Dim Sums: Agricultural Markets in China

At a July 22, 2015 executive meeting of the State Council, Premier Li Keqiang emphasized the necessity of transforming China's agricultural model . Instead of viewing "agriculture" as a compartmentalized activity for peasants, Li wants officials to treat agriculture as an industry that operates like a factory and is linked with processing and marketing sectors. Premier Li told a story that reveals the medieval view of agriculture that still prevails among many Chinese officials. Li recalled being confused during a visit to Canada ten years ago when his Canadian hosts spoke of "agricultural industry" (directly translated  "农业工业" according to the article, which is not a common Chinese term). Li wondered, "How can 'agriculture' also be 'industry'?" In China, "agriculture" and "industry" have always been two separate and compartmentalized parts of the economy. When the Canadians took Li on an agricultural t...

China's anticorruption drive led to a big drop-off in orders for fruit during its first year. This exposed an unhealthy reliance on government sales, and hopefully will spur farmers to pay more attention to what consumers want. As the fruit harvest approached in August 2014, Shanghai fruit producers faced an estimated 10%-20% decline in sales. The problem was that government departments they normally can count on for a big chunk of their sales weren't buying . According to the leader of a grape-producers' cooperative, government units normally bought 30% of their product in bulk either to give as gifts or distribute to their employees as a type of fringe benefit. With officials being careful scrutinized for their handling of public funds during the anti-corruption drive launched by Xi Jinping, government officials are afraid to get caught using public money for anything questionable. So nearly all sales to government units vanished. Last fall, another article reported ...

China's hog production is plummeting. The National Bureau of Statistics report on economic data for the first half of 2015 showed that pork production was 25.74 million metric tons, down 4.9 percent from the first half of 2014. The number of hogs slaughtered during January-June totaled 334 million, down 5.1 percent from last year. Item Jan-June 2015 Change from a year ago Million metric tons Percent Pork output 25.7 -4.9 Hogs slaughtered 334.4 -5.1 Hog inventory 417.4 -6.0 Source: China National Bureau of Statistics The number of hogs in inventory at the end of June 2015 was 417 million, down 48 million from the 465 million reported at the end of 2014. The 48-million decline in Chinese hog numbers over six months is more than all the hogs in Brazil, equal to three-fourths of the U.S. swine inventory or a third of hogs in the EU. The pork output number for the second quarter was down 7.5 percent year-on-year, twice as fast as the 3.1 perce...

Some Chinese market analysts see a signal of imminent corn price liberalization in an obscure document posted on a Chinese Ministry of Agriculture web site last week. The text consisted of two paragraphs on agricultural commodity price liberalization buried in a Ministry of Agriculture response to a policy recommendation offered by a National Peoples Congress member from Zhejiang Province. The main focus of the document is on cropland-consolidation policies, but two cryptic paragraphs offer an unusually incisive evaluation of Chinese agricultural price-intervention policies and sets forth a general blueprint for reduced interference that will allow market forces to have the "decisive role" demanded by top Chinese leaders. Rice and wheat will continue to have minimum prices, but prices of other major commodities--corn, soybeans, rapeseed, and cotton--will be determined by market forces. The document briefly recounts the 30-year history of gradually liberalizing farm price...

In recent years, China's soybean industry became compartmentalized: imported GMO soybeans are used in the edible-oil crushing industry while domestic non-GMO soybeans are used for foods like tofu and soybean milk. As Chinese soybean production falls, there are indications that use of imported soybeans is spilling over into the food processing sector. A June article on a Chinese website noted that food processors--including some large fast food chains--began using imported soybeans in 2012 as they became cheaper than domestic soybeans. The price advantage of imported soybeans was about 1000 yuan per metric ton in 2014. Now, says the article, "people are worried that imported GMO soybeans are going directly into their stomachs." The article explains that soybean crushing plants directly purchase imported soybeans in most of the 20 or so ports where the beans enter China. However, there is an open market for soybeans at two ports--Qingdao and Lianyungang--where importe...

Chinese authorities have launched a reform of their decade-old farm subsidy program that will divert funds for grain subsidies to "new-style" large-scale farm operations that don't currently get subsidies. Most subsidy funds will still go to villagers for their contracted land, but those subsidies are redesigned to make sure they plant grain on the subsidized land. The details on how the subsidies will be given are left up to authorities in five pilot provinces. The reform was initiated in an obscure document issued by the Ministries of Finance and Agriculture May 22, 2015. The reform focuses on so-called "three subsidies": a "general input subsidy" for grain producers a direct payment to grain producers subsidies for "improved seeds" for rice, wheat, corn, soybeans, rapeseed, cotton, peanuts, and highland barley. The document says the reform is necessary because changes in the countryside have rendered the subsidies ineffective in m...

Last month, Chinese scientists struck back against consumer fears about genetically modified crops. One scientist gave a speech designed to boost confidence in genetic engineering at a food safety forum held in Beijing. At another meeting last month a scientist noted that China has numerous genetically modified corn varieties that could pass  the country's multistage approval process within 3-to-5 years. At a "media training camp" on food safety sponsored by China's State Council, Professor Luo Yunbo, dean of Food Science at China Agricultural University, emphasized that this is the "biological century," and predicted that biotechnology will play a major role in food, environment, health and medicine. Luo emphasized that biotechnology is more predictable and efficient than conventional breeding. Luo dispelled three rumors that have been circulating on the Internet in China. A French study claiming to find more tumors on rats fed genetically modified c...