Dim Sums: Agricultural Markets in China

If you're thinking about starting a socialist country, you might want to take note: after 70 years of socialism, China's elite Chinese Academy of Social Sciences (CASS) has pronounced that,  "the rural collective economy is still at a low level of development [italics added], its development is uneven, and it lacks sustainability and profitability." The comments were made at a Beijing forum on CASS's Rural Development Report in preparation for writing the 14th five-year plan for 2021-25.  The report's unusually candid assessment identified rural problems and "contradictions" that include weak farming incentives, difficulty achieving sustainable income growth, growing divisions within villages, and an aging population. CASS noted that a 135-million-metric-ton shortfall in grain supplies is projected for 2025, rural industry is unprofitable, business financing is inadequate, rural services are lacking, a rural garbage disposal problem is mounting, a...

Nervous Chinese officials reversed course in 2020 by encouraging production of the "early" rice crop that is shunned by consumers due to its poor taste and is grown mainly to pad production statistics. After jettisoning its massive overstocks of cotton and corn, China's next target was to dump massive stocks of rice. Officials had been easing up on policies supporting production of the early rice crop for several years to alleviate the surplus, but food security hysteria somewhere in Beijing's inner sanctum and panic over the novel coronavirus pandemic prompted a reversal of policy in 2020. "Early" rice is planted in early spring and harvested in summer, followed by a "late" rice crop harvested in late fall--two crops a year on the same field. Most farmers prefer to grow a single rice crop that allows them to maximize their time working in cities, returning only for planting and harvest. Double-cropping rice is labor intensive and unprofitable for ...

An article from the China grain net detects weakening rice prices as a big new harvest comes on the market. The author of the article speculates that the government will try boost prices by increasing procurement for state reserves. The author notes the influence of the government on prices. Early-season rice harvested this summer opened with a relatively high price after harvest, but it fell when government procurement tailed off. In Hunan, Hubei, Chongqing, and other areas of the south where grain reserve depots have been procuring rice the price for middle-season rice is about 0.9 yuan/jin or higher. In Sichuan, the price is about 0.9 or lower--the weak prices there are attributed to government aid (rice) pumped into the region affected by earthquake, pushing supply beyond demand. In the northeastern provinces, rice has just started coming on the market. The author anticipates a similar pattern of high opening price followed by a decline unless the government decides to support pri...

Cotton has been one of the hottest agricultural import items since China's WTO accession. Much of this cotton is manufactured into garments that are re-exported. The slowing U.S. economy may be slowing the Chinese export machine. A Sept. 24 article reports that blazing growth of textile exports slowed in August to just 2.8% above year-earlier exports. Textile/apparel exports grew 12% in 2007 and that was down from over 20% growth in 2006. The slow-down in textile demand combined with burgeoning domestic cotton supplies translates to a slowing of cotton imports. Cotton imports were down 27% year-on-year in August. Domestic cotton is in excess supply, especially in Xinjiang autonomous region in China's far west (the biggest cotton-producing region). According to railroad statistics, in 2007 cotton transported from Xinjiang totaled about 2.93 mmt, about 8.7% higher than the previous year. Approaching the end of the current market year, by the end of august Chinese cotton enterpris...

Illnesses due to tainted milk powder now exceed 6,000 and 3 deaths. Powder from the biggest dairy companies in China have all tested positive for adulteration with melamine. Test results showed melamine present in samples of 69 products from 22 brands of milk powder tested, 14% of the products and 20% of the brands tested. There were 87 brands that were free of melamine in the tests. According to the State Council , there are 175 milk powder producers nationwide, of which 66 have stopped production. The 69 products that tested positive are not allowed to leave the factory. All 11 Sanlu brand samples tested positive with far higher concentration of melamine than any other brand. The two biggest companies were not free of melamine but were not among the worst performers: Yili had 1 out of 38 samples test positive and Mengniu had 3 out of 28 positive. Sanlu's concentration of 2563 mg/kg was much higher than 68.2 mg/kg for Mengniu and 12 mg/kg for Yili. The vice-secretary and mayor of ...

Over 1,250 (so far, the number keeps rising day by day) babies have become sick and two have died from consuming infant formula adulterated with melamine—a chemical derived from coal. This scandal combines elements from two of China’s biggest food safety incidents. You’ll recall that the big publicity about food safety problems with Chinese food imports started in 2007 when dog and cat deaths were linked to melamine. China’s watershed domestic food safety incident came in 2004 when a series of babies died from malnutrition due to fake infant formula that had little nutritive value. The latest problem is centered in Gansu Province in western China where babies had been showing up at hospitals with kidney stone problems since March or April of this year. The link among the cases was that all the babies consumed the same brand of milk powder. According to the Chinese Xinhua article of Sept 11 , the condition found in the babies is usually the result of poor nutrition typically found only ...

We were wowed by the Olympic ceremonies. This amazing display demonstrated how China can concentrate resources on a problem it wants to solve regardless of the cost. Food safety was one of the big concerns in preparations for the games. Organizers worried that sick athletes or failed doping tests due to hormone-laced meat would give China bad publicity. So since 2005 there has been a massive effort to develop an elaborate system of production bases for vegetables, milk, poultry, etc., including secret pig farms where the hogs eat like kings, have to swear off drugs and get to roam around in exercise yards in accord with European animal welfare requirements. Last year I visited the control room in northwest Beijing to see the city's food safety monitoring system. Like the opening ceremonies it was an awe-inspiring martialing of technology and "Big Brother"-type control. The wall was covered by a bank of video and computer screens. There is a massive database that allegedly...

The biofuels industry is on a quixotic quest for a free lunch--to find raw materials that don't cost anything--switchgrass, jatropha, used vegetable oil, wind, etc. Most of these are years or decades away from practical use. But let’s consider cassava, also known as tapioca, a “nongrain” feedstock that has already been brought into production. In December 2007 China opened its first biofuel factory that uses a nongrain feedstock—cassava, also known as tapioca. Cassava is basically a weed that will grow anywhere. You just stick a piece of it in the ground and come back 8 months later to pull up its starchy root. It grows mostly in Guangxi Province and other parts of Southeast Asia where there is lots of rain, sunshine, and marginal soils. The idea is that biofuel can be produced from cassava without diverting grain away from food or feed users—that is, basically a “free” good. (If you skipped the first chapter of your economics textbook, the basic fact of scarcity is that ...

China has come a long way from the days of Marxism-Leninism. The Farmers Daily newspaper (the title used to be translated Peasants Daily in the old days) brings up the economic concept of “opportunity cost” in a July 16 article discussing declining profits from selling wheat, showing that Adam Smith may be more influential than Mao Zedong in today's Chinese economy. The journalist notes that fertilizer and diesel prices have raised wheat production costs about 80 yuan per mu (that turns out to be about $80 per acre at the present exchange rate). The government raised the minimum price for the recently-harvested wheat by about 0.05 yuan per jin. With a yield of 800 jin per mu, that works out to an increase of 40 yuan in revenue per mu, so profits are slimmed down, and farmers are wondering whether market conditions might push prices higher in coming months, making it advantageous to sell later. (By the way, wheat and rice are the only major crops that have minimum prices--most pri...

As I arrived in the city of Guangzhou for the first time in 8 years I was taken aback by the number of Africans on the street. Dozens of young African men were going about their business in the area around my hotel. They were clearly not students, diplomats, tourists or 5-star executives—the kind of foreigners one expects to see in China. I was also intrigued by the number of restaurants with Arabic signs around town. I went back to my hotel room and consulted Google to find out what these Africans were doing in Guangzhou. An English translation of an article from Guangzhou’s Southern Metropolitan Daily provided the answers. Over the past decade thousands of African and Middle Eastern merchants have been coming to China—mainly Guangzhou—to buy blue jeans and other budget-priced merchandise to ship back to their home countries, including Nigeria, Mali, Congo, Angola, Yemen, and Lebanon. By some counts there are at least 20,000 and perhaps 100,000 Africans in Guangzhou and the number ar...

Usually, wheat is more expensive than corn in China (and most other places). Wheat mostly is ground into flour for making bread and noodles while corn is fed mainly to animals. Presently, the usual price relationship is reversed—corn is now more expensive than wheat. A report on China ’s feed industry ( www.yumi.com.cn ) this week noted that feed mills in northern China are paying RMB1690/metric ton for corn and RMB1670/mt for wheat. In past years—before 2006—corn was typically about RMB200 less than wheat. Chinese feed mills, looking to minimize their costs, are adjusting their feed recipes to use a higher ratio of wheat to corn. The report says mills are generally replacing about 20-40% of corn with wheat, and in parts of Shandong Province (a major wheat-growing area where demand for corn to make starch is booming) half of the corn is being replaced with wheat. Moreover, the new harvest of winter wheat is about to happen, which usually brings on a seasonal decline in wheat prices...