Dim Sums: Agricultural Markets in China

Officials have launched a campaign to promote China's domestic dairy industry as an essential foundation of the country's all-round well-off society. One of five initiatives to revive China's dairy industry, donations of milk to students in poor rural areas were the focus of the kick-off meeting held in Beijing on February 21, 2017. Vice Minister of Agriculture Yu Kangzhen urged attendees at the meeting to "learn from the guiding spirit" expressed by General Secretary Xi Jinping during his January 24, 2017 inspection of an infant formula factory in Hebei Province. At the inspection , Xi pronounced, "Let the motherland's next generation drink good milk powder; this is of great concern to me." General Secretary Xi Jinping tours farm supplying milk powder factory  According to the Ministry of Agriculture Press Office, China is in a stage where it is approaching the achievement of an "all-round well-off" (xiaokang) society by 2020...

As grain prices fall and profits shrink, some of China's new large-scale farmers are walking away from land rental contracts or demanding lower rents. Corn prices in China were down 20.5% from a year ago in January 2017, according to the latest monthly Situation and Outlook Report from the Ministry of Agriculture. The National Development and Reform Commission has just announced that minimum prices for rice will be reduced in 2017. With shrinking profits and other unanticipated problems, quite a few of China's large-scale tenant farmers are returning their rented farmland to village collectives or asking for lower rents. An article in the magazine Liaowang (Outlook) describes the situation in several counties of Shandong Province. One farmer in Wucheng County said he lost 16 million yuan growing corn and wheat on 8,749 mu (1,440 acres) of land he rented on a 10-year contract. He gave back the land and will now concentrate on his furniture business in Beiji...

Profit margins for China's flour mills are under pressure from high wheat prices and weak flour prices, according to an analysis last week by Agricultural Futures Net . The peak season for flour demand around the Chinese new year has now passed, and flour mills have been slow to restart production after the holiday due to slim profits. Some have taken the opportunity to retool machinery. The cost of raw materials is up. Flour mills are paying an average of 1.33 yuan/500g for wheat, up from 1.19 yuan/500g last year. Wet weather in parts of China's wheat belt last summer have reduced the supply of good quality wheat in China this year. Flour prices have not risen to match the rise in wheat prices. Salesmen reportedly have not been getting as many orders as they normally do at this time of year. The competition for customers has led to price wars for flour. The average ex-factory price for flour is reported to be 1.7 yuan/500g in Shandong, Hebei, and Henan Provinces, down ...

China's minimum prices for rice for the 2017/18 crop will be reduced, according to a February 17 announcement by the National Development and Reform Commission . The small reductions, however, will do little to close the 27-percent gap between China and international prices reported by the Ministry of Agriculture for January 2017. The 2017/18 minimum prices will be 130 yuan/50kg for early long grain rice, 136 yuan/50kg for single-season and late-season long-grain, and 150 yuan/50kg for medium grain rice. The government's grain reserve corporation will purchase rice at these minimum prices if the market price falls below the minimum price level. The minimum prices are announced before spring planting, so these will apply to the early long grain crop harvested in July and the fall crops harvested September-October this year. The early rice price was reduced 3 yuan/50kg from last year, the middle/late long grain price was reduced 2 yuan/50kg, and the medium grain price was ...

China has a serious shortfall of strong-gluten wheat this year, sending prices soaring, according to Grain and Oils News . China's wheat predominantly has moderate levels of gluten which are suitable for traditional products like steamed bread, but western-style breads require flour with high gluten content. After decades of cajoling farmers to produce more of this type of wheat, it is still in short supply. This year's "central document no. 1" includes a directive to focus on producing high- and low-gluten wheat. This year the shortfall is worse than normal for two reasons. First, there were widespread quality problems with the 2016 wheat crop due to rains and cloudy weather around harvest time. The weather problems affected the main strong-gluten wheat-producing regions, Henan and Hebei Provinces, Grain and Oils News said. The overall quality of wheat from last year's harvest is low. A second reason for this year's shortfall is greater demand for high...

Worried about the slow pace of corn purchases, officials in a northeastern China province have ordered local officials and companies to step up corn-buying efforts. A February 3, 2017 circular issued by the Jilin Provincial government raised concerns that last fall's corn crop is being purchased at a much slower pace than usual. The 15.7 million metric tons of corn purchased as of last month's spring festival was much less than in previous years. Despite great efforts and special measures to ensure that farmers are able to buy this year's corn harvest, the document says there have been declines in price recently, buyers became cautious, and farmers are anxious to sell their corn. There has been a steady increase in unspecified new contradictions, new situations, and pressure on grain marketing. Each local government and department must pay high attention, clearly recognize the new situation grasp the extreme importance, complexity, and arduousness of grain purchase and...

China is revving up its build-it-and-they-will come economic growth model to overhaul the countryside. China's Central Document No. 1 lays out an elaborate grand-sounding program for supply side structural reform of the countryside, but it boils down to doling out cash to mop up surplus commodities, bulldozing old stuff, pouring concrete, and creating a "market" for uncompetitive seed and farm equipment companies. The cash sluice gate was opened by the strategic agreement signed between the Agricultural Development Bank of China and the Ministry of Agriculture in September 2016 which pledged to lend no less than 3 trillion yuan ($450 billion) to support agricultural modernization by 2020. Created from Agricultural Development Bank annual reports, adbc.com.cn According to the Ministry of Agriculture ,  the Bank had approved 24.7 billion yuan ($3.5 billion) in loans by the end of December and loans had been disbursed for projects worth 13.55 billion yuan ($2 ...

China narrowed its foreign trade deficit in agricultural products during 2016, according to figures reported by its Ministry of Agriculture . Data for January-December 2016 show the value of imports was $111.57 billion, down 4.5 percent from the previous year and the value of exports was $72.99 billion, up 3.3 percent. The deficit of $38.58 billion had narrowed by 16.5%, according to the Ministry of Agriculture's estimates. China agricultural imports and exports, 2016 Exports Imports Net Value (Billion US dollars) 72.99 111.57 -38.58 Change from previous year (percent) 3.3 -4.5 -16.5 The volume of soybean, wheat and rice imports for January-December 2016 was up, and the volume of pork imports doubled. Imports of corn, cotton, and sugar fell by about a third. Imports of yarn were also down. Imports of substitutes for corn--barley, sorghum, distillers dried grains, and cassava--all fell dramatically. Beef and milk ...

The Ministry of Agriculture's China Agricultural Supply and Demand Estimates for February 2017 made only slight changes for the 2016/17 market year. The estimate of China's corn imports for 2016/17 was cut to 800,000 metric tons, down from 1 million metric tons last month. The CASDE has shaved their estimate of corn imports from 2.4 million metric tons estimated in July and August last summer to 1 million metric tons November-January, and now 800,000 metric tons. The report's authors attribute the lower import number to China's corn prices gradually falling in line with international prices after elimination of the temporary reserve policy. CASDE says the price of imported corn with 1% tariff for arrival in southern China was 1700 yuan per metric ton in January 2017, which they say exceeds the cost of domestic corn by 120 yuan. They expect the price of imported corn to be in the 1650-1750 yuan per metric ton range during 2016/17. The average wholesale price in product...

According China's Grain and Oils News , the Heilongjiang Branch of China's Grain Reserve Corporation procured 35 million metric tons of grain in 2016. This branch claims to now have an inventory of 150 million metric tons of grain reserves purchased on the government's behalf. The Heilongjiang grain reserve company brags that its purchases of grain raised incomes for farmers by 10 billion yuan ($1.45 billion). Wow! However, the company reports that the subsidies distributed to granaries last year to cover the cost of storing the grain was 11.5 billion yuan ($1.67 billion). So...it cost 11.5 billion yuan to raise farmers' income by 10 billion yuan. This doesn't count the shrinking book value of the grain, nor losses due to spoilage. Market prices for corn in Heilongjiang are now 1300-1400 yuan/mt, much lower than the support price for corn of 2220 yuan/metric ton they would have paid for corn in 2013 and 2014, and about 600-700 yuan less than the 2000 yuan they w...

Chinese President Xi Jinping decreed at last December's "rural work meeting" that "supply side reform" will be the slogan guiding rural policy in 2017. "Supply side reform" is a catch-all for fixing everything: overhauling the countryside by moving rural people into cities and consolidating farms, attacking pockets of rural poverty by moving people out and creating new industries, improving the agricultural product structure and making farming more profitable and competitive using "the two hands of government and the market." One of the many targets of supply side reform is China's grain industry, which is suffering from one of the biggest mismatches of supply and demand ever created.  In an interview with the official Xinhua News Service last month, the deputy director of China's State Administration of Grain pronounced that 2017 will be a key year for reform of the grain industry. While celebrating the massive 43-percent incre...