Dim Sums: Agricultural Markets in China

Granaries are completely full in China's largest grain-producing province, and worries are mounting over procurement of this coming Fall's new crop, according to a report from Business Reference News . The reporter visited granaries in eastern Heilongjiang Province and found corn and rice piled seven meters high to the ceiling in warehouses. Temporary bins lined the courtyards. One grain storage facility manager claimed that his 3 million tons of capacity was filled, including 40 warehouses and 900 rudimentary temporary bins. According to the report, the entire city's storage is full, and the situation is similar across the province. This image from Google earth shows a facility in Heilongjiang with 40  temporary steel bins (shiny things on the left).  A provincial Grain Bureau official said nearly 80 million metric tons of grain was procured from the 2015 crop in Heilongjiang, 7.5 million tons more than the previous year. Of that total, 63.9 million metric tons...

Farmers in Anhui Province hit by heavy rain this summer will be able to sell their substandard wheat to provincial authorities at a premium price. Procurement of China's wheat crop this year is slower than usual because a large proportion of wheat has been degraded in quality by effects of the wet weather. As of July 15, a total of 34.6 million metric tons of wheat had been purchased by all types of enterprises, 4.5 mmt less than last year at the same time. All six eligible provinces have been purchasing wheat at China's national minimum price of 2360 yuan per metric ton ($352 per metric ton). Shandong Province's procurement volume at the minimum price totaled 5.15 mmt as of July 20, 71 percent more than last year at the same time. However, in southern provinces hit by wet weather much of the wheat cannot meet the minimum price program's quality standard , so less wheat has been purchased at the national minimum price. Of the 2.5 million tons of wheat purchased in ...

COFCO's acquisition of Chinatex is the latest--and not the last--step in Beijing's plan to engineer a company that is dominant in food markets and follows the communist party's marching orders. On July 18, the State Asset Commission announced the State Council's approval of the plan for Chinatex to become a fully-owned subsidiary of COFCO. Both are state-owned enterprises owned by the central government with business in agricultural trading, processing, marketing and sundry other businesses. According to Economic Observer , this deal is part of a grand scheme to whittle down the number of centrally-owned state-owned enterprises to less than 100, creating "stronger, better, bigger" companies, by "slimming down, shaping up" and experimenting with a separation of capital ownership from capital management that gives managers more autonomy. In addition to being a model of supply-side structural reform, the COFCO merger has a particular aim of creat...

China's pork output is in its second straight year of decline, according to the National Bureau of Statistics. The NBS report on GDP for the first half of 2016 estimated that January-to-June pork output was down 3.9 percent from a year earlier. That followed a 3.7 percent decline in pork for 2015 reported by the Bureau earlier. The Statistics Bureau's numbers for hog slaughter and hog inventory show similar declines of 3-to-4 percent in both years. Change in China's hog production Item 2015 2016 Jan-June Percent change National Bureau of Statistics: Pork output -3.7 -3.9 Hog slaughter -3.7 -4.4 Hog inventory -3.2 -3.7 Ministry of Agriculture: Hog slaughter -1.1 -6.3 Hog inventory -9.0 0.0 Ministry of Agriculture numbers, on the other hand, appear to have some inconsistencies.  The number of hogs slaughtered at designated slaughterhouses during January...

China's Ministry of Agriculture is trying to improve statistics on livestock and poultry. These efforts open a window into the crevices of China's rickety statistical system that is largely untouched by 20th century developments like stratified sampling, weighting, and standard errors. Most outsiders think China's statistical problems are simply a matter of lying by statistical bureaus, but the problems are deep-seated and systemic. Last month, a training meeting was held in Liaoning Province for personnel from key counties in northern Provinces to teach them how to collect statistics on livestock and poultry, and to ensure that they all use standardized procedures. In his remarks at the meeting, the vice-director of the national livestock station said work on livestock statistical monitoring needs greater attention from leaders, the capacity of personnel needs to be improved, and the work needs to be better-funded. He emphasized that township-level personnel needed t...

China's Ministry of Agriculture issued its first China Agricultural Supply and Demand report  this week, taking a long-awaited step toward providing useful information on agricultural markets. Several private companies in China have been selling reports like this by subscription for years, but this is the first report with regular agricultural supply and demand estimates to be released by a Chinese government agency to the public without charge. The China Agricultural Supply and Demand Estimates (CASDE) includes supply and demand balance sheets for corn, soybeans, cotton, vegetable oils, and sugar, plus a brief narrative explaining supply and demand conditions for each commodity. (Notably, rice and wheat are excluded--perhaps these commodities are too sensitive to discuss.) The report appears to be modeled on the USDA's WASDE report, although it only covers a few commodities and is limited to China's S&D situation. The report contains S&D estimates for market year...

New regulations will protect farmers' rights in China's booming rural land transfer market --at least that's the hope of the Ministry of Agriculture that issued regulations. The Ministry says rentals and other transfers of the rights to farm rural land now account for over one-third of collectively-owned land contracted to rural residents. (The proportion is up from about 7 percent in 2008 when officials first gave the go-ahead to set up pilot land exchanges and encourage the practice.) Over 10 percent of land has been transferred to enterprises or companies. Agriculture Ministry officials are watching the land-transfer trend with trepidation. According to Economy Daily , it has become popular for commercial investors to go to the countryside to "play agriculture" and for entire villages to rent out their land as a single big parcel. The Director or the Agriculture Ministry's rural operations office said that transferring large parcels of land can increa...

The target price subsidy will be 130.87 yuan/mu for soybeans planted in Heilongjiang Province during 2015, according to an announcement by Provincial authorities . That is equivalent to $118 per acre at the current exchange rate. The 2015 subsidy is more than double the 60.5 yuan/mu ($55 per acre) that was given for 2014 soybeans. There is no news about soybean subsidies in other provinces. Last year's target price subsidy for soybeans was 54 yuan per mu in Jilin and reportedly just 10 yuan per mu in Liaoning . The soybean subsidy will be distributed to farmers based on the area of soybeans they planted for the 2015 crop (approximately 15 months ago) that has harvested last fall. The subsidy funds will arrive several months after farmers planted their 2016 crop. The subsidy for the soybean crop currently in the ground will be paid out a year from now in 2017. The target price subsidy is a trial program for soybeans initiated in 2014 for northeastern provinces. The subsidy is...

China's farm subsidy overhaul took another step forward last week as the Ministry of Finance announced regulations for distribution of funds for "support and protection" payments , including a new subsidy for support of "appropriate scale farms." The Ministry of Finance will budget funds for the farm subsidies annually, then issue the money to the Ministry of Agriculture. It will then be passed down to provincial and county governments for distribution to farmers and other recipients. The new regulations set general guidelines for distribution of the funds, but local governments will decide the details of how much the subsidies will be and on what basis the subsidies will be awarded. With each locality determining the size and subsidy method, and with several types of distinct recipients, these subsidies will be even less transparent than China's existing farm subsidies. As announced previously, the new subsidy will replace three existing subsidies: the ...

Statisticians expected China to produce a near-record 130 million metric tons of wheat this year. However, a large proportion of the wheat crop recently harvested is inedible due to the effects of heavy rainfall that caused head scab, sprouting, and other problems with the grain. The poor quality wheat is not good for flour-milling since its gluten level is too low. Wheat that sprouts while still on the stem. A photo from 2015. The degree of problems with substandard wheat kernels varies from place to place, but the problems seem to be widespread across the winter wheat region in central and eastern China. The hardest-hit places appear to be in southern Jiangsu, Anhui, and Henan Provinces. This summer five provinces have launched their minimum price procurement programs to place a floor under market prices. However, large portions of wheat cannot meet the standard of less than 20-percent substandard kernels required to qualify for the minimum price program. Farmers then hav...