Dim Sums: Agricultural Markets in China

On November 25 Chinese authorities announced the beginning of "temporary reserve" purchases from the 2014 corn crop. As expected, the temporary reserve prices were held at the same level as last year. With China experiencing a corn glut for the third year in a row, the government is expected to purchase a large volume of corn again this year. With grain bins already full, the temporary reserve announcement included an exhortation to prevent "hidden threats" of mold and fire from destroying millions of tons of corn stored in thousands of rudimentary bins scattered across northeastern China. China began the "temporary reserve" policy in 2008 to place a floor under market prices. Since then, authorities announced minimum prices for each of four northeastern provinces each year and promised to buy grain for government stockpiles when the market price falls below the minimum. The grain is stored until the price rebounds. Then it is sold back into the market. ...

The good news is that China's elimination of price supports has reduced the incentive for its farmers to produce large volumes of poor quality cotton. The bad news is that the world still has too much cotton. According to China Cotton Association data reported by a textile industry analysis , the country has 12 million metric tons (mmt) of cotton in storage. This year, Chinese production is expected to add another 6.6 mmt to the supply. Its import quota has been chopped to 890,000 metric tons (imports have been running over 4 mmt in recent  years). Adding up inventories, production and imports, China will have 19.7 mmt of cotton available. That's nearly three times estimated annual consumption of 6.8 mmt. The Chinese textile business is not what it once was. Factory bosses complain that they pay 3,000 yuan more than the international price for every ton of cotton they use. They are also paying higher wages and sometimes encountering labor shor...

On November 11, China received its first cargo of imported Bulgarian corn . This corn represents China's new approach to agricultural trade in which Chinese entities control the commodity from its source. This corn was grown by a Chinese company on soil that happens to be in Bulgaria. The 36,700-ton cargo--identified prominently in news media as "non-GMO"--was received at the Shenzhen port, where it was promptly inspected and testing with expedited "green channel" procedures for agricultural cargoes. This treatment stands in contrast to other cargoes which are turned away or languish in their berths for weeks waiting for port officials to approve the shipment. A representatitve of the importer--Tianjin Nongken Longchen Jiayi International Company--notes that the corn was grown in Bulgaria to be sold back to China. The company plans to import 175,000 metric tons of corn in 2014 and hopes to import 300,000-500,000 tons next year. The corn shipment is t...

According to information learned by Futures Daily , China's support price purchase program for 2014/15 is expected to begin by November 20 with the support price level unchanged from 2013/14. The support level is higher than current purchase prices and is expected to boost Chinese prices and add to the nation's corn stockpile. Temporary reserve purchases are expected to take place from November 20, 2014 through April 30, 2015. Futures Daily learned from sources that the support price for corn will be the same as last year. This is a break from the practice of raising the support price annually over the last six years. Current prices are 100-200 yuan below the support levels. Traders will be inclined to sell the corn they buy to the state reserves, thus boosting market prices. Province Support price Current prices yuan/mt yuan/mt Heilongjiang 2220 1960-2080 Jilin 2240 2070-2130 Inner Mongolia (Tongliao) 2260 2160-2180 Liaoning 2260 2140-2150 The inform...

When Chinese officials describe their grain subsidy programs, they say the policies motivate local (officials) and farmers, in that order. This rhetoric reflects the importance of transfer payments sent to rural counties to encourage local officials to support grain production, an activity that generates minimal GDP and virtually no tax revenue. With private financing and services for farmers mostly nonexistent, China relies on local officials to provide needed investment and services for farm production. Yet officials are not inclined to give attention to farm production since it yields little GDP and virtually no tax revenue. China's major grain-producing counties have a very narrow tax base, with local tax revenues often just 15%-to-20% of financial expenditures. Thus, rural governments are financed with massive transfers from higher levels of government. An October 2013 article in Economic Reference News , " Vicious Circle: The More Grain Prod...

Consuming dog meat is a deeply embedded part of food culture in certain regions and ethnic groups of China. However, the growing number of dog lovers has generated fierce opposition to the practice of killing dogs and eating them. Dog meat trade is legal, but regulating the production and marketing of dogs for human consumption presents a challenge for authorities. [ warning: images in this article will be disturbing to animal lovers ] The focal point of attention is a dog meat festival held each June in the city of Yulin, Guangxi Province. During 2014, the festival prompted protests and an appeal from an animal protection group to ban the festival. With so much public opposition, the Yulin municipal government issued a statement stating that the festival is put on by private operators, and Yulin authorities disavowed any role in organizing the festival. Another dog meat festival in Zhejiang Province has been canceled due to public opposition to the killing of dogs on street co...

The results of a new survey show that "farmers view land like gold, and they're reluctant to give it up." Villagers' uncertainty about their rights to their land makes them reluctant to let go of it, posing a problem for the new class of large farms looking to consolidate farmland. On October 13, the Shaanxi branch of the National Bureau of Statistics rural survey team announced the results of a survey of rural land transfer conducted in 2013 . The survey found that 11.8 percent of the province's contracted land had been transferred from its original "owner" or contractor to someone else. That rate was lower than the national average of 21.7 percent, and much lower than the 40 percent share of land transferred in some eastern provinces, according to the survey report. Of the 11.8 percent of land transferred, 64 percent of it is rented to neighbors and relatives they know, often just on a verbal agreement. About 13 percent each is transferred to compa...