Dim Sums: Agricultural Markets in China

With plentiful supplies of soybeans worldwide and weak demand, China's cooking oil prices have been falling for the last two years. A Hangzhou newspaper reports that a five-liter bottle of soybean oil is under 30 yuan (about $4.90). A supermarket procurement officer estimates that retail prices in his store this December are down 40-percent from a year ago. Cooking oil companies have been running frequent promotions with bright stickers on shelves and posters. They give away a small bottle taped to a large five-liter bottle. Early in 2014 the free bottles were 300 ml, but now companies are giving away 700 ml bottles. The supermarket procurement manager says the two biggest cooking oil companies have had two price cuts this year--one in April and the second in October--each about 10-percent. The supermarket manager says the decline in prices is linked to declines in soybean prices on the Chicago Board of Trade. According to the National Grain and Oils Information Center, the ...

A swine industry meeting held by Shuanghui Group (the company that acquired Smithfield Foods in 2013) this month discussed the "new normal" for China's swine production. The era of massive expansion and big profits is over; now the industry needs to consolidate, cut costs, adopt new concepts of environmental protection and biosecurity, and develop a self-sustaining supply of breeding stock. "New normal" is a reference to President Xi Jinping's declaration of an era of slower but higher-quality GDP growth. An official from the Luohe City animal husbandry bureau said the "new normal" for the swine industry means thin profit margins and slower growth. The industry should not expect a return to big profits. Instead, the industry will need to restructure and producers should focus on controlling costs, develop environmental protection concepts, promote farmer cooperatives, and stick together "for warmth" to increase their say over prices...

The China-Australia free trade agreement will gradually reduce tariffs to zero on Chinese dairy imports from Australia. This follows a 2008 China-New Zealand FTA that contributed to a New Zealand dairy-export boom. A November article in a Chinese publication, Economic and Nation Weekly , asked whether the competition from imports would pressure the Chinese dairy industry. China's current tariffs on dairy products are mostly 10-to-15-percent, so the tariff reductions in theory could increase imports that would reduce the market share of Chinese companies. The low price of imports is expected to put downward pressure on domestic prices for Chinese companies. Source: China customs data analyzed by dimsums.blogspot.com In fact, China's dairy imports from New Zealand began their explosive growth immediately after its FTA with New Zealand took effect in October 2008. Interestingly, the FTA coincided with China's melamine adulteration crisis (test results showing infant f...

Local environmental authorities have blocked construction of an industrialized chicken complex planned for a rural county in China's Shaanxi Province. Since when do environmental bureaus in rural counties block big-money projects backed by the county chief? Is this China's "new normal"? Or has the company put the project on hold until the poultry industry recovers? According to a December 2, 2014 report from China's Daily Business News , the country's largest feed manufacturer, New Hope-Liuhe Group, planned to invest 860 million yuan (about $40 million) to build a feed-chicken industrial complex in Fufeng County in Shaanxi Province, about midway between Xi'an and Baoji city. According to the county government's description , the project was to include a feed mill producing 300,000 metric tons of feed annually, a hatchery to supply chicks to farmers, a model commercial chicken-farming base, a slaughter plant that could process 36 million chickens each...

A Jiangxi Province newspaper recently told the cautionary tale of a rice mill owner who disappeared after his side business as an underground lender got him deep into debt to family and friends. The story appears to be a warning about the dangers of underground lending, but it illustrates how China's Ponzi-style economy is unraveling. "Mr. Li" got into the rice-milling business in 2009 when he invested several hundred thousand yuan to buy some milling equipment. He was "instantly transformed from farmer to factory boss." In 2011, he built a mill using a 2-million-yuan loan that was secured by his inventory of unprocessed rice. The debt kept spiraling. During 2012-13, he borrowed 10 million yuan from several banks, but rice-milling business started running into trouble as the Chinese economy slowed. The rice mill wasn't generating enough cash to cover his daily expenses, so Mr. Li became an underground lender in 2013. He lent 8 million yuan to a busine...

Chinese farmers growing crops over the border in Russia have been hit by the fall of the Russian currency . This year Chinese farmers are bringing most of their Russia-grown crops back to China instead of selling them in Russia. There are said to be 70 Sino-Russian cropping, livestock, and agricultural processing projects covering 400,000 hectares in Russia. Over the past decade, there has been a growing stream of Chinese farmers crossing the border to grow crops in Russia. Heilongjiang, Jilin and other provinces have reportedly invested US$ 200 million in Russian farms. Most of the farmers are from the state farm system in Heilongjiang Province where land is scarce and the increase in mechanization has reduced the need for workers. Across the border in Russia's far east they can rent land much cheaper, the soil is good, and they can farm huge farms with large machinery. The Hulin Eastern Star Farm has a 20,000-hectare farm in Russia where they grow 20,000 metric tons of soyb...

Chinese President Xi Jinping always makes time for rural visits during his trips abroad. Premier Li Keqiang has been featuring agricultural investment and opening trade with new partners in his trips abroad. This is part of China's "farm diplomacy" which elevates agriculture to an important role in foreign policy. A propaganda piece from the official Xinhua news agency reviewing Xi Jinping's Latin American visit during July 2014 introduced the "farm diplomacy" strategy. Chairman Xi has visited an Argentine ranch, brought seeds along on a visit to Fidel Castro's family hacienda, had coffee at a rural home in Costa Rice, visited a cattle farm in Australia, inspected a farm in Ireland, attended a tulip exhibition in the Netherlands, and drove a tractor in the United States. When he visited the United States as vice president he insisted on holding a meeting on agriculture in Iowa where he got reacquainted with a farm family he had previously visited in t...

For more than a year, Chinese border officials have been rejecting shipments of corn containing any trace of unapproved genetically-modified strains. No GMO corn has been approved for planting inside China, but there are indications that production of unapproved GMO corn has quietly spread despite crackdowns over the past four years. If Chinese officials were really serious about keeping unapproved GMOs out of their food system, they would test domestic corn as well. Chinese corn prices are more than double the price in the United States, but the GMO issue is a barrier to imports from all the leading exporters--the United States, Brazil and Argentina. Consequently, Chinese traders are scouring the globe for other cheap feed ingredients. On November 18, 2014 AQSIQ, China's agency for inspection and quarantine, posted an online Q&A where Chinese trading companies peppered an AQSIQ official with dozens of questions about importing corn, sorghum, ...