Dim Sums: Agricultural Markets in China

Years of excessive chemical fertilizer use have reduced the productivity of rice paddies in many parts of Hubei Province, according to a news report from China's official broadcasting service . Mr. Song, a Hubei rice producer who has contracted 1650 mu (272 acres) of land, says yields have been declining and he now plans to leave a lot of his land fallow or plant other crops on his rented fields. Describing a kind of treadmill process, he says his chemical fertilizer application has doubled but yields are about the same as a decade ago. According to the article, this phenomenon of declining yields and land left idle is common all over Hubei Province, one of China's leading rice-producing areas. An agricultural technician explained that the lower yields are due to the compaction of the soil. After many years of applying chemical fertilizer, a 20-cm. layer of fertilizer has built up. Oxygen cannot penetrate below the surface. The soil is difficult to plow, whether using water...

Chinese officials are obsessed with self-sufficiency because they don't believe in equilibrium. They view the market as an inherently unstable mechanism in which the winner takes all. In their binary view of imports and domestic products, once imports gain a foothold, they will inevitably take over the market and completely drive out domestic producers. Therefore, this thinking dictates that China must block imports or isolate them from the domestic market by confining them to special economic zones, export-processing, or state-trading monopolies. This linear, binary thinking is an impediment to finding an equilibrium between imported and domestic supplies of food that is surely China's future. Two views of the way forward in agricultural markets are contrasted this month in (1) a speech by a top policy advisor and (2) an essay about the dairy industry that appeared in a Chinese livestock industry journal. A speech to an international agribusiness conference in Beijing thi...

China's livestock industry is set to receive central government support for policies to subsidize acquisition of breeding stock, construction of large-scale farms, subsidized insurance, manure treatment, free vaccinations, compensation for culling animals, aid for disposing of diseased carcasses and subsidies for village veterinarians. Most of the 2015 livestock programs reflect a decade-long campaign to reshape the livestock sector into a "modern" industry launched during the 11th five-year plan. By 2005, the sprawling, chaotic sector composed of hundreds of millions of "backyard" producers had become subject to cyclical swings in prices and disease epidemics, including a serious avian influenza outbreak at the time. Chinese officials made "livestock modernization" a theme of the five-year plan for 2005-10. The programs gained more impetus from an epidemic of "blue ear" disease combined with a mass-culling of sows in 2006-07 that sent por...

Just as the broader Chinese economy has entered a "new normal" phase of less-rapid growth and structural change, the livestock industry has also entered a "new normal" that is changing the structure of consumption, production, and marketing of livestock products. China Animal Husbandry and Veterinary News laid out these changes in a recent article. Over the last two-plus years, China's central communist party authorities have pricked a "bubble" of excessive and wasteful livestock product consumption by ordering officials to cut back on banquets, special cafeterias, and gifts. New supply and demand relationships have become apparent over the past two years. Hogs and chickens are in excess supply with prices declining, but China has structural shortages of beef and sheep meat which may persist in the future. A new change since last year, said the Animal Husbandry News , is a slight decline in the price of mutton after years of increase. The News say...

An April 2015 study tour of feed and livestock producers in Guangdong Province reveals how the industry's discovery of imported sorghum undermined Beijing's attempt to enforce high Chinese corn prices by banning corn imports. The flexibility and inventiveness of industry on China's southern coast contrasts with the sclerotic inside-the-box thinking at communist party headquarters in the northern capital. A survey team organized by COFCO's futures market research unit with support from Dalian Commodity Exchange spent 7 days visiting feed, livestock, oilseed-processing, ports and trading companies in ten regions of Guangdong Province. Guangdong is one of China's two largest feed-milling provinces, the largest importer of feed ingredients, and a major producer and consumer of livestock and aquaculture products.  (A more detailed rundown of the visits is here .) The survey team estimated that sales of feed are overall dow...

As shipments of imported sorghum soar, inspectors at Chinese ports are carefully scrutinizing the grain for problems. Inspection and quarantine authorities say they have stepped up inspections and testing to prevent new pathogens and weeds from entering the country, but more cynical observers might suspect that the inspections are a disguised trade barrier. A May 4, 2015 article entitled " The 'Hidden Killer' in American Sorghum " announced the discovery of a pathogen that causes "grape vine blight" in a 49,000-metric-ton shipment of U.S. sorghum at a port in Shenzhen. The article originated with China's inspection and quarantine authority and has been re-posted on a number of Chinese web sites. The pathogen, phoma glomerata , is said to have a wide range of possible hosts, could threaten "hundreds of plants," and could inflict "incalculable" losses on China's environment and agricultural production, according to the article. ...

While China's economy and living standards appear to be approaching first-world levels, the economy still relies on a rootless army of migrants from the countryside. The flood of migrants has slowed and is getting older, but wages still rose nearly 10 percent during 2014.   The annual survey of rural workers by China's National Bureau of Statistics reports that 274 million rural people had nonfarm employment in 2014. Most of those workers--168 million--were migrants who left their place of official residence in the countryside to find work. Separately, the Bureau reported that the "floating population" (people who live in a city other than the place where they are officially registered) was 253 million--18 percent of the population. The 168 million migrants equal more than a fourth of China's workforce: 28% of the 778 million people reported employed in China during 2014. Of the migrants, 36 million have made a permanent move, and 132 mi...

Chinese officialdom has decided to make a great leap to scale farming without privatizing land. The stated goal of letting the market have a "decisive role" in resource allocation is undermined by banning development of a market to allocate land, the most important resource in farming. The result is a "market failure" which means Chinese officials step in to play a central role in brokering and subsidizing deals to consolidate land and launch new-style scale-farmers. A sprawling list of 50 farm policies  published by China's Ministry of Agriculture last month included new policies aimed at new-style scale farmers--specialized grain producers, "family farms," alliances of farmers, farmer cooperatives, and farming companies. This year, China allocated RMB 23.4 billion (about $3.8 billion) for new-style scale farmers in addition to its usual direct payments, seed, input, and machinery subsidies. The MOA list also revealed that bureaucracy is...