Dim Sums: Agricultural Markets in China

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 pri...

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 re...

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. Repo...

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 ...

Beijing municipality is taking extreme measures to crack down on illegal conversion of land designated for agriculture, including the installation of video cameras to keep an eye on the land. According to Beijing Evening News , the Beijing planning and land management commission has announced a multi-channel system for monitoring rural collective land use to prevent illegal construction on land designated for agricultural use. The channels include a telephone hot line, reporting violations to local or higher-level authorities, inspections by land management officials, inspection of satellite imagery, filing petitions, and a network of remote video surveillance. The video system, begun in June this year, reportedly covers 90 percent of Beijing municipality's cultivated land. The system is described as a "watching from heaven, inspections on the ground, online management" clue discovery system. An explanation of the system posted by the Land Ministry in 2013 said wirel...

An economist with China's Development Research Center  who spoke at a China Grain and Food Security Summit  in Beijing on November 13 observed a link between China's huge grain reserves and excessive imports. The economist, Li Wei, reported that China now has nearly 560 million metric tons (mmt) of grain inventories, which he says is a record-high amount. He thinks less than half of this reserve level--200-250 mmt--would be adequate for China's needs. Li estimates that China is also importing excess volumes of grain, prompted by China's high grain prices. Noting that China imported 130 mmt of grain during 2015, Li calculates the actual deficit between China's consumption and production of grain is just 30 mmt. Thus, Li concludes that China imported 100 mmt of grain more than it needed last year. The main prescription he offered was the "supply side structural adjustment" policy that will switch area from corn to other crops. Chinese authorities put a p...

China will conduct its third agricultural census in January 2017. This may be the largest statistical activity ever and one of the most challenging. The first modern agricultural census was conducted in 1997 and resulted in major revisions of land and livestock statistics. A second census in 2007 received less fanfare. Officials insist it was accurate but there were allegations of shoddy work and village officials filling out questionnaires in their offices with made-up numbers. The agricultural census is conducted by recruiting thousands of local officials, teachers, and other temporary enumerators who fan out across the countryside to administer six different questionnaires to farmers, companies, village and town officials. Statisticians hope to find out who lives in the countryside, what they do, how much land they have and what they plant on it, what machinery and animals they have on hand, and take an inventory of rural land use and infrastructure. The census will be conducted ...

China's Ministry of Agriculture's (MOA) November China Agricultural Supply and Demand Estimates report raised its estimate of the country's 2016/17 corn crop by 1.15 million metric tons (mmt), reflecting a higher yield compared with October's estimate. They attribute the higher yield to a frost that came 5-10 days later than usual in northeastern provinces. Imports for 2016/17 were reduced to 1 mmt this month as MOA determined that the drop in Chinese corn prices had rendered imported corn uncompetitive. Industrial use was increased by 500,000 metric tons due to subsidies for corn processors in northeastern provinces. Loss was increased by 200,000 metric tons as a result of rain and snow in the northeast that degraded quality of some corn. China corn supply and demand (Ministry of Ag, November 2016) Item Unit 2015/16 2016/17 Nov. Change from Oct Planted area 1000 ha 38,117 36,026 Harvested area 1000 ha 38,117 ...

Chinese wheat prices rose during October due to an artificial shortage created by a policy that channels large volumes of grain into government warehouses where it remains for years until it becomes rat food. A local Henan Province wheat trader told Futures Daily that a surge in wheat prices that began in September has market participants puzzled. Normally, the price starts to fall when the government finishes purchasing wheat for reserves on September 30, but this year the price started climbing in October. The price rally has been unexpectedly robust. The rising prices have prompted traders to increase their purchases. Flour mills have shifted from a wait-and-see approach to a more aggressive buying strategy. Futures Daily reports that a flour mill in Xinxiang of Henan Province posted new purchase prices for wheat from various regions that ranged from 2580 to 2620 yuan/mt. The notice reminded traders to cover trucks with tarpaulins to keep wheat dry since the reg...

Years of breakneck growth have given way to a four-year funk for China's chicken industry. Industry leaders are looking to jump-start growth by reassuring consumers of product safety and quality, vertically integrating, and developing independent breeding capacity. During the first half of 2016, the major publicly-listed chicken companies all reported big increases in profits, suggesting the industry may be ready to turn the corner. Like many food industries in China, the chicken industry has been under a cloud of food safety rumors. Last month, a broiler chicken alliance of 36 companies gathered at a publicity meeting to take a pledge to uphold food safety to show the industry's cohesion and restore consumer confidence, according to the alliance's president. Since 2012, the industry has been hit by a series of incidents that sowed fears of chicken. These included the so-called "instant chicken" rumors, human illnesses resulting from H7N9 infections that were...