Dim Sums: Agricultural Markets in China

In northeast China's Changchun City, farmers, suppliers and construction companies gather at the gates of Dacheng Biotech Group to collect on unpaid bills. Most go away empty-handed from the mostly-deserted headquarters of Asia's largest corn-processor which has been idle most of this year. The company is listed on the Hong Kong stock exchange and is Asia's largest "deep-processor" of corn, yet it has accumulated 80 million yuan in unpaid IOUs to farmers who sold corn to the company. The money owed to farmers is a miniscule part of Dacheng's arrears.  Voice of China reports  that a company official says Dacheng is behind on RMB 9.8 billion in bank loans and owes RMB 1.2 billion to suppliers. They claim to have struck a deal to pay off debts to farmers by the end of the year. After a string of bad business decisions and with demand for its main product shrinking along with the Chinese hog herd, Dacheng Group's cash flow has dried up. China's big f...

Chinese authorities are intent on overhauling their bloated farm subsidy program after it spiraled out of control in its first decade. They urgently need to move on to a new generation of subsidies, but they have encountered unexpected problems in trial programs. Economic Observer reports that agricultural subsidy programs are in the midst of a major reform. Business Reference News reports that the 13th Five-Year Plan (2016-2020) will alter grain subsidies and reform the fiscal system for disbursing the funds. Economic Observer says there has been a lot of criticism of agricultural subsidies for their cost, ineffectiveness, and complexity. There are 50 major agricultural programs, and according to some estimates their annual cost is over 1 trillion yuan (nearly US$ 160 billion). There have been a number of motions and proposals to reform agricultural subsidies put forward at National Peoples Congress sessions during the last several years. At this year's session, the chair...

Chinese authorities lowered their floor price for corn for the first time since the program began as they battle bloated stockpiles and surging imports of corn-substitutes. A September 18 document from China's Grain Administration announced  a "temporary reserve" price for corn of 2000 yuan per metric ton for 2015/16. This is an 11-percent cut from the 2014/15 level and a return to the level set in 2011/12. This year's price floor is equivalent to $8 per bushel, more than twice as high as corn prices in the United States. The beleaguered temporary reserve program will operate only in China's four northeastern provinces from November 1 to April 1 (about a month earlier than in previous years). This year, the program will set a single floor price for all four provinces instead of setting different levels for Heilongjiang, Jilin, and Liaoning/Inner Mongolia as had been done since the program was first launched in 2008. The discount/premium for different grades ...

President Xi Jinping is trying to engineer an historic overhaul of China's rural economic and political system. He appears to be adopting approaches that echo the Mao era, which is ironic since Xi's challenge is to uproot deeply-entrenched institutions put in place by Mao himself. Earlier this month, a "Xi Jinping San Nong Thought" seminar on rural affairs was held in Beijing in conjunction with the celebration of the 60-year anniversary of the "war to resist Japanese aggression." Xi was not there personally and the seminar had no connection to the war or the Japanese. A procession of reliable apparatchiks gave speeches explaining "Secretary Xi Jinping's" concern about agricultural and rural problems and his approach to addressing them. Xi was not physically present at Minister of Agriculture Han Changfu's Q&A with unidentified journalists on September 14 either. But Xi's name was invoked five times by Minister Han in his disc...

Genetically-modified soybeans are illegally grown in parts of China's major soybean-growing region, according to a report from China Business Journal , a news media outlet. On September 9, t he provincial agriculture commission announced an investigation of illegal soybean cultivation and says the culprits will be "severely dealt with." A food processing company that buys soybeans in Heilongjiang Province told China Business Journal that it discovered GMO soybeans during 2013 and 2014 when it tested samples it had purchased in the province's Suihua prefecture. The company claims that GMO soybeans are widely grown in counties of that region. No one knows where the seeds came from. One Heilongjiang field manager reports that seed from a trade show was surreptitiously sold. According to China Business Journal , Monsanto says they have never sold GMO seed in China. Other reports say that stealing and propagating seeds is commonplace in China. Chinese authorities hav...

As China's fall harvest arrives, there is strong downward pressure on farm commodity prices. Downward pressure in international markets and weak demand in China are driving prices down as attempts to wall off the Chinese market from the world are crumbling. News reports say the government is deliberating on how much to cut this year's support price for corn from last year's prices of 2220-2260 yuan/metric ton in northeastern provinces. However, early-harvested spring corn from Shaanxi and Xinjiang is already selling below 2000 yuan/mt . Prices are at or below 2000 yuan in in north China (Henan and Hebei) where some private warehouses are selling off their old corn from inventories to clear out space for the new crop--and perhaps they also anticipate a slide in prices. Chinese futures prices for January corn are trading even lower--well below 1950 yuan. According to one calculation , the cost of U.S. corn arriving in China was estimated at 1593 yuan/metric ton, which w...

China has subsidized creation of the world's largest cotton patch in its arid northwestern Xinjiang territory. China is the world's second-largest cotton producer, and 60% of its output came from Xinjiang in 2014 (one source says the share is 70% in 2015). Hundreds of thousands of laborers have to be brought in from other provinces to pick the cotton. And, with virtually no textile industry nearby--the government is also subsidizing the creation of a Xinjiang textile industry to process the cotton. A survey by the Xinjiang Academy of Agricultural Sciences reported last month that farmers there received an average of 444 yuan per mu (about US$ 435 per acre) in subsidies from the trial "target price" subsidy program that began in the 2014/15 marketing year. The subsidy was enough to give the Xinjiang cotton farmers a profit of 235.8 yuan per mu. Without the subsidy, farmers would have lost 208.56 yuan per mu. Propaganda photo shows Xinjiang man getting cotton su...