China considers beef import safeguards

China will investigate impacts of imported beef on the Chinese industry to determine whether safeguard measures to protect the domestic beef industry from imports are justified, according to an announcement by the Ministry of Commerce on December 27. 

China's national livestock industry association and 9 provincial associations submitted an 81-page application for the investigation that claims the increased volume of beef imports since 2019 has harmed the Chinese beef industry. 

The Commerce Ministry's announcement cites a 64.93% increase in beef imports from 2019 to 2023 and an increase in imports' share of the Chinese beef market from 20.55% in 2019 to 30.9% in the first half of 2024 to justify the investigation. The announcement claims that "there is a causal relationship between the increase in import volume and serious damage to China's domestic industry. 

An explanation of the investigation posted by The Ministry of Agriculture and Rural Affairs reports that two-thirds or more of farms have been incurring financial losses averaging 1000 yuan per cow for 8 months due to beef prices that are at their lowest point in 5 years. The article suggests that many farmers are heavily in debt, cows are being sent to slaughter, and some farms have quit the industry.

The investigation will examine imports of fresh, chilled, or frozen beef (HS codes 020110, 020120, 020130, 020210, 020220, 020230) between January 1, 2019 and June 30, 2024. The request lists 22 exporters in 11 countries and 15 Chinese importers to be investigated. The request claims that imported beef and domestic beef are comparable in quality and can be substituted for each other. The investigation will conducted from December 27, 2024 through June 30, 2025.

A law professor from China's National University of Politics explained to Peoples Daily that safeguard investigations are permitted by WTO rules to protect domestic industries from a surge of imports. A safeguard differs from anti-dumping and countervailing duty investigations because it applies to imports from all sources and does not target a particular country. China's antidumping investigations have mainly targeted developed countries: U.S. broiler meat, distillers grains and sorghum; Australian barley and wine; and this year European Union pork and Canadian rapeseed. However, the proposed beef safeguard measures will mostly impact beef exporters in Brazil and elsewhere in Latin America where China is trying hard to make friends and expand its influence. 

The request for the beef safeguard investigation shows over 40% of China's beef imports came from Brazil during 2023 and 2024. Fourteen of the 22 exporting companies identified for investigation are in Latin America: 4 each in Brazil and Argentina, 3 in Uruguay, and one each in Chile, Costa Rica, and Mexico. The investigation list also includes 3 exporters in the U.S., 2 in Australia, and one each in Ireland, France and New Zealand. 

Customs data show Brazil has been clearly the main source of the imported beef surge during the investigation period that begins in 2019. Argentina and Uruguay are the 2nd and 3rd-largest suppliers. Bolivia, Chile, Costa Rica, and Panama have also participated in the surge. Other Chinese friends Belarus, Russia, Ukraine, and Serbia have also contributed to the surge, but no exporters in those countries are targeted for investigation. China's imports of U.S. beef have rebounded during the investigation period but are comparatively small. Imports from Australia and New Zealand have been relatively stable. China banned beef from 10 Australian suppliers during 2020-22.

Chinese customs data, HS codes 020110, 020120, 020130, 020210, 020220, 020230. 

The application for safeguard investigation claims that growth in beef import volume is "recent, sudden, sharp and significant," but China's beef imports have been growing for a decade. The request for investigation fails to recognize that the rising trend in beef imports stopped in 2023--it shows charts with trend lines drawn through data from 2019 to 2023, ignoring the end of the trend in 2023-24. A comparison of quarterly imports (chart below) shows no trend in imports since the second quarter of 2022. It's probably no coincidence that the flattening of import growth and decline in Chinese beef prices during 2022-24 corresponds to the tanking of the Chinese economy.

Source: Chinese customs data. 

The request for investigation cherry-picks percentage changes in imports and Chinese beef prices to claim that surging imports caused China's beef prices. But beef prices in China actually grew and remained high during the fastest surge in beef imports in 2019-22. Chinese beef and cattle prices did not begin to fall until 2023 and 2024--after beef imports had stopped growing. 

China's beef output expanded rapidly during the years of import growth. Official data show that China's cattle inventory grew 18% from 2018 to 2023, and the Ministry of Agriculture article admits that beef cattle inventory grew to a record high in June 2023. Beef output increased by 3.8% in 2021, 2.9% in 2022, and 4.8% in 2023. Production increased 4% year-on-year in the first half of 2024. Chinese producers appear to have expanded aggressively in response to the 30-percent Chinese beef price increase during 2019-20. Now the beef price bubble in China has popped. 

Source: China National Bureau of Statistics, agricultural product prices.

Chinese beef prices diverged from international prices more than a decade ago, and Chinese domestic wholesale beef prices were often twice as high as U.S. and Brazilian prices over the past 10 years. Chinese beef prices did not begin their steep decline until 2023. The request for safeguards claims that a decrease in prices of imported beef caused the decline in Chinese price. Brazilian prices declined from a temporary peak in 2023 but there is no long-term trend in Brazilian beef prices. In the U.S. beef prices fluctuated and drifted upward, probably a main reason why the U.S. share of China's beef imports was less than 6% in 2023 and 2024. 

Sources: China Ministry of Agriculture and Rural Affairs, USDA, FAO.

Beef prices are dropping toward parity with international prices, popping the Chinese beef price bubble that formed 5 years ago. This blog has pointed out several times that Chinese prices have been declining for many agricultural commodities over the past two years. More actions like this safeguard investigation will be rolled out as Chinese authorities get nervous about restive farmers, reversal of progress on rural poverty alleviation and undermining of the rural revitalization initiative.

China makes arid Xinjiang a "national granary"

Chinese leaders are celebrating increased grain output in Xinjiang this year as part of their plan to boost the territory's role in national food security. 

According to official data released last week, Xinjiang's grain output grew 2.11 million metric tons (mmt) in 2024, Heilongjiang Province increased its output by 2.135 mmt, and Inner Mongolia increased its output 1.427 mmt. These 3 territories along China's northern fringe with broad swathes of grassland, desert, forest and swamps accounted for about half of this year's 11.1-mmt increase in national grain output.

MMT=million metric tons.

The political importance of the Xinjiang grain initiative is reflected by the number of articles in State media gushing over Xinjiang's grain targets and statistics. 

China's Xinhua News Service hailed the increase in Xinjiang's 2024 grain output this week, pointing to a record yield and the largest expansion of area planted of any province-level region. In October--two months before this year's data was released--Xinhua praised the Xinjiang Production Corps' record-setting grain yields, mechanization and technical expertise. 

In 2023 national leaders designated Xinjiang as a national reserve granary that will propel the plan to achieve another 50-million-ton increase in national grain output. Last year Xinjiang was ordered to plant 2.73 million hectares of grains. Official data indicate Xinjiang exceeded the target by 19 percent.  

In January 2024 State media led off the year by highlighting Xinjiang's contribution of one-third of the increase in 2023 grain output, lauding the filling of China's "food bowls" with "more Xinjiang grain." 

In February Xinjiang's agricultural work meeting increased the territory's target for grain output to no less than 22 mmt, demanding an increase in this year's grain output of 1 mmt. In May Xinjiang's deputy party secretary pledged to create China's "western granary" by boosting grain production 1 million metric tons. Official data released this month indicate Xinjiang again exceeded the target by producing 23.3 million metric tons. 

All Chinese officials were ordered to boost grain planting this year, and official data indicate that all but 5 of China's provinces reported increases in area planted in grain crops. Xinjiang beat them all by increasing its grain planting by 135,200 hectares in 2024, following up last year's increase of 390,200 hectares in its first year as a "national reserve granary." Jilin province was number 2 with an increase of 28,200 hectares this year and Inner Mongolia was number 3 with 27,100 hectares--both far behind Xinjiang's expansion. 

Source: Xinjiang and China Statistical Yearbooks.

Officials claim that most of the increase in Xinjiang's grain output came from improved yields. They cite high-standard field construction, mechanization, introducing high-yield varieties, dense planting of corn, building canals and facilities to move water from rivers and snow melt to fields, drip irrigation, spraying chemicals with drones and other techniques. However, Xinjiang's data looks dicey. The Xinjiang statistical bureau's site is several years out of date with no data since 2020. Is anyone watching? An earlier spike in Xinjiang's grain production from 2008 to 2015 looks questionable. 

China's State media published this photo of men filling a drone
apparently meant to spray on crops in Xinjiang.

As in the rest of the country, corn is the main grain crop in Xinjiang. Officials say the region's strategy is to maintain stable wheat production with an increasing proportion of strong gluten, selenium-rich and special use wheat, while expanding corn production with emphasis on corn for seed, silage, sweet corn and other special uses. 

According to a response to a question about this year's subsidies, a Xinjiang agricultural official said that growers of winter wheat would get a subsidy of 220 yuan per mu this year while the spring wheat subsidy was 115 yuan per mu (the subsidy had been 230 yuan in 2023). The official explained that Xinjiang uses the land fertility protection subsidy as a "baton" (presumably like an orchestra conductor) to "inspire and guide" farmers by setting differentiated subsidies for wheat, corn, silage, alfalfa and cash crops. The "one-time subsidy" was also distributed in this manner in 2022 and 2023. Subsidies for farm machinery purchases in Xinjiang were reported to be 1.37 billion yuan (over $200 million) in 2023. Grain production is also funded by transfer payments to major grain producing counties. 

In an earlier decade China moved nearly all the country's cotton production to Xinjiang to preserve "national cotton security," freeing up more land for grain in central and eastern provinces to maintain food security.  Now national food security policy dictates that Xinjiang produce more grain too. A Xinjiang official said the objective is to increase grain output while maintaining the region's cotton production at 5 mmt or more. Statistics for 2023 showed that cotton was the largest single crop in Xinjiang in terms of area planted (2.37 million hectares), followed by corn (1.437 mil. ha.) and wheat (1.21 mil ha).

Source: Xinjiang and China Statistical Yearbooks.

One of the problems with this plan is that Xinjiang is a long distance from China's population centers. Xinjiang's cotton already requires subsidies to transport to textile production centers on China's east coast by rail or truck, and grain would require a similar subsidy. The Xinjiang granary project includes construction of massive new warehouse capacity, so additional grain will likely be stockpiled and never actually consumed by humans. 

A major problem is Xinjiang's arid climate. The State Council's Development Research Center's initial assessment of the plan for making Xinjiang a "national granary" cited lack of water as one of the obstacles. Another official brushes off this issue by claiming that water can be moved around the region to irrigate the crops. The Xinjiang Production Corps claims to achieve high corn yields on desert land.

The Xinjiang project has similarities to a Soviet project in the 1960s that diverted two rivers in Central Asia to "make the desert bloom" by irrigating cotton, causing the Aral Sea to mostly dry up. The United Nations Development Program called this "the most staggering tragedy of the twentieth century." The U.S. "dust bowl" created by expanding crop area on the Great Plains a century ago also comes to mind. Is China producing a similar folly pushing crop production into environmentally fragile regions on its periphery where no one can see what's happening? Is anyone watching?

A water transfer canal in Xinjiang published by State media.

China's grain data for 2024: output 'at a new level'

China's grain output "reached a new level" in 2024 as it surpassed 700 mmt for the first time, according to a Chinese official explaining this year's grain data. Production rose 1.3 percent to 706.5 million metric tons (mmt) in 2024. The area planted in grain crops increased by 0.3% and average yield increased 1.3 percent in 2024 according to data released December 13. 

Corn was the driver of China's growth in grain output as it has been for many years. According to the Statistics Bureau's communique on 2024 grain output, corn production reached a record 294.92 mmt in 2024, well above the output of rice (207.54 mmt) and wheat (140.1 mmt). Corn output rose 6.1 mmt this year (up 2.1 percent) and wheat output rose 3.5 mmt, as the two crops accounted for most of the 11.1-mmt increase in grain output. Rice output rose 900,000 metric tons and soybean output declined 200,000 metric tons. Production of early-season rice fell 600,000 metric tons, probably due to summer floods in southern provinces.

Source: China National Bureau of Statistics.

Corn also accounted for nearly all of the increase in area planted in grain during 2024, with an increase of 521,800 hectares (+1.2 percent). Rice area rose 57,800 hectares, including a 21,700-hectare increase in early rice. Wheat area fell 39,800 hectares. Soybean plantings fell 140,700 hectares as Xi Jinping's campaign to boost soybean self-sufficiency seems to have faltered. 

Source: China's National Bureau of Statistics.

Wheat accounted for most of the improvement in grain yield as growing conditions were favorable for the winter wheat crop. Wheat yield increased by 158.6 kg-per-hectare (+2.7%). Early rice was the only grain crop with a decline in yield. 

Source: China National Bureau of Statistics.

Corn's dominance of grain output growth continues a long-term trend. Corn output grew at a frantic pace from 2004 until a massive corn glut was built up during 2012-15. A "supply side structural adjustment" during 2016-20 to alleviate the glut interrupted the growth. Corn output growth was resumed since 2020. Rice output seems to have plateaued and wheat is growing at a moderate pace. Soybean output is stuck around 20 mmt. 

Source: Data from China National Bureau of Statistics.

The National Bureau of Statistics official explained that this year's bumper harvest was due to officials preventing loss of arable land, averting impacts of natural disasters, and the central communist party leadership's support for grain output: raising the minimum prices for wheat and rice, paying grain producers an "arable land fertility protection" subsidy, corn, soybean and rice producer subsidies, improving a full-cost insurance and income protection insurance program, an agricultural input price stabilization program, "comprehensive land governance", and expansion of summer crop planting to maximize the potential area planted in grain. Based on the official's explanation, the objective of the soybean producer subsidy seems to have quietly shifted from increasing soybean self-sufficiency to keeping soybean area planted stable at 10 million hectares or more. 

The official attributed good yields to good sunlight and moisture in grain-producing regions despite floods, droughts, and typhoons. He credited the "high standard field construction" program, and an action plan to raise yields through increased planting density, combining fertilizer application with irrigation, and a program that combines a growth-promoting spray with herbicide and pesticide applications. 

The official began his explanation by crediting Xi Jinping's guidance for record grain output and concluded by explaining the grain output figures support Xi's priorities. A shorter description of the grain data and the official's explanation were also featured on page 1 of the December 14 Peoples Daily. According to the Statistics Bureau official, China's record grain output contributes to national food security, global food security, stabilizes the world grain market, and lays a foundation for China's status as an agricultural power. Grain production advances rural revitalization, drives "high quality development" and puts economic recovery on a good trend, the official said. 

China's CPI hides big price drops for some items

 China's November Consumer Price Index was up 0.2 percent. The food component was up 0.9 percent, but that number hides a lot of big price declines for agricultural goods further up the supply chain. The table below compares year-on-year changes in select food categories from the November CPI report with year-on-year price changes calculated from several other November price data reports from China. 

For example, the CPI reported a 1.1 percent decline, but other data sources reported 18 and 19-percent declines for wheat, a 17 percent decline for flour, and price declines of as much as 4-to-6 percent for rice. 

Beef prices are down 13.5 percent in the CPI and down 18.3 percent in the Ministry of Agriculture's wholesale price report. Milk prices are down 1.4 percent from last year in the CPI, but raw milk is down 15.2 percent according to the agriculture ministry's wholesale price data.

Apples and potatoes are down about 10 percent from last year. 

The main components of animal feed were down by double-digits. Corn prices were down 18-to-21 percent and soybean meal was down 24-to-26 percent from a year ago. 

In contrast, pork prices are up about 14 percent from their depressed level of a year ago in the CPI and in wholesale price databases (but still below their level from November 2022) as many producers have cut back on production capacity after financial losses last year. With higher pork prices and lower feed prices many pig farms are seeing a reverse of last year's steep losses. 

Vegetables are another item with higher prices this year. The CPI vegetable component was up 10 percent from a year ago, probably reflecting the impact of summer flooding. According to MySteel agricultural price reports, garlic and chili peppers are up more than 20 percent and ginger is up 16.5 percent from last year. 

The declines in many prices reflect weak demand, the influence of sinking global prices for many agricultural commodities, and a deflating economy. The declines are consistent with anecdotal reports from China of food bargain-hunting, popular cut-price buffets, and more cooking at home to save money.

China's relentless soybean crushing build-out drives imports

China keeps building more soybean processing capacity, driving its demand for soybeans ever higher and undermining Xi Jinping's dream of reducing dependence on imported soybeans. 

An article issued by Shanghai-based Mysteel agricultural commodities last month reported that China's soybean crushing capacity increased from 120 million metric tons (mmt) to 140 mmt over the past 10 years. 

A similar article chronicling China's soybean crushing expansion that appeared in 2022 said 10 to 15 soybean crushing facilities with 60,000 metric tons per day were planned for completion between 2022 and 2025. The ones completed have contributed to the expansion reported above. With more scheduled for completion, the Mysteel article predicts that capacity will grow further in the next 2 years. 

The massive build-out of capacity--from 10 mmt in 2000 to 140 mmt now--powered China's emergence as the world's dominant soybean consumer. 

USDA's PS&D estimates show that China was already the world's biggest soybean crusher 10 years ago (in market year 2014/15). That year China consumed 74.5 million metric tons,46-percent more than the amount crushed by the United States. For 2024/25 USDA estimates China will crush 103 million metric tons, 57 percent more than the U.S. China's 28.5-million-metric-ton increase over the past decade is close to the increase in crush by the United States and Brazil combined. The combined increase in crush over 10 years by the other 7 countries in the top 10 was less than 10 mmt. 

If the Mysteel capacity numbers are correct, China was using only 62 percent of its crushing capacity in 2014/15, yet crushers felt the need to add 20 mmt of new capacity over 10 years. The numbers imply that China will utilize 74 percent of its crushing capacity this year. 

The Mysteel article reports capacity utilization for China's soybean crushing industry fluctuating between 55% and 70%, and just 42% for the first 10 months of 2024. The Mysteel author describes the industry as suffering from excess capacity. (The lower utilization is only partly explained by a divergence between USDA and official Chinese crush estimates: China's Ministry of Agriculture's CASDE has a 17.6-mmt increase in soybean crush over 10 years from 77.3 mmt to 94.9 mmt in 2024/25.)

A separate article posted on multiple sites in 2022 reported that crush capacity was 174 mmt with a utilization of 54%. That article described the industry as suffering from serious excess capacity.

China has hundreds of crushing facilities built mainly at ports and rivers for cheap and easy access to imported soybeans. According to last month's Mysteel article the regional layout has been stable with 85% of capacity in coastal provinces ranging from the Bohai Gulf region in the north to the southern coast. The largest concentration of soybean crushing facilities are in the provinces of Shandong, Jiangsu, and Guangdong. Only 15% of capacity is inland, along the Yangtze River and in big pig-producing southwestern provinces of Sichuan and Yunnan.

Created from data in Mysteel agricultural commodities article.

The Mysteel article says it excludes capacity that has been idled for a long time. It appears to also exclude crushing capacity in Heilongjiang Province. The 2022 article reported that most of the Heilongjiang crushing capacity--meant for processing domestic soybeans--had been idled or switched to manufacture soy-based food products like tofu. The 2022 article implied that only 1 mmt of domestic soybeans were crushed to produce oil and soybean meal during 2021/22. 

Control of China's crushing capacity is almost equally split among Chinese state-owned companies (38% of capacity), Chinese private companies (32%) and multinational companies (30%). The top companies have all been adding crushing capacity for imported soybeans aggressively, but state-owned companies (SOEs) have led the way. 

The leading share of crushing capacity held by state-owned companies (SOEs) dates back to a 2008 campaign to dilute multinationals' share of soybean crushing by bankrolling SOEs COFCO and Jiusan to acquire other companies--smaller private crushers, Singapore's Noble Agri, and another SOE called Chinatex--and to build more than 10 new crushing facilities at coastal and river ports. At the end of 2021 there were 41 SOE crushing facilities, 41 private crushers, and 33 foreign-invested crushing facilities. 

A posting on Baidu.com said COFCO had 20% of capacity, while SOEs Sinograin and Jiusan each had 9% of crushing capacity. Singapore-based Willmar was the largest multinational with 11% of capacity.

The bottom line is that different tentacles of the Chinese State are working at cross-purposes in the soybean sector. 

Supreme leader Xi Jinping has decreed an increase in soybean self-sufficiency by ordering agricultural officials to subsidize and expand domestic soybean output and to convince feed mills to substitute alternative feeds for soybean meal. 

Meanwhile, state-owned companies continue building crushing capacity for imported soybeans. And imported soybeans have been getting cheaper, keeping the facilities among the few profitable businesses in China this year. The need for an ever-increasing flow of imported soybeans to utilize the capacity, cover the fixed costs and pay debts incurred to build the facilities ultimately undermines Xi's goal of reducing reliance on imported soybeans.