Dim Sums: Agricultural Markets in China

China will end its "temporary reserve" price support program for corn, allow corn prices to be set by market forces, and give corn producers subsidy payments this year according to information dribbling out from Chinese officials this week.  The move is expected to allow corn prices in China to drop to parity with international prices and choke off the country's two-year-old import boom for corn substitutes that include sorghum, barley, distillers grain, and cassava. This will add more downward pressure to a global bear market for grains. The corn market liberalization was not unexpected, but the announcement was tentative and confusing, probably a reflection of the controversy over the plan that has raged behind the scenes. Last summer many market watchers speculated that a liberalization would be announced in September 2015. Instead, the temporary reserve was retained and the price was cut by 10%. The central no. 1 document issued in January 2016 singled out the ...

China's 13th Five-Year Plan includes a complete makeover for the country's agriculture. The plan intends to demolish walls between city and countryside and stop pillaging the environment, but it retains inherent contradictions that will ultimately cement the control of China's mandarins over the food supply. The outline of the sprawling, ambitious plan published March 17, 2016 lays out China's vision for becoming a more mature, self-sustaining economy, and to actively participate in global affairs while maintaining national security. This document consists of a series of aspirations, strategies, and policy initiatives that are rattled off without explanation. Detailed plans for specific sectors will come later. The contents have been laid out in speeches and other documents over the past three years, so there are no big surprises. Most initiatives are already underway. Four of the plan's 80 chapters focus on agriculture. According to the plan, hordes of peasant...

China's Jilin Province has announced a subsidy of 150 yuan (about $23) per metric ton for corn used by industrial processing enterprises. Recipients must use corn procured from Jilin Province for their own use between January and June 2016. The March 17, 2016 document was issued by the provincial finance department, provincial grain bureau and Jilin's information and industry department. Many grain industry web sites posted an article on the document, but not the Jilin grain bureau that issued it. The article includes an image of the document, but there don't seem to be any electronic versions of the document. The Jilin subsidy was announced nearly two months after a document issued by several central government departments encouraged local authorities, companies and banks to take measures to dispose of excessive grain stockpiles. The announcement comes in mid-March with just over three months left in the six-month window for collecting the subsidy.

A 200-metric-ton shipment of corn was sent from China's Henan Province to Tajikistan in what appears to be a deal orchestrated to both promote the "one road-one belt" push into Central Asia and address the overstock of corn in China. China has some of the world's highest corn prices, but no mention is made of the price paid by the Tajiks. The shipment of corn is described as a demonstration project in a propaganda article posted on numerous news sites in China . The corn reportedly originated with a farmers "cooperative" in Henan's Taikang County. A Henan seed company supplied the farmers with seeds and inputs, and then bought the corn back for export to fulfill an agreement with Tajikistan ( the company's web site features a photo of its leaders signing an agreement with a central asian country). The corn was inspected at an inspection and quarantine facility in Luohe City and then transferred to the Zhengzhou-Europe railroad for shipment to Ta...

Despite a series of anti-smuggling campaigns, China's smuggled rice imports reached 2 million metric tons (mmt) during 2015, according to estimates by a Chinese grain industry newspaper. China's Grain and Oils News deduced the smuggled volume by comparing export statistics from Vietnam and Burma which far exceed China's officially-reported imports of rice from those countries. The article doesn't explain why exporters selling to smugglers would report the sales to customs officials. There seem to be several typographical errors in the article, but the estimate of 2 mmt seems to be in line with reality. Adding the estimated 2 mmt of smuggled rice to official imports of 3.35 mmt recorded by customs statistics brings China's total imports to 5.35 mmt. Subtracting China's rice exports of 280,000 metric tons still leaves the net import volume--smuggled and legal--at over 5 million metric tons. Grain and Oils News asserts that the imports have a severe impact...

A Chinese corn processing industry executive submitted a recommendation to the National Peoples Congress urging the government to de-stock corn reserves and to subsidize exports of his industry's products. The request was made on March 10 by Tong Yi, the general manager of COFCO's Jilin management center and a "grass roots" representative to the Congress. Mr. Tong reckoned that China's policy reserves of corn surpassed 250 million metric tons (mmt) at the end of February, with an estimated annual cost of 50 billion yuan ($7.7 billion) for interest and storage. He noted that 70 mmt of corn is at or beyond its 3-year maximum storage period and faces serious risk of degradation. Mr. Tong said the 88 mmt of corn reported "temporary reserve" purchases from the 2015 harvest by February 29 represented 90% of the northeast region's production. He complained that corn processors in the northeastern region lost their competitive advantage of cheap raw mat...

Cotton farmers in China's Xinjiang Autonomous Region will receive subsidies of 500 yuan per mu  (about $468 per acre) for the 2015 crop, up from 440 yuan last year. The subsidy is as high as 540 yuan in southern Xinjiang. The "target price" subsidy in Xinjiang will be mostly distributed  according to the amount farmers sold by the end of January 2016 at a rate of 1.99 yuan/kg. Some special cotton got a higher subsidy of  2.58 yuan/kg. Farmers in southern Xinjiang got a subsidy of 141.75 yuan/mu. Only a few other provinces have announced their cotton subsidy for this year. Shandong reduced its subsidy to 150 yuan/mu for the 2015 crop, down from 235 yuan last year. Hebei Province raised its subsidy  to 201 yuan/mu, up from 164 yuan/mu last year. Henan Province's subsidy is 140 yuan/mu, slightly higher than last year. A survey of 5000 cotton farmers conducted in January by the national cotton technical monitoring projec...