and  represents a change in policy direction. The minimum price for white wheat (blue) and  average wholesale market price (red), 2006 to 2015. Source: China Grain Net.  The minimum price for wheat was raised every year from 2008 to 2014, a total of 920 yuan/metric ton (64 percent) over 7 years. In 2008, authorities adopted a practice of announcing a higher minimum price in the fall--planting time for the winter wheat crop--to assure farmers of a price high enough to cover rising production costs. This is the fi...

Imported meat is making inroads in the Chinese market, pitting the interests of consumers against those of producers--no longer one and the same. Nevertheless, getting meat into China appears to be a risky game, given a strategy of tightening and loosening import procedures based on domestic market conditions. A July article in the Guangzhou Daily observed that the rising import of meats is generally welcomed by consumers, but is greeted with resentment by people in the domestic meat industry. The Guangzhou Daily reporter visited supermarkets to get the views of consumers and managers on imported meat. The manager of one store told him sales were up 20%-40% so far this year. Most of the business is relatively low-priced cuts of Australian beef. Sales of high-end beef--128 yuan for the most expensive T-bone--are increasing as fast. Another manager told the reporter that he once tried selling imported beef in 2008-09, but it didn't last long. Since the end of 2013, however, s...

China has been rejecting shipments of U.S. corn for nearly 11 months now with no clear explanation. There has been much speculation about what Chinese officials are up to. Now there is another possible motivation for the inscrutable action against U.S. corn: they wanted to break U.S. dominance as China's nearly exclusive source of corn imports. In 2013, Chinese news media grumbled about the United States supplying 98-99 percent of China's corn imports. Expedited approval of Argentina as a corn supplier in 2013 was attributed to an urgency to create competition for U.S. corn . However, Argentina has only managed to send one shipment of corn to China since then. China struck a phytosanitary agreement with Brazil to supply corn in November 2013, a move that  was interpreted by Chinese observers as a measure to break the dominance of the United States as China's near-exclusive corn supplier. However, the Chinese apparently didn't know that the GMO corn variety ...

According to China Times , officials of China's National Development and Reform Commission and Ministry of Agriculture are eager to eliminate "temporary reserve" agricultural price support programs in favor of "target price" subsidies. According to officials, the experimental target price subsidies are likely to be extended to cotton producers outside of Xinjiang "Autonomous Region" and to corn as soon as 2015. According to Futures Daily , China is having another big corn harvest (despite panicked reports of drought over the summer), and there is strong downward pressure on corn prices. In an area of Henan Province, corn with 25% moisture is reportedly selling for 1.1 yuan/kg, a little more than half the customary 2-yuan price. In Jining, Shandong Province, a grain depot manager says that corn yields are over 650 kg/mu this year (the national average reached 600 kg/mu in 2013 for the first time) and prices have fallen from 2.5 yuan/kg to 2.24 yuan/kg...

China's  21st-century push for "agricultural modernization" aims to undo the fragmentation of its farming sector by consolidating farms into larger operations. Like China's ill-fated 1958 "Great Leap Forward," the new "modernization" campaign needs to gather funds to finance investment in fixed assets. The new campaign is said to be guided by the "decisive role of the market," yet the banking system--behind its veneer--is still stuck in the era of central planning. Consequently, the "decisive" market mechanism is sidelined as Chinese officials subsidize, cajole and otherwise intervene to promote investment in agriculture. In 2011, the Ministry of Agriculture signed a memorandum of understanding with the China Development Bank to finance "agricultural modernization" projects and overseas agricultural investment during the 12th five-year plan (2011-2015). The bank's agricultural loan balance was 19.5 billion yuan a...

Chinese President Xi Jinping apparently has stepped in to quell public angst about genetically modified foods by endorsing transgenic technology for agricultural products. The endorsement came as part of a speech on agricultural issues he gave in December 2013 that was not previously released to the public. He began the speech by relating his personal experience of hunger. He recounted how he himself went hungry during the "three years of natural disaster." As a primary school student he often had nothing to eat but soup. Later, when he was sent to the countryside as a young man during the cultural revolution he was often hungry, going for months without a taste of meat or a drop of cooking oil. Xi's speech had a familiar theme of self-reliance and restoring China to a strong position in the world. If China has a food problem, "No one can save us," said Xi. He warned that China cannot buy enough food from the international market for even half a y...