Dim Sums: Agricultural Markets in China

Grain and Oils News quoted a rapeseed farmer in China's Hubei Province who said, "At this price, I won't plant rapeseed next year. Wheat has a support price and earns a higher return, so I'll plant wheat." This farmer's comment encapsulates the unanticipated consequences of setting an attractive price for wheat while all other prices are collapsing in a weak Chinese economy. On October 10, Chinese officials announced that next year's minimum price for wheat will be held steady at this year's level of 118 yuan per 50 kg. According to Futures Daily ,  the government announced the unchanged price for next year in order to bolster confidence among farmers who were considering abandoning wheat due to declining prices. Many in the industry were expecting a cut in next year's wheat price because Chinese wheat prices started falling in October after the conclusion of the 2015 minimum-price purchasing program. The announcement eight months ahead of t...

There are rumors that China's Ministry of Commerce is mulling an antidumping investigation to slow imports of U.S. Distillers Dried Grains with Solubles (DDGS). On October 27, 2015, China's Farmers Daily published a collection of articles from a "corn industry alert" meeting held by the Ministry of Agriculture's Information Center on October 9 where industry representatives discussed how to deal with problems of soaring corn stockpiles, declining prices, weak demand and pressure from imported corn substitutes. Two of the articles called for limits on DDGS imports to help the domestic ethanol industry return to profitability. DDGS is the by-product of manufacturing ethanol from corn. China also has manufacturers of ethanol for fuel, beverage and industrial uses who rely on selling distillers grain by-products for a significant portion of their revenue. Domestic DDGS prices have tumbled by half or more over the past year. One price report today says DDGS pr...

With demand weak and another big harvest underway, Chinese prices for major farm commodities are falling. It looks like China's attempt to hold the line against falling world prices over the past two years is gradually collapsing. Corn prices are leading the decline. In September, Chinese authorities announced that the floor price for corn in northeastern provinces would be 2000 yuan/metric ton, down about 10% from last year. Since then, corn prices in China have fallen about 20% and are now far below the 2000-yuan floor price. The Ministry of Agriculture price report for October 21 says prices were generally in the 1600-1780 yuan/metric ton-range. Pries are below the 2000-yuan floor in the northeast provinces--Liaoning, Jilin, and Heilongjiang--where the program will begin operation in November. (The floor price, or "temporary reserve" program only applies to the northeastern provinces, but most farmers sell to an intermediary at a discount who then sells the grain ...

The government grain reserve corporation in China's largest grain-producing province warned that its grain stockpile could grow by 50% after this year's crop is harvested. The grain stockpile is sucking up capital to finance purchases of a commodity that is largely substandard and falling in value. Stricter standards for purchasing threaten to leave farmers stuck with unsalable grain. The Sinograin Corporation's Heilongjiang Province branch said it is already holding a stockpile of 81 million metric tons (mmt) of grain, and it could grow to 120 mmt after the 2015 crop is marketed. Sinograin anticipates procuring 35-40 mmt of this year's grain crop in Heilongjiang--13 mmt of rice and 22-27 mmt of corn. The Heilongjiang branch of the government's Agricultural Development Bank of China says it has 140 billion yuan (about $22 billion) to finance purchases of grain for the stockpile if necessary. With a massive oversupply of grain last year, ADBC reported financin...

Substandard wheat and rice harvested in China this summer presents a quandary for Chinese price support programs. Officials are ordered not to purchase substandard grains for the national grain reserve. Instead, provincial officials are being prodded to subsidize purchase of the worthless grain. With downward pressure on prices and many flour and rice mills operating far below capacity, the government launched intervention purchases at minimum prices for wheat and early-season rice harvested during the summer. The government's grain reserve corporation began buying wheat at support prices in late May in five provinces (Jiangsu, Hubei, Anhui, Henan, and Shandong), In July it began purchasing early-season rice in three provinces (Jiangxi, Hunan, and Hubei). According to Farmers Daily , total intervention purchases of wheat totaled 19.5 million metric tons as of September 10, which was 23% less than in 2014. Large portions of wheat did not meet government standards in parts of Hub...

China produces about half of the world's pigs, but its farmers are still figuring out the business of commercial hog production. The average daily weight gain of hogs has risen dramatically from about 0.4 kg/day in the early 1990s to nearly 0.7 kg/day for "scale" farms (30 or more head), but improvement seems to have plateaued in the last few years. Source: Calculated from China National Development and Reform Commission production cost survey data. A recent article in China Livestock and Veterinary News  asserts that Chinese farmers are taking on bigger and bigger risks as the scale of hog farms grows larger. The author points out that farmers experience big losses from lackadaisical management and cutting corners in ways that result in spread of disease and poor performance. He hopes that calling attention to these "loopholes" will bring them "from tears to riches." The author points out that modern livestock production is a high-tech ind...