Dim Sums: Agricultural Markets in China

China's leading rural policy advisor promised reform of the corn pricing mechanism soon after the "two meetings" of communist party officials conclude in March. The reform should be announced ahead of spring planting, he said. In a departure from the past party line, the advisor called for reform of wheat and rice prices as well, although he said he himself doesn't know whether this will occur. Chen Xiwen, vice director of the leadership group on rural work, made the statements at a meeting on rural affairs sponsored by Farmers Daily on February 27. Chen said the reform of the mechanism for determining corn prices would move ahead because the grain is used as an industrial raw material and animal feed and because corn has the most prominent contradictions with excessive inventories and other issues. Chen did not specify whether the reform would be a lowering of the "temporary reserve" price for the 2016 crop or an elimination of the program altogether. ...

The Jiangsu agricultural commission estimates that the province's rapeseed area will plunge from last year's 7 million mu to just 3 million mu this year. Experts say the province's rapeseed area can't fall any further--it is now limited to small plots in the backyards of farmhouses where farmers grow it for their own use. Promoting rapeseed production was once a core objective of a 2007 plan to revive China's oilseed industry . Alarmed over the growing dependence on imported soybeans, Chinese officials formulated a plan to boost production of rapeseed, peanuts and other oilseeds. The plan included a dozen subsidies and support measures (listed at the end of this post) aimed at encouraging production, improving yields, producing seeds that yield more oil, giving loans to Chinese companies to build processing facilities and "guiding" companies to establish contracting relationships with "production bases" of farmers. The 2007 plan aimed to boost...

The Chinese government has hoovered up corn at a record pace again this year to keep prices artificially high. Having already spent billions to buy up and store the corn, the government is preparing more subsidies to sell it off. As of February 10, 2016, officials had purchased 82.6 million metric tons (mmt) of this year's corn crop for the "temporary reserve." That's 37 percent of the entire corn crop and roughly matches last year's government purchases. The purchases will continue through next month, so the total could surpass 90 mmt . At a price of 2000 yuan per ton, that would be a 180-billion yuan (nearly $28 billion) corn shopping spree since last November. Some analysts in China estimate the corn stockpile has grown to nearly a year's supply, and officials are now making preparations to offload the  reserves. China's grain bureau has reportedly drawn up a preliminary list of processing enterprises it intends to target for special sales of corn...

Sour investments bankrupted dozens of rural cooperative banking organizations in China, destroying the life savings of thousands of  peasants. It seems that small cooperative banks are just as vulnerable to looting and irresponsible investments as big ones on Wall Street.  About ten years ago, farmers in northern Jiangsu Province's Yancheng municipality began setting up farmer cooperative mutual funds ( 农民资金互助合作社) to pool their savings and loan out money to local farmers. The organizations functioned like small, local banks and were considered to be a promising microcredit model for meeting the credit needs of Chinese farmers. The mutual fund cooperatives are not visibly different from commercial banks but they are located in townships where they are convenient for farmers to make deposits.  Depositors display receipts outside closed farmer cooperative bank ( Beijing News ). Yancheng municipal officials started up 138 such mutual cooperative funds in rural tow...

Citing testing results show chronic problems with residues of veterinary drugs in food, an official of China's Food and Drug Administration promised to work with the Ministry of Agriculture to attack the problem at its source. At a February 2, 2016 news conference , CFDA Vice Director Teng Guicai said testing of food samples showed that 3.8% had excessive traces of banned substances. He interpreted these results as indicators of a "prominent problem." Teng said problems arise mainly from use of banned chemicals in farming, storage, and transportation of food. He specifically cited "lean meat powder", malachite green, and dicofol as problems. "Lean meat powder" is a colloquial term that refers to compounds like clenbuterol, ractopamine, and salbutamol that promote building of muscle in animals. Malachite green is an antimicrobial used in fish farming. Dicofol is a pesticide used to kill spider mites in crops. Teng also mentioned residues of several ...

China is the world's leading importer of rice yet it has huge amounts of rice in warehouses that no one will buy. According to Grain and Oils News , authorities held auctions to release 101 million metric tons of rice from reserves during 2015, but only 5.3 mmt of it was sold. There was little interest in any types of rice: 18 mmt of early-season indica rice was offered but only 3.8% sold;  38.9 mmt of medium grain rice was offered, but only 4.8% sold;  43.7 mmt of long-grain rice was offered but only 6% sold.  Grain and Oils News focuses on the early-season rice as the nexus of the problem. Authorities have offered about 500,000 tons of this rice every week since October, but there have been virtually no buyers. The early rice crop is planted in early spring, harvested in mid-summer and followed by a second crop harvested in the late fall. The early rice doesn't taste very good, so much of it is used as government food reserves, as animal feed, or for liquo...

Chinese authorities announced the minimum price for the 2016 wheat crop last October, nine months ahead of the marketing season. Their decision to hold the wheat price steady at RMB 2360 /metric ton -- the same level as the last two years -- may result in a serious glut of low-quality wheat this year. Authorities thought they could insulate the wheat market from declining prices in the rest of the world by clamping down on imports -- 90 percent of the wheat import quota is awarded only to state-designated trading companies who presumably can only import when the government gives them permission. However, the wheat price is facing strong downward pressure as the price of corn and related feed materials has fallen significantly below the wheat price. Grain and Oils News warns that China's wheat market will face heavy pressure to sell off stockpiles in the months after the spring festival holiday. During January, the government held auctions to offer 4.6 million tons of wheat fro...

A Chinese Communist Party discipline inspection team berated the National Bureau of Statistics for poor communist party discipline and ongoing violations of President Xi Jinping's anti-corruption campaign, a reminder of the highly politicized nature of Chinese statistics and the incentives for corruption in the statistical system. Discipline inspection team announces findings at National Bureau of Statistics. An article from the Central Commission on Discipline Inspection web site re-posted on the National Bureau of Statistics site reported on a January 31, 2016 meeting where an inspection team berated the bureau's communist party organization for weak leadership, poor party discipline, failure to fulfill responsibilities, and failure to establish party organizations at the grass roots level. The inspectors found a number of problems at the bureau, including improper employment and promotion practices, officials who used "data" for personal gain, abuse of powe...

Chinese authorities have waffled between funding research on genetically modified crops while stoking fears of imported GMOs. As they dragged their heels on approving transgenic crops for commercial use, there is mounting evidence that Chinese farmers are growing them illegally.  The Chinese communist party's "document no. 1" released last month called for "strengthening research on transgenic agricultural technology and its supervision, carefully spreading results on the basis of safety assurances." Is it a coincidence that a week later it is announced that the Chinese state-owned company ChemChina plans to pay $43 billion for the Swiss company Syngenta whose products include transgenic crops? This deal appears to be in line with the "strengthening research" part. The admonitions about "supervision" and "careful" dissemination of transgenic crops may be about a decade too late.  A detailed Greenpeace survey of the corn ...