Dim Sums: Agricultural Markets in China

Chinese leaders cloak themselves in first-world food snobbery, but underneath they are obsessed with removing humans from agriculture through mechanization, relying on the latest scientific fads to magically increase crop yields, commoditizing "food" into standardized tons, and producing food in chemistry labs and factories. China's 5-year plan for 2026-30 reveals the "modernization" obsession. At a  June 2 press conference  the Ministry of Agriculture and Rural Affairs explained its approach to implementing the 5-year plan by identifying a handful of industries they expect to underpin the growth of "new quality productive forces" in agriculture: AI in plant breeding new energy agricultural machinery agricultural low altitude economy (drones) agricultural biological manufacturing novel food products A June 10 meeting of the agriculture ministry's leading group on science and technology innovation  prioritized biomanufacturing and artificial intelli...

As China's biggest city and one of its richest, Shanghai has a thriving food industry supplied mainly with products from other provinces and from overseas. Shanghai is on the leading edge of a national trend of adding food miles and degrees of separation between consumers and farms. A thriving, gradually maturing industry is growing rapidly to get tasty food to consumers. But the trend also creates safety risks and opportunities for criminal food fraud.  An annual "white paper" by Shanghai's market supervision authority  posted on the central government's web site is meant to assure Chinese consumers that authorities have food safety under control.  The report says Shanghai is becoming a "food distribution city" as the number of local food producers plummets. In 2020, 80 percent of the food consumed in Shanghai came from outside the municipality. The ratio was up 10 percentage points from five years earlier, according to the report.  Relatively few local...

China's food spending was relatively stable as the economy cratered during the Q1 2020 COVID-19 pandemic. However, sales to restaurants, cafeterias and hotels shrank dramatically while food sales direct to consumers in stores and online were among the few bright spots in retail, according to figures released by China's National Bureau of Statistics . Food processing output and investment were down sharply, but a yawning gap in meat supplies left by last year's African swine fever epidemic is layered over the impacts of the this year's crisis. China change in food industry indicators, Q1 2020 vs a year earlier Indicator Percent Consumer expenditure on food, alcohol, tobacco 2.1 Retail food sales by above-scale stores 12.6 Online sales of edible items 32.7 Food service industry sales -44.3 Primary processing of farm products and foods -11.1 Food manufacturing -7.9 GDP...

China is prioritizing development of agricultural processing industry, according to an article in Farmers Daily last week . The plan is logical and elaborate, but relies on a host of subsidies, tax breaks, and coordination among officials in two dozen ministries and bureaus. Officials are now working to develop agricultural processing and integrate primary, secondary, and tertiary industries as ordered by General Secretary Xi Jinping and Premier Li Keqiang and directed by a guidance document  issued in December by the State Council . While agricultural processing has already become a "pillar industry" in China's countryside with 81,000 enterprises and gross income of 20 trillion yuan, Farmers' Daily says the industry is still weak, is not in sync with the requirements of modern agriculture, and cannot adequately meet the needs of the changing structure of food consumption. Farmers Daily says developing an agricultural processing industry is urgently needed to ...

A subsidy designed to entice mills to grind up surplus grain in Heilongjiang Province has set off a "firestorm" in the local grain industry. One commentator described the subsidy as riddled with loopholes that "dug up rent-seeking worms." China has a massive overstock of corn and rice in Heilongjiang Province. In April, the province began offering a subsidy for processing grain purchased from the government's bloated stockpile and in June the subsidy was doubled. The new subsidy is 200 yuan for each metric ton of rice and 400 yuan for each ton of corn purchased from state reserves from April 15 through October 31, 2015. Rice must be milled and corn must be processed into starch or alcohol products. (Jilin Province has a subsidy of 150 yuan per metric ton for corn processing.) The controversy is over the list of companies eligible for the subsidy. Only mills with an annual capacity of 100,000 metric tons were eligible for the subsidy. The provincial governme...

At a July 22, 2015 executive meeting of the State Council, Premier Li Keqiang emphasized the necessity of transforming China's agricultural model . Instead of viewing "agriculture" as a compartmentalized activity for peasants, Li wants officials to treat agriculture as an industry that operates like a factory and is linked with processing and marketing sectors. Premier Li told a story that reveals the medieval view of agriculture that still prevails among many Chinese officials. Li recalled being confused during a visit to Canada ten years ago when his Canadian hosts spoke of "agricultural industry" (directly translated  "农业工业" according to the article, which is not a common Chinese term). Li wondered, "How can 'agriculture' also be 'industry'?" In China, "agriculture" and "industry" have always been two separate and compartmentalized parts of the economy. When the Canadians took Li on an agricultural t...

Suddenly, this "BRIC" is looking soft. China has surpluses and excess capacity not just in industrial sectors like steel and ship-building but in nearly every segment of its food industry. China produces half of the world's pork and apples, two-thirds of the vegetables, 30 percent of the world's rice, 22 percent of the world's corn, and 40 percent of the world's peanuts for 22 percent of the world's population. Its grain reserves are at a record-high level. China has too much pork. Breathless stories (like this one from the December edition of The Economist ) about its supposedly insatiable demand for pork are still coming out, yet the Chinese swine industry has been shedding excess capacity for the last two years. The number of sows--essentially the machines that turn out pigs that become pork--has declined nearly every month for the past two years (if we are to believe the dodgy numbers) as negative margins between pig prices and feed costs induce far...

China’s food industry barely existed as recently as the 1990s, and it is still a slapdash collection of thousands of small, low-tech, under-capitalized companies that produce little value added and mostly serve local markets. In China, everything has to happen overnight, but the process of sifting and consolidating companies to build a strong industry that interfaces effectively between farms and consumers takes time. Will Chinese officials and consumers have the patience to wait for a strong food industry to take shape? An August 2013 survey of Heilongjiang Province’s food industry provides an interesting snapshot of the difficult process of creating a food industry in an urbanizing society. Heilongjiang is in China’s far northeast, bordering Russia. It is more lightly populated than most of China, has large expanses of forest and grassland and is China’s leading producer of grain and second-largest dairy producer. Because of its relatively clean environment, it is a leading produc...

Shuanghui International Holdings recently completed its acquisition of Smithfield Foods Inc. , the largest Chinese acquisition of a U.S. company to date. This acquisition of overseas pork production capacity is ironic in light of a May 2013 Chinese Ministry of Commerce document that reported a massive effort to shut down pork processing facilities in a domestic industry that utilizes only 42 percent of its production capacity. According to the 2012 Hog Slaughter Industry Analysis Report  an industry-wide audit and rectification program closed 26 percent of China's hog slaughter facilities during 2012 ( the dimsums blog reported on this campaign in February). The Ministry says there are now 14,720 hog slaughter enterprises, including 4,585 "designated" slaughter enterprises. China's pork industry has added hundreds of large mechanized slaughter facilities with global-standard food safety and sanitation controls, but thousands of older rudimentary slaughter facilit...

In 2013, Chinese officials have been ordered to curb their eating and drinking at the public's expense. The impact on the food industry reveals the significant role of government consumption on an important service sector as the leaders try to install a consumer-driven service-oriented economy. The new leadership of China has responded to the Chinese public's irritation over officials' expenditure of public funds on eating and drinking, travel, and use of public automobiles, known as " three public consumptions " (三公消费). In 2010, 61 central government departments reported a total of 9.47 billion yuan (about $1.5 billion) for expenses on cars (6.2 billion), foreign trips (1.8 billion yuan) and official banquets (1.5 billion yuan). The National Bureau of Statistics estimated the per capita "three public" expenses at over 5000 yuan, slightly higher than per capita rural income that year. Beijing's municipal government found it owned over 60,000 cars. ...

According to China's Commerce Ministry , restaurants just barely made a profit in 2012. The profit margin was the worst for restaurants since 1991 (except for the unusual year in 2003 when everything closed during the SARS epidemic). Costs are up, sales growth is slowing and experts say China's food service industry is transitioning into a new, more competitive stage of development as the industry matures. Restaurant sales were up 13.6 percent last year, but the growth has been slowing for three years in a row. The growth rate was 3.3 percentage points slower than in 2011. Growth also slowed during the preceding two years but the slowdown was less than 1 percentage point during those years. Expenses grew 14.2 percent. A Ministry of Commerce spokesperson described it as an "unprecedented" grim situation. The slowdown is hitting both upscale and downscale eating places. A ramen noodle chain's sales grew just 3.7 percent during the first half of the year. Profits...

Following the scandal over excessive use of pharmaceuticals in chicken-raising there is a lot of introspection in China's chicken industry. One of the items up for consideration is the "company + base + farmer" industry chain model which has been the foundation for China's "agricultural industrializtion." The poultry industry is the leading proponent of this model in which a company relies on thousands of small-scale farmers in a "production base" to supply chickens. The company supplies farmers with chicks, feed, pharmaceuticals, and tells them what to do. The company promises to buy the full-grown chickens at a reasonable price. This model is said to be in accord with "Chinese characteristics" since it incorporates large numbers of small-scale farmers, increases their income and involves them in modern agricultural supply chains. A "win-win." One article questioned the high risk associated with the "company + farmer...