Saturday, December 31, 2016

China Corn Price Dips Again

Corn prices in China fell about 15 percent over the past month after a brief rebound during October-November. Chinese officials would like to export some of their surplus corn in 2017, but they are not willing to let their price fall low enough to be competitive on the world market.

According to an analysis by, tight supply conditions in the early months of China's 2016/17 corn marketing season have reversed. The peak season for corn sales has arrived, and weather and logistics factors that constrained corn marketing during October-November have now been alleviated. Cofeed says that farmers in northeast China have given up their reluctance to sell their corn after receiving their corn producer subsidies. They need to raise money to pay off loans and prepare for the Chinese new year holiday.

Demand for corn in China, meanwhile, is tepid. Hog farmers have stepped up their slaughter as the peak consumption season approaches, and there is little impetus to expand among either hog or poultry producers. Purchases by industrial processors motivated by subsidies of 100-200 yuan per metric ton in northeastern provinces have tailed off as commercial inventories piled up. A number of starch manufacturers in north China have shut down or cut back on production due to environmental regulations aimed at clearing up what may be the worst-ever air pollution in the region.

Futures Daily also reported that corn traders have seen a much larger volume of corn entering the market recently, and processors have received more deliveries than they can use. The spot price at ports in Liaoning Province has fallen to 1500 yuan per metric ton and the futures price for May 2017 delivery has fallen to the same level.

According to prices posted on the Ministry of Agriculture web site, cash prices at Dalian ports fell about 15 percent from November 24 to December 29.

Corn prices at ports in Dalian, China during 2016
Month Yuan/mt
24-Nov 1750-1780
30-Nov 1720-1740
7-Dec 1660-1680
14-Dec 1580-1600
21-Dec 1490-1510
29-Dec 1490-1510 reports that the price for domestic corn arriving from the northeast in Guangdong province reached 1600 yuan per metric ton on December 26, down 310-340 yuan from late November. The estimated C&F price of U.S. corn arriving in Guangdong is estimated at 1570 yuan. Cofeed pronounces that imported corn has lost its price advantage. They forecast that China's corn imports will be about 2 mmt during calendar year 2017, down from an estimated 3.1 mmt in 2016.

There are also rumors that China plans to export corn. Cofeed reports that the Chinese government has issued export licenses to a number of large trading companies, and surmises that there is a strong likelihood that China will export corn in 2017.

Another online outlet reported that COFCO and at least one other state-owned company received corn export licenses in September, and linked China's corn export plan to the need to dispose of corn inventories. This report mentioned an initial estimate of 2 million metric tons for the export campaign, a volume that would put further downward pressure on international prices.

An article by COFCO's futures research institute anticipates that China could export large amounts of corn from the 2016/17 crop while channeling corn from massive reserves into the domestic market.

This month's corn prices at Dalian (the likely point of departure for any exports) translate to US$215-217 per metric ton, which does not appear to be competitive in nearby export markets. The average value of November corn imports by Japan ($188) and South Korea ($208) reported by customs statistics were lower than Chinese prices. Taiwan imported corn at $181 in October. There is speculation about whether Chinese officials will subsidize exports--that would be a violation of China's WTO accession commitment not to use export subsidies for agricultural commodities.

Despite their ambitions to export, Chinese authorities are taking action to prevent domestic corn prices from falling enough to be internationally competitive. At the beginning of the marketing season officials adopted an informal price floor of 1400 yuan per metric ton in northeastern provinces which they calculated to be the breakeven price that covers farmers' production costs (not including land rent). With renewed downward pressure on prices, Sinograin--the government's grain reserve corporation--is rumored to be preparing purchases of corn to hold the 1400-yuan "line of defense." Instead of the massive purchases used to support prices in the last 10 years, this year Sinograin is making small intermittent purchases and making announcements about their 1400-yuan price to put an informal floor under prices.

To put this informal price floor in perspective, the 1400-yuan "line of defense" is 30 percent less than last year's "temporary reserve" support price of 2000 yuan. The end of the temporary reserve program left a big hole in the northeastern corn market. Grain Bureau statistics show that only 36 mmt of the 2016 corn harvest had been purchased in major producing provinces as of December 25. That was 25.9 mmt behind last year's pace. The December 25 purchase volume also represents only 16 percent of the harvest reported by the National Bureau of Statistics.

China is moving at a snail's pace toward equilibrium in its corn market. Despite already-massive excess supply and huge reserves, the National Bureau of Statistics reported that 2016 corn production declined only 0.3 percent from the previous year. Cofeed estimates that corn consumption will be 190 mmt in 2016/17, which falls far short of the estimated production of 219.6 mmt. Chinese officials are targeting a decline in corn planting of only 10 million mu (670,000 ha). The COFCO futures analysis sees a possibility of a La Nina causing a surge in prices that would allow China to offload its reserves. Absent a catastrophic event or other market turmoil, it looks like China will have excess corn supplies for years to come.

Tuesday, December 27, 2016

Controversy on GMO Ban in China Province

A Chinese Province has banned planting genetically modified crops for five years. The ban has a complicated back story which includes another cynical manipulation of food safety hysteria to protect a province's soybean industry.

According to Xinhua News Agency, the ban was adopted this month as a revision of Heilongjiang's 4-year-old food safety regulations. The new regulation passed by the standing committee of the province's Peoples Congress stipulates that genetically modified food crops--specifically rice, corn, and soybeans--may not be planted in regions administered by the province starting May 1, 2017. It also bans the illegal production and marketing of genetically modified grain seeds, as well as illegal production, processing, and sale of food products containing GMOs. The regulation bans illegal imports or smuggling of GMOs. The regulation demands that genetically modified agricultural products and foods containing genetically modified material must be placed on specially-designated shelves or areas of retail stores or markets.

A Heilongjiang official involved in formulating the ban said the province supports research and development of genetically modified crops and does not oppose experimental trials, but the province thinks caution in the dissemination of genetically modified crops is "a wise choice" as long as there is "no accurate answer" regarding whether this technology is safe.

An unnamed agricultural official from the province said the genetically modified crops are not "green" food, so banning them gives more room for development of a "green food industry" and the ban "maintains food safety at the source," they said.

The Heilongjiang ban is controversial in China. Futures Daily praised Heilongjiang as a model for food safety regulation. According to Futures Daily, unnamed experts say the ban reflects the wishes of the public and should be a model for other provinces. Several other news media organs affiliated with the central communist party authorities, however, fired back with criticism of the province's ban.

Jinghua Shibao--a paper backed by Beijing propaganda authorities--criticized the Heilongjiang legislators who promulgated the ban for lacking scientific and legal knowledge. Jinghua said the ban is superfluous, as it duplicates existing laws. It also conflicts with the State Council's authority over agricultural GMOs, Jinghua said. The central government has set up a system to test and approve GMO crops. Jinghua also pointed out that the ban conflicts with the pledge to pursue commercialization of pest-resistant corn and herbicide-tolerant soybeans in the 13th five-year plan for science and technology innovation. Heilongjiang is China's largest producer of both corn and soybeans.

Jinghua Shibao further criticized the Heilongjiang GMO ban on scientific grounds. Jinghua quoted academicians from the Chinese Academy of Science who assert that transgenic technology used in breeding is not a food safety or environmental threat. One scientist pointed out that the Ministry of Agriculture, the United States FDA and Academy of Sciences have found no food safety concerns with GMOs. Jinghua commented that it is "worrying" that Heilongjiang legislators have insufficient understanding of science and technology.

In an article subtitled "Don't let the public be misled in science," Science and Technology Daily raised concerns that divided opinion on the GMO ban posed "endless worry for the development of transgenic technology" in China. This article quoted scientific experts who assert no conflict between genetically modified crops and "green" development.

Science and Technology Daily implied that the province's commercial concerns are the real motivation behind the ban when it quoted a Heilongjiang official who explained that the ban is designed to transform the province from a "big granary" to a "green granary," a "green garden," and a "green kitchen." The Heilongjiang official explained that this strategy is predicated on the concerns about GMO foods among Chinese consumers.

The Xinhua article on the Heilongjiang ban said the provincial statistics bureau found 91.5% of people surveyed in Heilongjiang during October opposed the production of genetically modified crops in the province.

"Do not let food safety concerns be kidnapped by local interests," another commentary on Guangming Net, suggested that food safety concerns mask the protection of local interests that lies behind the GMO ban in Heilongjiang.

Early in the last decade the Heilongjiang Province soybean industry began strategizing to use "non-GMO" and "green" attributes to differentiate their product from imported soybeans. Over the years, this business strategy morphed into a strategy of manipulating GMO fears to portray imported soybeans as "unsafe."

The first "soybean revival plan" was launched in Heilongjiang during 2001, the year China joined the WTO and about five years after China began importing soybeans in large volumes. That campaign sought to help local farmers compete head to head with imported soybeans mainly by subsidizing seeds for high-oil varieties used to produce oil and meal. A smaller proportion of seeds were for high-protein beans--used for food products like tofu and soybean milk.

In 2003, the Ministry of Agriculture released a plan focused on developing "high-oil soybean" advantaged areas, mainly in Heilongjiang. The focus on high-oil varieties probably reflected the fact that it was also (primarily?) intended to protect soybean oil processors in the province, most prominently a particular company affiliated with Heilongjiang's state farm system.

China's first regulations for management of genetically modified organisms were also issued in 2001. The 2003 high-oil soybean plan launched the strategy of taking advantage of GMO fears to differentiate non-GMO Heilongjiang soybeans as "safe." The plan advocated using the "food safety advantage" of Northeastern China's non-GMO soybeans to create a market niche among consumers around the world who worried about GMOs. One of the four recommendations of the 2003 plan to "strictly enforce the regulations on GMO labeling" used language nearly identical to the Heilongjiang official's explanation of this month's ban. The plan said that supervision of GMO products had to be strengthened to protect consumers' "right to know" and "right to choose" as long as the harmful effects on human health and the environment are not fully determined.
A 2004 article on strategy for Heilongjiang's soybean industry emphasized the advantage of non-GMO soybeans, recommending the industry follow public opinion and consumer psychology. This article recommended setting up specialized non-GMO soybean-producing districts to ensure that GMO beans do not mix with non-GMO beans. However, the authors were not themselves anti-GMO: they also called for staying abreast of world research on GMO soybeans.

Soybean imports doubled in spite of the plans and subsidies for Chinese soybeans. Chinese news media began to routinely refer to "GMO imported soybeans." They also adopted military metaphors such as "invasion" and "war." A 2007 article, "Restore the glory of the soybean industry in Heilongjiang and the entire country," warned that the surge of imported soybeans had reduced domestic production and prices and allowed foreign companies to take control of the vegetable oil industry. A 2009 article pronounced another soybean crisis in which "the industry seems weak but it holds the good non-GMO card."

In June 2013, Heilongjiang's soybean advocates played the GMO card in a big way by asserting on national television that imported soybeans cause cancer. In a program on China's Central TV network, the deputy director of the Heilongjiang soybean association claimed he had found a correlation in the incidence of cancer across provinces and the consumption of GMO soybean oil. The industry official produced no scientific study, instead turning the tables by demanding that proponents of GMOs produce studies proving they are safe. The soybean association official's evidence: "After working over 20 years in the grain industry, I have seen the possibility that GMO soybean oil and the probability of developing tumors are related." He cited a 2012 study by a scientist in France that was withdrawn due to poor experimental design and an unconventional release of the results calculated to generate sensational news media stories before any other scientists could refute them.
Heilongjiang soybean association official interviewed on TV
about his findings linking soybean oil consumption to cancer.

The soybean industry official said at the time, "Our association’s conclusion is that edible transgenic soybean oil can cause cancer and infertility in consumers. so GMO soybean oil should not be used for commercial consumption without findings that it is safe." This scared Chinese consumers accustomed to food safety scandals, and was followed by numerous other news media reports on the topic. The alleged GMO-cancer-infertility link became conventional wisdom for many Chinese citizens, yet soybean imports continued growing.

In January 2016, the soybean industry official repeated his assertion that imported GMO soybeans are unsafe and proclaimed that it was time for the country to take action. However, most of his comments were focused on his assertion that excessive soybean imports are a "powerful weapon for foreign control of the Chinese vegetable oil industry." The official emphasized that China needed to keep its non-GMO soybeans separate from GMO beans to prevent contamination because there is such great demand for non-GMO soybean protein used for foods in Japan, Korea, the United States and Southeast Asia.

Returning to the ban on GMOs announced this month, none of the articles quote the deputy director of the Heilongjiang soybean industry association even though he is normally quoted in nearly every news media article on the soybean industry. However, the Heilongjiang officials explaining why they promulgated the ban used language nearly identical to his, including the demand that safety of GMOs be proven before they are commercialized and referring to imported soybeans as a "powerful weapon."

A Heilongjiang legislative official quoted by Science and Technology Daily admitted:
"In fact, early on we worried that imported crops carried a GMO weapon. I saw on the internet that people in Europe claimed that GMOs caused tumors, although that was later refuted. But clearly these rumors have taken root."  
A science writer quoted in the same article said, "Anti-GMO [attitudes] persist despite refutation of the rumor." His assessment was that "the incident reflects a lot of problems," including insufficient knowledge of transgenic technology among local officials.

An economics professor at Beijing Technology University also quoted by Science and Technology Daily who has studied adoption of GMOs in agriculture for many years said,
"It is not hard to incite public opinion with bewitching rumors. It is easy for rumors to influence public policy when the public lacks correct knowledge and information."

Wednesday, December 21, 2016

China B-ball League Blames Doping on Pork

A Chinese basketball star appealed his suspension for failing a doping test by arguing that he must have accidentally ingested the banned substance through something he ate. Such allegedly inadvertent doping incidents have become so common that the Chinese Basketball Association has told teams to require their players to eat all meals in team hotels.

Tao Hanlin, star player for the Shandong Hi-speed team in the CBA, failed a doping test prior to a game on November 29. He has been suspended from league play since then. The Shandong team has lost 5 of 8 games since Tao was suspended.

Tao tested positive for "lean meat powder" (瘦肉精), a colloquial name used in China for a class of beta agonists that are used to build muscle. Clenbuterol is the most common one. These compounds are used by bodybuilders to build muscle mass, but farmers also use them (illegally) to raise pigs and other livestock with a higher proportion of muscle instead of fat. The use of beta agonists in raising livestock has been banned in China since 2000.

Tao claimed that he must have ingested the banned substance accidentally from food that he ate. A league hearing held on December 20 confirmed Tao's claim that he accidentally ingested the banned substance, but his suspension has not yet been lifted. The National Sports Bureau is reportedly reviewing the results of the league's investigation before a final decision is announced.

Beijing Youth Daily reports that alleged inadvertent doping tests in China's basketball league are on the upswing. Tao's teammate, Jia Cheng, has also been suspended for failing a drug test. Jia's story is that he accidentally ingested a banned substance when he used an herbal balm to recover from injuries before an international competition last summer. In previous seasons other players have blamed their failed drug tests on substances in food. One such player got off with a warning instead of a suspension last season.

League officials have urged teams to require their players to eat with the team in their hotel or training facility. Moreover, they recommend requiring the hotel to keep records of all the food served and save samples of meat for at least 3 days.

Some players complain that such draconian rules would be hard to enforce. It would be unreasonable to ban players from going out after games or having dinner with friends, some players say.

Inadvertent failure of drug tests by athletes has been a concern since Beijing hosted the Olympics in 2008. Special pig farms were set up to supply Olympic facilities and athletes were forbidden to eat outside the Olympic Village. Two years ago, this blog posted a review of cases where Chinese athletic teams were forbidden to eat outside their training facilities to avoid inadvertent consumption of beta agonists.

In 2015, Ministry of Agriculture testing showed that only 4 percent of meat samples were rejected, and an official claimed the problem was under control. During 2016, the Ministry launched a tighter inspection regime for hog slaughter plants, and one of the priorities was to prevent beta agonists from entering the meat supply. The inspection uncovered 4839 cases of illegal behavior, but did not say how many involved beta agonists. This year's campaign also closed 2715 illegal butchering operations.

Tuesday, December 13, 2016

Farm Costs "Strangle" Competitiveness in China

China's high farm production costs stem from high land rents, incompatibility of fragmented fields with mechanized farming, and tenants' disincentive to make long-term investments, according to a recent article in Economic Information Daily.

The article zooms in on bottlenecks in a countryside set up for small-scale subsistence farming that are "strangling" the competitiveness of newly commercialized Chinese farmers caught between the "floor" of rising production costs and the "ceiling" of low prices for imported commodities. The director of a government grain-buying station in Jiangxi Province identifies high costs as the root problem that keeps Chinese farmers from being internationally competitive. "If we don't address this problem, the volume of grain imports will be hard to reduce," he warns.

The director of rice producers cooperative in Jiangxi said land rent of 350 yuan per mu per crop --farmers here commonly grow two rice crops per year -- is the largest component of  production cost for rice. Taking into account the local yield, the the 850-yuan production cost translates to a break-even price of 2 yuan per kg for paddy rice. That translates to a price for milled rice of roughly $450 per metric ton at the current exchange rate. That price is slightly higher than the average value of China's imports of rice from Vietnam during October 2016.

The Jiangxi Province production cost survey estimated the rice production cost at 958 yuan per mu, but their estimate of land cost was only 150 yuan. The production cost survey estimated that farmers' profit was only 113 yuan per mu, down 26.7% from last year.

The cost survey team in Jiangxi's Fuzhou County estimated the rent for good quality land at 700 yuan per mu (about $250 per acre at the current exchange rate). The Fuzhou team attributed the high rental to competition for a limited supply of good land due to "blind" investment in commercial scale farming by some farmers and outside investors. A local agricultural official in Anhui Province's Taihe County estimated local land rent at 800-1000 yuan per mu ($287-$359/acre), which he described as "exceeding farmers' expectations."

In Quanjiao County of Anhui Province, a provincial agricultural official estimated that the cost of planting a winter wheat crop followed by rice costs 1700 yuan per mu to produce. At minimum prices for both crops and taking into account average yields, he estimates the "profit" at 150-200 yuan per mu.

Farmers would like to mechanize production to save on labor costs as off-farm wages soar. However, the Economic Information Daily reporter found that poor rural infrastructure impedes the mechanization process. An official in Hunan Province described the problem with a popular saying: "Tractors can't get through the gate, can't get down to the field, and can't get home." A large-scale farmer in Jiangxi Province told the reporter that there is a harvester that can be hitched to a tractor but it can't be used in the small, fragmented fields in his area.

Economic Information Daily also found that large-scale farmers have little incentive to make long-term investments to address the poor infrastructure due to "unstable contracting relations." Rural land cannot be bought or sold--farmers who want to expand their operations must rent the rights to use the land from dozens of villagers. Thus, large-scale farmers are tenants who face the risk of losing the land. Another risk is that the villager/landlords may demand higher rents if the tenants make investments in the land that raise their profits.

Another farmer in Poyang County of Jiangxi Province who has been renting in land for ten years gave an example. During rains the roads he uses to reach his fields become flooded and impassible. He finally spent 10,000 yuan to hire trucks to put gravel on the road. The farmer says he would have made a larger investment to pave the road a long time ago if he had more certainty about his control of the farmland. The "instability" of land rental raises costs by inducing farmers to spend money on repeated short-term fixes, the Poyang farmer said.

The Economic Information Daily reporter asserts that slow development of farm services also contributes to high production costs. For example, he finds that farmers are unable to hire people to bring in machinery to plow, seed, or harvest their fields at a reasonable cost because custom-farming services have been slow to develop. The government instead subsidizes small farmers to buy their own machinery which is only used a few times a year. The reporter describes the idle machinery as wasteful and costly.

According to a Jiangxi farmer cultivating 10,000 mu (4050 acres), farmers still have to spend a lot of their own money to buy farm machines even though there is a generous government subsidy. He says the farmers would rather hire someone to come in to do the plowing, seeding and harvesting for them instead of buying their own machines. But they usually charge a high fee--if you can find someone to do it.

This farmer plans to act as an input dealer and offer mechanized farming services to other farmers. He says he can buy seed, fertilizer and pesticide in bulk directly from the factory at a discount which he passes on to farmers who buy from him. He also offers custom farming services. He claims these services can cut production costs for his farmer-customers by 100 yuan per mu.

The director of an extension station in Anhui Province recommends that the government regulate land transfer to facilitate rentals and reduce costs. He recommends setting land rentals to ensure that farmers get a minimum net return. This sounds like turning agriculture into a public utility.

The weak incentives for farmers to make long-term investments means that it's up to the government to make the investments. And indeed, one of the government's headline agricultural support programs is to build "high standard" agricultural fields. However, it's unclear that the government can do all of the investment. The construction programs subsidize only part of the cost, with much of it financed by loans. A local official in Anhui Province's Tongling City observes that the central and local governments have been engaged in such rural infrastructure programs for years, but the pace has been insufficient to address the problems. Moreover, there are too many unpaid debts from this program, the official said.

An official in Gao'an County of Jiangxi agrees that the pace of construction is not fast enough to address the urgent problems. He estimates that it would take 30-40 years to compete the "high standard field" task in his county.

The government is also giving a lot of attention to improving agricultural services, but plans seem vague. The leader of an agricultural services cooperative union in Jiangxi makes typically vague recommendations that the government foster a specialized agricultural services industry, calculate reasonable costs for services, and use subsidized loans and "government buys services" to expand the sector.

Saturday, December 10, 2016

China Grain Output Falls--First Time Since 2003

China's National Bureau of Statistics has reported that the country's grain production fell during 2016. This is the first decline reported by the Bureau since 2003, breaking China's string of 12-straight increases in grain output. A senior statistician with the Bureau explained that the decline in output was the result of simultaneous declines in both area planted and yield. The Bureau estimates that 33 percent of the decrease in output was due to shrinking area planted and 67 percent was due to lower yields.

China 2016 grain production statistics

Area planted Yield Production

1000 ha kg/ha 1000 mt
Grain 113,028.2 5,452.1 616,239
Cereals 94,370.8 5,988.8 565,165
Corn 36,759.7 5,972.7 219,554
Rice 30,162.4 6,860.7 206,934
Wheat 24,186.5 5,327.4 128,850
Beans 9,710.5 1,781.0 17,294
Tubers 8,946.9 3,775.5 33,779
Other* 3,262.2 3,012.7 9,828
By season:

Summer grain 27632.4 5037.7 139,204
Early rice 5619.8 5832.4 32,777
Fall grain 79776.0 5568.8 444,258
*"other" grain numbers calculated.
note: China's definition of "grain" includes soybeans, other beans, and tubers, as well as cereal grains.

The decline in grain output was modest--down only 0.8 percent from last year--and the Bureau described the 2016 output of 616.34 million metric tons as an "abundant harvest." With China now suffering from a grain glut, there is less urgency to increase grain output [and perhaps less urgency for statisticians to report increases?]. The 12-straight increases in grain production during 2003-15 followed an alarming drop in output in 2003 that was accompanied by a surge in prices late that year. The 2016 output is still 35 percent larger than the output in 2002.

In historical context, China's grain output is six times the output in 1950 despite relatively little change in the amount of area planted in grain. In fact, the area planted in grain this year is roughly the same as reported in 1950. The area planted in grain in 2016 has rebounded since 2003 and is somehow at roughly the same level it has been over the last 65 years, despite massive urbanization, construction of industrial parks, highways, and diversion of agricultural land to fruit orchards, fish ponds, and other uses during the last two decades.

There are also some cycles evident in grain-planting. Area planted in grain surged as the country stabilized and reclaimed land during the 1950s, declined during the ironically-named "Great Leap Forward" of 1959-61, rose during the 1970s, fell when farmers were given freedom to plant what they wanted during the 1980s, and area fell sharply during the last grain glut of 1998-2003. A heavy policy emphasis on grain production from 2004 to 2015 resulted in relentless increases in grain planting even as housing estates spread across the countryside, rural-urban migration accelerated and other crops became more profitable than grain.

China may be about to enter another down-cycle in grain output as authorities seek to deal with bulging stockpiles of grain and environmental calamity. A structural adjustment program will shift land from corn to soybeans and fodder crops over five years, land contaminated with heavy metals will be retired, and land will be taken out of grain production in areas where underground aquifers have shrunk to alarming levels. The Bureau's statistician explained that the structural adjustment program of "corn to soybeans," "grain to fodder," and "grain to oil crops" was the main reason for the decline in grain area during 2016. Corn output fell 2.2 percent--less than many expected yet still accounting for most of the decline in grain output. Wheat output fell 1 percent and rice output fell 0.6 percent.

The statistician explained that the structural adjustment program also contributed to the decline in overall grain yield this year. The corn yield is 3.3 times the soybean yield, so switching area from corn to soybeans brings down the overall grain yield. Soybean area expanded 10.7 percent, he said (although the report did not reveal any soybean statistics).

The statistician also blamed widespread flooding and drought for the decline in grain yields during 2016. Heavy rains during the early summer flooded some fields and caused lodging of crops in southern regions, especially in Anhui and Hubei provinces. Southern provinces were also affected by extremely hot weather during mid-summer. Corn was affected by drought in parts of northeastern and northwestern provinces where irrigation was not available. According to the Bureau, 26.5 million hectares were "affected" by disasters during January-October this year, up 25.7 percent from last year. They say crops were lost entirely on 4.15 million hectares, 70 percent more than last year.

Thursday, December 8, 2016

China's porous borders facilitate ag product smuggling

Smuggling of agricultural products over China's porous borders has become rampant as Chinese prices are now far above prices in neighboring countries.

Rice is one of the most commonly smuggled commodities since China has a long border with major rice producing countries. Customs officials say they caught 57 gangs smuggling 218,500 metric tons of rice and other grains valued at over 1 billion yuan during the first ten months of 2016.

A Chinese reporter went to Nanning, Kunming, and Wuhan to investigate how rice is smuggled into the country. At a remote part of the border with Vietnam as many as 1000 small boats crossed the 70-80-meter wide Red River loaded with rice. Rice also comes in over small roads through the mountains. In a crackdown there last year authorities claim to have seized 2400 metric tons of smuggled rice in a single day.

Authorities have built a number of concrete barriers--including a 100-meter reinforced concrete wall--to stop the smuggling. However, payoffs to local enforcement officers and new routes to circumvent the walls allowed the smuggling to continue.

Another means of smuggling rice is to falsely report long-grain rice from Vietnam as medium-grain rice, which is eligible for a lower tariff.

Once in the country, smuggled rice reportedly is shipped by rail to various cities around China in Chongqing, Chengdu, Nanjing, and Henan. There it is blended with higher quality rice, polished, or repackaged as domestic rice. Wuhan--thousands of miles from the border--had two anti-smuggling campaigns that nabbed 18 smugglers and 28,700 metric tons of rice.

A detailed investigative report of pig-smuggling broadcast on China's central television in November got a lot of public attention. One individual involved in the business estimated that 15,000 live hogs are smuggled each night at a Guangxi Province border crossing with Vietnam. Trucks bypassed an inspection station, passed through a toll booth and reportedly delivered hogs to slaughterhouses in various Chinese provinces. Smuggling of various items is so profitable in this area that local entrepreneurs have constructed dozens of private roads that smugglers pay to use. China has banned pigs from Vietnam since 2003 over concerns about foot and mouth disease (Vietnam bans Chinese pigs over classical swine fever which the Chinese deny is a problem).

The TV report raised concerns that discouraged consumers from buying pork. A local journalist in Sichuan Province's Luzhou City reassured readers that he found no smuggled pork in the city's local markets.

During August, inspection and quarantine officials in Yunnan Province's Pu'er district seized and destroyed 99 hogs smuggled in from Myanmar. The same month, Yunnan officials reported another seizure of pigs smuggled from Vietnam.

Other smuggling occurs at ports. In Guangdong Province officials uncovered a gang that circumvented the tariff rate quota system to smuggle 40,000 metric tons of cotton from 2012 to 2014.

Wednesday, December 7, 2016

CASDE Dec 2016

The China Agricultural Supply and Demand Estimates (CASDE) for December have only a few modest tweaks to the estimates compared with November.

Most changes were made in the corn estimates. 2016/17 corn production was raised 1.05 million metric tons (mmt), to 214.65 mmt. Corn consumption was raised 450,000 metric tons, to 210.72 mmt. The carry-out was increased by 600,000 mt. CASDE forecasts China's 2016/17 corn inventory to expand by 4.43 mmt. Imports are kept at a minimum level of 1 mmt for 2016/17.

CASDE revised upward their view of the 2016/17 corn crop. They raised harvested area to 36.016 million hectares, essentially equal to their planted area of 36.026 mil. ha. The yield was also revised upward to 5960 kg/ha from last month's 5935 kg/ha estimate. Compared with last year, CASDE estimates that 2016/17 corn area and yield are both down from 2015/16. The estimate of China's corn output for 2016/17 is down 4.4 percent from 2015/16, yet the inventory is still expected to increase this year.

CASDE increased their estimate of corn consumption for food (100,000 mt), feed (50,000 mt) and industrial use (300,000) mt. CASDE attributed the increase in industrial use to lower corn prices and better profits for starch and alcohol manufacturers.

China corn supply and demand (Ministry of Ag, December 2016)
Item Unit 2015/16 2016/17 Nov. 2016/17 Dec.
Planted area 1000 ha 38,117 36,026 36,026
Harvested area 1000 ha 38,117 35,990 36,016
Yield Kg/ha 5,892 5,935 5,960
Production MMT 224.58 213.6 214.65
Imports MMT 3.2 1.0 1.0
Consumption MMT 194.05 210.27 210.72
--Food MMT 7.65 7.72 7.82
--Feed MMT 121.01 133.48 133.53
--Industrial use MMT 54.17 57.45 57.75
--Seed MMT 1.66 1.61 1.61
Loss and other MMT 9.56 10.01 10.01
Exports MMT 0.01 0.5 0.5
Surplus MMT 33.72 3.83 4.43

The CASDE write-up on soybeans emphasizes the effect of a September regulation that raised trucking costs and reduced shipments of domestic soybeans from the northeast (the report's discussion of corn does not mention this, although other sources say transportation costs and bottlenecks are slowing domestic shipments of corn). Processors have raised their soybean purchase prices, CASDE says. China's National Grain Reserve Corporation (Sinograin) has also raised its procurement price to replenish reserves, CASDE says, causing other buyers to raise prices. CASDE raised its forecasted interval for domestic soybeans by 100 yuan to 4450-4650 yuan/metric ton. The C&F price of imported soybeans is 3250-3450 yuan/mt. CASDE has not changed its 2016/17 estimate of imports--still 85.3 mmt.

China soybean supply and demand (Ministry of Ag, December 2016)
Item Unit  2015/16   2016/17 Nov.   2016/17 Dec 
Planted area 1000 ha 6,590 7,156 7,156
Harvested area 1000 ha 6,590 7,150 7,150
Yield Kg/ha 1,762 1,748 1,748
Production MMT 11.6 12.5 12.5
Imports MMT 83.2 85.3 85.3
Consumption MMT 96.7 99.7 99.7
--Crushing MMT 82.9 85.5 85.5
--Food MMT 10.4 11.2 11.2
--Seed MMT 0.5 0.6 0.6
Loss and other MMT 2.9 2.5 2.5
Exports MMT 0.1 0.2 0.2
Surplus MMT -1.9 -2.1 -2.1

Only minor changes were made in CASDE's cotton balance sheet, including small reductions in yield and imports for 2016/17. Cotton imports were shaved from 960,000 mt to 900,000 mt. China's cotton imports are down as authorities issue only the bare minimum of tariff rate quota for the second year in a row. China continues to slowly unwind its cotton inventory. CASDE expects 2.05 mmt of cotton inventories to be injected into the market during 2016/17, but the carry-out will still be 9.18 mmt, still a very high stocks-use ratio of 122 percent.

China cotton supply and demand (Ministry of Ag, December 2016)
Item Unit 2015/16 2016/17 Nov. 2016/17 Dec
Begin inventory MMT 12.8 11.11 11.11
Planted area 1000 ha 3,267 3,100 3,100
Yield Kg/ha 1,510 1,526 1,523
Production MMT 4.93 4.73 4.72
Imports MMT 0.96 0.97 0.90
Consumption MMT 7.54 7.52 7.54
Exports MMT 0.02 0.02 0.01
End Inventory MMT 11.13 9.27 9.18

Only minor changes were made in the edible oils balance sheets and no changes were made in the sugar S&D.

China edible oils supply and demand (Min Agriculture, December 2016)
Item Unit 2015/16 2016/17 Nov. 2016/17 Dec
Production MMT 25.3 25.81 25.79
--Soy oil MMT 14.74 15.17 15.16
--Rapeseed oil MMT 5.6 5.55 5.55
--Peanut oil MMT 3.01 3.18 3.18
Imports MMT 5.81 5.50 5.55
--Palm oil MMT 3.39 3.20 3.20
--Rapeseed oil MMT 0.77 0.75 0.80
--Soy oil MMT 0.59 0.58 0.58
Consumption MMT 31.17 31.38 31.41
--Urban MMT 20.41 20.55 20.8
--Rural MMT 10.76 10.83 10.61
Exports MMT 0.11 0.13 0.13
Surplus MMT -0.17 -0.19 -0.20

China sugar supply and demand (Ministry of Ag, December 2016)
Item Unit 2015/16 2016/17
Planted area 1000 ha 1423 1433
--sugar cane 1000 ha 1295 1270
--sugar beets 1000 ha 128 163
--sugar cane MT/ha 60.3 60
--sugar beets MT/ha 53.85 52.5
Sugar output MMT 8.7 9.9
--sugar cane MMT 7.85 8.85
--sugar beets MMT 0.85 1.05
Imports MMT 3.73 3.5
Consumption MMT 15.2 15
Exports MMT 0.15 0.07
Surplus MMT -2.92 -1.67

This CASDE report was issued December 5, a week earlier than the scheduled December 12 release. The report updated the list of scheduled release dates for 2017, with the next report due January 12, 2017.

Wednesday, November 30, 2016

Grain Marketing, Technology, and Rule of Law

Two new measures make it easier for Chinese farmers to sell their grain. However, the two measures are contradictory. A pilot program adopts computerized systems to streamline the grain-buying process, but most Chinese farmers sell their grain to unlicensed individual grain traders who cannot afford any of this equipment. The story illustrates the tricky challenges Chinese officials must navigate to move a chaotic countryside toward a society governed by laws rather than expediency.

An initiative in Heilongjiang Province requires grain-buying stations to have electronic testing equipment and automated data systems to shorten the time farmers wait for test results and payment for their grain. An electronic unit tests grain for moisture in a few seconds--a procedure that used to take 20 minutes while farmers waited outside. Video cameras let farmers watch lab technicians test their grain to prevent the lab from producing false results to downgrade the grain and pay farmers a lower price--a longstanding method of cheating peasants. Farmers deliver their grain by truck, the license number is recorded and farmers show their ID card. The moisture, variety, grade, test weight, foreign matter, and incidence of mold are measured and entered in the system, the price is determined and payment is made to the farmer's bank account within minutes.
Farmers watch video screen and grain specifications.

In an article describing the system in 2014, a technician with 25 years of experience testing grain remarked, "With the new video surveillance system we cannot tolerate carelessness in our work." The technician continued, "Using the moisture testing equipment completely changes the longstanding practice of lab technicians testing grain using their teeth and their eyes." Officials say the new system for purchasing grain is more transparent and efficient. Most of the grain stations in Heilongjiang buying rice for the minimum purchase price program reportedly have this equipment now.
Grain moisture testing apparatus advertisement. 

This is a nice system, but as it turns out only a minority of farmers actually sell their grain at these depots. Most farmers sell their grain to private traders who come to villages to buy grain door to door, store it temporarily and then sell it on to grain buying stations or processors. These intermediaries make it more convenient for farmers to sell grain, but most of them have been operating illegally because they don't meet the requirements for a license to buy grain. 

A September 14, 2016 regulation issued by China's Grain Bureau makes these grain traders instantly legal by exempting farmers, individual grain traders (粮食经纪人), and traders in retail agricultural markets (农贸市场粮食交易者) from the requirements for a grain-purchasing license that were set in a 2004 regulation. Companies and enterprises--like the grain-buying stations above--are still subject to license requirements.
A grain-buying license issued by the State Administration of Grain

According to an article describing the license waiver, people in the industry estimate that there are 1 million such unlicensed traders, who have all been operating illegally until now. Selling to these traders has become popular because it saves farmers a long trip to the grain station, saves them the cost of hiring a truck, and reduces the need for laborers to load and drive the trucks. A professor at Henan Polytechnic University estimated that 85 percent of grain in his province is sold to these intermediaries. Many of the traders are farmers themselves who use their spare time to buy and sell grain. They store grain in courtyards and rented buildings.

Few of the private traders have licenses. In the Luohe district of Henan Province, a grain bureau official says only 12 of the 150 grain purchasing licenses are held by private individual traders. Shandong's Qihe County has 135 licensed grain buyers, including state-owned and private companies and flour mills, but a grain official estimates there are 700-800 unlicensed individual traders.

Mr. Zhang, a trader in Henan Province, has ten years of experience and buys 500,000 kg of grain annually. Mr. Zhang estimates there are 1000 traders like him in his country, and he never heard of anyone who had a license. Mr. Wang, another Henan trader with 20 years experience, didn't know a license was required to buy grain from farmers.

The licensing requirements are beyond the reach of individual traders. You have to prove you have 30,000 yuan in working capital, 200 metric tons of storage capacity, an official stamp, a legal document showing ownership or a rental contract for facilities, certain testing equipment, and qualified technicians and managers. (It sounds like the traders probably violate other regulations by storing grain in unapproved buildings or constructing warehouses on land designated for farming). Regulations stipulate that official granaries are not to accept grain that was purchased illegally. Violators are to be assessed a fine of five times the value of the grain. Nevertheless, the Henan branch of the China Grain Reserve Corporation (Sinograin) says most grain is delivered to granaries by small traders.

The article explains how an essentially illegal industry was created by quoting a common phrase: "Above there is a policy, below there is a countermeasure." As with many central government policies, the requirement for a grain license is widely ignored by local officials out of expediency. Many even encouraged the individual grain traders because farmers could not market their grain without the traders. A county grain official in Henan said there is not enough labor in the countryside to dry grain, load and haul it to distant grain-buying stations. But as long as the license requirement existed, traders always faced the risk that a zealous local official might order a crackdown.

One trader in Shandong told the reporter he was informed by local officials last year that he could no longer buy grain without a license. The trader made a phone call to a county grain bureau official he knew, and the local officials decided not to enforce the license requirement after all. 

There have been scattered cases where unlicensed grain traders were fined. The rule was mainly enforced to protect local markets from outsiders. In Guangxi Province, traders from Fujian and Zhejiang Provinces were fined for trying to sell rice they had purchased illegally without a license. 
The wife of a grain trader sits on a pile of sub-standard wheat refused by the Sinograin depot. Source: New Capital News.

The lifting of license requirements is applauded by small grain traders. The license waiver contrasts with dairy, hog-slaughter, and feed industries where re-licensing campaigns have shut down thousands of small operators who couldn't meet the requirements. Officials were probably forced to lift the grain license requirement because the small traders are so prevalent, and an entire industry composed of illegal operators just won't do when the country is now supposed to be run by the "rule of law." 

The waiver is probably not the end of the story. A Renmin University professor anticipates that a registration and reporting system will probably be introduced for these traders in the near future. Large-scale full-time grain producers may be more inclined to haul their grain to a distant licensed grain-buying depot equipped with electronic testing, video, and record-keeping equipment. Officials may be counting on the advent of these "new-type" farmers to reduce the need for the army of small grain traders. 

The small grain traders lack testing equipment and secure storage facilities like those of the state-owned grain stations in Heilongjiang described above. Will these traders get subsidies to buy testing equipment, grain dryers, and modern storage bins? Until they do, the traders will face the risk of having grain rejected when they sell it on to depots; they will be careful when buying from farmers and apply discounts based on eyeball evaluations. 

Monday, November 28, 2016

China corn v. soybeans in charts

China has become a corn-soybean-centered agricultural economy--much like the United States--but with a twist. Instead of rotating the two crops, China's farmers specialized in massive mono-cropping of corn while nearly all of the country's soybeans were imported. Here's the China corn v. soybean story in charts.

China's corn output has grown relentlessly since 1970, and is now the largest single crop produced in the country. The growth accelerated after 2004 when Chinese authorities adopted pro-cereal grain policies. Growth in corn accelerated even faster during 2009-2012 when a "temporary reserve" floor price program guaranteed farmers a minimum price. Production of corn doubled from about 110 million metric tons in 2000 to about 225 million metric tons in 2015. The surge has ended now--with massive stockpiles--and many are projecting a drop in corn output in 2016.

Source: Data from China National Bureau of Statistics.

Soybean output in China was relatively stagnant over that entire period. Chinese journalists like to write alarmist stories about stagnant soybean production but these stories ignore the flip side: soybean production was stagnant because Chinese farmers went all-in on corn.

Most of the increase in corn came from planting more land in the crop, including encroaching on grasslands, wetlands, and erodible hillsides, and pushing the crop further into the frozen north. The area planted in corn increased by 11.8 million hectares (45%) during 2005-15. The 11.8-million-hectare increase represented 6.7% of all the corn area in the world in 2015. Only three countries--United States, China and Brazil--plant more than 11.8 million hectares of corn. The area planted in soybeans fell 3 million hectares (30%) during 2005-15.
Source: China National Bureau of Statistics; projected plantings for 2016 from Ministry of Agriculture.

Relentless growth in China's soybean imports mirrors the country's soaring corn production. China first imported soybeans in 1995 and is projected to import 86 million metric tons in 2016/17. Hypothetically, if China had used the increased corn area (11.8 million hectares) for soybeans instead of corn, it could have produced only 20 mmt of additional soybeans (assuming an average yield of 1700 metric tons per hectare), less than a fourth of the actual volume of soybean imports.
Source: USDA, Production, Distribution and Supply database.

Why did China specialize in corn? Compared with soybeans, corn yields about three times more physical output  per hectare of land. Planting corn helped meet purely quantitative targets for grain self-sufficiency. In China, the gap between corn and soybean yields has widened from 189% in 2000 to 254% in 2015, according to the National Development and Reform Commission's agricultural production cost survey.
Source: data from China National Development and Reform Commission production cost surveys.

Like a helium balloon, ag commodity prices sometimes float upward for extended periods, but they eventually come back down toward the ground. According to a database, the average corn procurement price on November 17, 2016 was 1684 yuan per metric ton. That was about 25 percent lower than the peak level that prevailed from 2011 to 2013 and about the same as the price in 2009.
Source: China Grain Net database (

The National Development and Reform Commission production cost data show that corn was a very profitable crop during the expansion years. Profits are now shrinking as prices fall to more reasonable levels. The increase in labor and land costs has changed the calculus of Chinese farm production. Rural labor and land used to be essentially free goods, but now they are scarce inputs which must be paid to entice them to produce particular crops.

Source: data from China National Development and Reform Commission production cost surveys.

Material inputs--primarily chemical fertilizer, seed, fuel, repairs, etc.--were about a third of the value of corn output per mu of land during the corn boom. The cost of labor reflects mainly imputed costs of family labor--so it is really profit to the farmer and his family. That "cost" rose rapidly as wages for rural migrants soared--it takes larger profits to entice rural people to stay home and farm. The "cost" of land was also an imputed cost when most farmers cultivated their own land and paid no rent. Now the Ministry of Agriculture says one-third of farmland is rented or otherwise transferred--usually with a rental payment. Moreover, rental rates have increased. Since 2014, gross income from corn production has fallen sharply due to the phase-out of the generous "temporary reserve" floor price policy. In 2015, the floor price was cut 10%. This year--2016/17--the policy was eliminated and price has fallen further. Income in northeastern provinces will be supplemented by a corn producer subsidy of about 120 yuan per  mu, but it will offset only part of the decline in gross income since the peak in 2013.

Soybeans have lower expenses per unit of land than corn for labor and material inputs. However, land rent is similar (depending on the location and quality of the land). Like corn costs, soybean production costs have also risen dramatically. The long rally in Chinese prices from 2004 to 2012 helped Chinese farmers cover those costs. In other countries, prices do not go up year-in and year-out to cover rising production costs. Competition from imported soybeans restrained the growth in Chinese soybean prices, so revenue from soybeans did not grow as fast as revenue from corn. When global commodity prices grew soft in 2013, China's soybean prices began to fall. A "temporary reserve" policy to support Chinese soybean prices collapsed in 2014 because processors bought cheaper imported soybeans and let the government buy up domestic soybeans at the floor price. China's soybean prices have also declined in 2016. The target price subsidy should give soybean producers a subsidy that will partly offset the decline in revenue.
Source: data from China National Development and Reform Commission production cost surveys.

Corn and soybean prices seem to be moving down in parallel. Likewise, subsidies to northeastern producers of both crops are roughly offsetting. Most analysts are predicting a modest rebound in soybean production next year, but there is no clear incentive to shift large amounts of area from corn to soybeans. Hence, Chinese officials constantly harp on their supply side structural adjustment program as the main means to reduce surplus, environmentally harmful corn production.

Thursday, November 24, 2016

China Corn Supplies Tight on Weather, Logistics

Corn prices in China are stable or rising, despite the elimination of the temporary reserve price floor policy. Chinese news media say cold, damp weather across corn-producing provinces and logistics bottlenecks are the main factors causing tight corn supplies in the first months of the corn-marketing season.

China's Grain Bureau says that a cumulative total of 19.55 mmt of corn from the 2016 crop had been procured in 11 major producing provinces as of November 20. The volume is 2 mmt less than at the same time last year. The corn-procurement season runs until April 30, so it's still early. (Last year, a total of 172.66 mmt was procured by April 30, so there could be another 150 mmt yet to be sold by farmers.)

Snow and cold temperatures across the northeast have made it difficult to dry corn and present possible mold problems. In Heilongjiang Province, a shortage of rail cars slowed the transportation of corn to ports in Liaoning for shipment to southern provinces. Reportedly, this problem is being addressed as Harbin's rail bureau makes more rail cars available. Some roads in Heilongjiang have been closed by heavy snowfall. Subsidies for northeastern processors is increasing demand for corn.

Foggy, damp weather in the Huang-Huai Rivers region of northern China also prevented corn from drying properly. Large amounts of corn in this region also are affected by mold, so supplies are tight. Feed mills need to replenish inventories as the peak meat consumption season at the lunar new year approaches.

The flow of corn to southern provinces is constricted by the above factors. Feed mills in the southern provinces need to hold larger inventories than those in producing areas, so there is keen competition for limited supplies and prices are rising in southern ports of Shanghai, Fujian, and Guangdong Provinces.

During the week of November 14-20, procurement prices for corn in Heilongjiang province ranged from 1200 to 1500 yuan/metric ton. In Jilin prices were 1400-1570 yuan/mt, Inner Mongolia 1420-1710 yuan/mt, and in Liaoining 1500-1780 yuan/mt. Prices at ports in Liaoning Province for shipment to southern provinces are 1750-1780 yuan/mt. Prices at ports in Fujian and Guangdong are 1960-1980 yuan/mt.

Corn futures at the Dalian exchange for January and May 2017 contracts have followed a V-pattern since the corn harvest began in September. Prices fell from about 1450 yuan to 1400 yuan during September 2016. Prices then rebounded during October and early November. The price for the January 2017 contract rose to over 1620 yuan in early November, and fell to 1592 yuan on November 24. The May 2017 contract rose to 1558 yuan in early November and was at 1543 yuan November 24. The spread between the two prices suggests that traders expect prices will fall in the spring after the peak consumption season is completed, farmers finish their sales of the new corn crop, and authorities try to re-start their sales of corn from reserves.

Tuesday, November 22, 2016

China Prepares for Outbound Ag Investment

China is gearing up for more outbound investment in agriculture and scientific cooperation.

China's five-year plan for the rural economy includes four paragraphs on "coordinated utilization of domestic and foreign markets and resources" tucked away among the ambitious initiatives for a makeover of the countryside. The paragraphs have diverse objectives to project China's influence abroad along the "new silk road," create world-beating agribusiness companies to supply China's food needs, gain more control over the flow of imports, and boost China's exports of horticultural crops and aquaculture products.

China wants to have more and better international cooperation with everybody in agricultural science to get the best technology and project its influence in the developing world. The plan calls for "deepening" cooperation with "neighboring countries," Africa, Latin America, and central and eastern Europe--with a focus on the "One Belt One Road" countries--and "strengthening" cooperation with developed countries in North America, Western Europe and Oceania. China hopes to play a more active role through engagement with international organizations, actively participating in setting international rules and standards.

The plan hopes to help agricultural companies “go global,” fostering a set of multinational grain trading, marketing and agricultural enterprise conglomerates that are internationally competitive and well-known brands. Big, well-funded companies will be chosen to act as models for outbound investment, including companies in the Ministry of agriculture's industrialized leading enterprise program (virtually all major agribusiness companies), and enterprises affiliated with the state farm system (like Bright Foods, Beidahuang, and Jiusan). The plan encourages Chinese enterprises to establish agricultural production, processing, storage and transportation bases outside the country’s borders to create global agricultural industry chains. The plan encourages alliances and ventures with international agricultural enterprises to promote "production capacity cooperation" in areas such as agricultural machinery and equipment, pesticides, and fertilizer. Another strategy is to build overseas "agricultural cooperation parks" where conditions are ripe and where they can play a strong demonstration role.

The plan has several measures to boost China's exports of fruit, vegetable products, tea, aquaproducts and products with special features and high value. It encourages multinational agricultural e-commerce and creation of agricultural export exchange platforms. "Green" and organic fruit and vegetable production and export bases will be constructed in border regions.

Authorities also want to get a grip on the flow of agricultural imports. They promise to encourage imports of items that are in short supply in China while using trade remedy and compensation measures to shield domestic industries whose survival is threatened by import competition. The plan calls for "improving" the mix of global suppliers, diversifying sources of imports, and establishing stable suppliers of imports. Officials hope to collect more information, do more analysis of imports, and issue "early warnings." Inspection and quarantine measures will be improved and authorities will crack down on smuggling of agricultural products into China.

China aspires to "bring in" as well as "go out" in agriculture. China will try to attract inbound foreign investment to key areas like livestock, poultry, aquaculture processing, manufacturing agricultural machinery and equipment, and agricultural environmental protection. China plans to establish a complete foreign investment access and security management system, gradually adopting a management model of “before entry, national treatment, clear negative list”. Interestingly, China still hopes to get preferential loans from international financial organizations (e.g. World Bank, Asian Development Bank) despite having massive amounts of capital in its own banks and having started up its own competitor for the World Bank. According to the plan, China also aspires to get grants and aid from foreign governments for its major national agricultural development strategies.

Several articles on the Ministry of Agriculture web site this week indicate that "international cooperation" is the flavor of the month. On November 16, the Chinese Academy of Agricultural Sciences held a meeting to launch a "Global Agricultural Big Data Information Services Alliance". The alliance members are research institutes, universities, and agribusiness enterprises. The main function appears to be to act as a clearinghouse and think tank to collect information on agricultural science and technology around the world that Chinese agribusiness companies can use for their overseas investments and international cooperation projects, with emphasis on the "One Belt, One Road" strategy.

An Overseas Agricultural Research Center will be the "wings" that provide science, technology and information for agricultural companies "going global" to take off. The center says it has developed remote sensing to estimate crop yields in key countries, and issues information through the center's web site, a Wechat public account and publications called “overseas agriculture observer” and “agricultural science and technology cutting edge and policy advice.” It has supplied over 20 advisory reports to the Ministries of Agriculture, Science and Technology, and Finance, and the National Development and Reform Commission.

On November 14, the Tropical Science Institute held a meeting to form networks of scientific experts on tropical agriculture to support Chinese companies sharing technology with "One Belt, One Road" countries. Strategies include setting up agricultural demonstration parks overseas and "external cooperation experimental areas" to disseminate tropical agriculture technology, share personnel and set up industrial incubators. Target countries are in Southeast Asia, Africa, South Asia, and South Sea islands. Crops include rubber, woody oil crops, cassava, sugar, and sisal. The meeting held in Hainan was attended by 14 companies working in Colombia, Philippines, Vietnam, Cambodia, Laos, and Sri Lanka, and 12 research institutes.

The 13th Five-year Plan for China's grain industry calls for fostering "a certain number" of large multinational grain conglomerates. The government will encourage and support grain enterprises to develop diverse forms of multinational businesses engaged in large scale production, marketing and processing of rice, corn, soybean and palm oil in countries along the "One Road, One Belt."