Dim Sums: Agricultural Markets in China

A joint venture between provincial state-owned companies reflects the resurgence of the State in grain marketing as Chinese officials cajole rich provinces into taking more "responsibility" for their grain supplies. The Zhejiang Province Rural Development Group announced that it signed an agreement to form a grain-marketing venture with the Heilongjiang Province State-owned assets commission. The venture will produce, store, and transport grain from Heilongjiang to Zhejiang. One of China's problems is that it is producing massive volumes of surplus, high-cost commodities in its peripheral provinces--corn and rice in Heilongjiang and Jilin, cotton in Xinjiang, pork in Sichuan. The central government bears the financial burden of subsidizing the storage and transportation of these commodities since agricultural hinterlands don't have much money and wouldn't spend it on agriculture if they did. The central government pipes money to farmers since it can't aff...

China's leaders have ordered their minions to overhaul the country's agricultural sector. The orders began with the top communist party leadership at their "economic work conference." The directive was repeated in the party's "No. 1 document" for 2015, and now the Ministry of Agriculture has issued a document putting top priority on a structural upgrade of the agricultural sector . The restructuring is wide-ranging, ambitious...and doomed to fail. The document suggests that officials are afraid to make hard choices in their planned overhaul of agriculture. Officials want to increase returns to farming, but they warn against abandoning grain production even though it brings low net returns. They want modern farming and mechanization, but they also call for promoting traditional culture and beautiful rural scenery. They want to promote environmentally-friendly farming and recycling of wastes, but they also call for cultivating idle "waste...

In 2012, Chinese officials were alarmed to discover that 99% of the country's corn imports came from the United States. They immediately rushed out to sign up Ukraine and Argentina as corn suppliers. Later, they signed up Bulgaria. An article reviewing China's 2014 corn imports concludes that China did indeed diversify its corn imports. Corn imports were down 20% during 2014, and all of the decrease reflected reduced imports from the United States due to rejections over the MIR162 issue. Imports from Ukraine, Thailand, Laos, and Myanmar increased. The Guoji Shangbao (Global Business News) article announced that the U.S. share of China's corn imports fell to 40%, "comparable to the proportion from Ukraine." Source: dim sums analysis of Chinese customs statistics .   This is a curious strategy for a country obsessed with "food security." The largest and most reliable corn supplier in the world is knocking on your door, offering to sell you as m...

China is in a dither about its swelling imports of agricultural commodities. The imports reflect a massive misallocation of resources. As China imported more commodities it also stored away massive amounts of its own harvest to keep prices high. Note: Imports for calendar year of soybeans, other oilseeds, grains, distillers grains, fish meal, and cassava; policy purchases by the government at minimum prices or for "temporary reserves." Source: dim sums blog using data from Chinese customs statistics. During 2014, Chinese authorities purchased 123.9 million metric tons of grain to support prices under its minimum purchase price and temporary reserve stock-holding programs. That was 35 percent of all grain purchased in the country and 20 percent of China's entire grain crop last year. The volume of policy-style purchases was up 40.7 mmt from 2013. The director of China's grain bureau said that the government's price support programs encouraged the country'...