Saturday, December 20, 2014

Chinese Farmers in Russia Hit by Ruble Crash

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 soybeans and 80,000 tons of corn. The farm manager says the price in Russia will be 400-500 yuan less than the Chinese price this year, so they will send 95 percent of their produce back to China to avoid losing money.

Bringing the crops back to China is costly. It involves a long journey by truck, tariff, taxes, and inspection. Chinese border authorities require the grain to be packed in bags, adding more cost.The Chinese soybean price is nearly double the price in Russia, so farmers say it's profitable to send the crops back to China even with the high costs.

The head of the Heilongjiang soybean industry association estimates the province's soybean output to be about 5.8 million metric tons this year. The Chinese production of soybeans in Russia is estimated in the range of 20-to-30-thousand metric tons, so he's not worried that the influx of beans will put pressure on Chinese prices.

At the Suifenhe border crossing, a transit area for grain from Russia is busy. The most popular crop is soybeans. People in Heilongjiang estimate that 90 percent of the soybeans grown on Chinese farms in Russia will be brought back to China this year.

1 comment:

Dan Berg said...

what do you make of short term spike in Chinese interest rates? see shibor