Dim Sums: Agricultural Markets in China

China's propaganda authorities revealed that data on rice production and other activities is severely inflated by local leaders who are under pressure to create the illusion of prosperity and growth whether it exists or not. Officials in Beijing fault their underlings for failing to "seek truth from facts," but it is Beijing's "food security" measures that are based on "facts" from the last century. China actually produces too much rice, so there is no need to pile unrealistic rice-planting quotas on village leaders and farmers.  A July 14 Central China TV broadcast reported shocking discrepancies between reported rice cultivation and actual figures  in Jianghua County of Hunan Province. While fields along the highway were planted in rice as dictated by quotas handed out to each town and village, a drone flight revealed that fields hidden behind hills were actually planted in cash crops. After checking the ledgers, the reporter found that a village...

China is dumping its surplus rice in developing countries at below-market prices. In doing so, China has now fully replicated the policy missteps made by North American and European countries during the last century.  China is simultaneously one of the world's largest importers of rice and one of the largest exporters. China imported 2.6 million metric tons of milled rice in the first 11 months of 2022, but it also exported nearly 2 million tons. (This excludes 3.4 million tons of broken rice imports used for animal feed discussed here last September .)  Note: excludes broken and rough rice. *2022 for January-November. Until 2016, China's rice exports were a dribble of medium grain rice sold to merchants in Japan and South Korea. Then exports suddenly boomed to about 2 million tons annually beginning in 2018. What happened? The exports are mainly medium grain rice, a variety grown in northeastern provinces and the Yangtze River delta. Northeastern rice has a reputation fo...

Rice quality has been reduced by this year's drought conditions in south China. Cngrain.com reports that hot, dry weather has resulted in low yields, low milling yields, and degraded quality that could affect the appearance, texture and taste of long grain rice. The problems have become apparent since the October 1 National Day.  Rice with quality problems is fetching low prices, while supplies of good quality rice are tight. Grain and Oils News reported last month that the low quality of this year's crop was boosting demand for old crop long grain rice released from reserves.  Authorities began purchasing long grain rice at minimum prices in Anhui, Jiangsu, and Henan Provinces this month. Such purchases are authorized only when market prices fall below the minimum price--set this year at 129 yuan per 50kg for single-season indica rice. Rice must meet grade-3 quality standards, and rice at higher grades gets a premium. A communist party web site posted a Q&A on governmen...

China's expensive corn is upending agricultural markets in unexpected ways. India banned exports of broken rice last week and imposed a 20-percent export tax on most other types of rice to pre-empt food security risks. Booming demand for broken rice has been blamed on the war in Ukraine as importers sought out replacements for Ukrainian corn. That's true, but China's demand for broken rice has been on the rise for two years, driven by spiraling Chinese corn prices. Customs data show a relentless growth in Chinese imports of broken rice--a type of grain typically used as an industrial or feed raw material and often imported by African nations. China's broken rice imports tripled from about 200,000 metric tons per quarter in 2020 to around 600,000 metric tons per quarter in 2021. With the onset of the Ukraine war, imports accelerated again to 800,000 metric tons in 2022 Q1 and over 1.2 million metric tons in 2022 Q2. Back in 2020, China imported broken rice mainly from V...

Heavy metal-contaminated rice has been turning up in China's market for decades. Officials blame bad actors rather than the system that shovels loans to trusted government-run companies with no market discipline, little oversight, and with protection from nosy journalists--except when it suits authorities' interests to unleash the reporters.  This month a husband-wife team was found guilty of selling "poison rice" by a court in the Guangdong Province city of Yangjiang. The couple named Zhu and Yan was sentenced to 15 and 10 years in prison, respectively, and ordered to pay 87 million yuan in penalties. According to news media , over the course of 8 months in 2019 Zhu and Yan purchased 5,884 metric tons of rice with excessive levels of cadmium from a granary in Hunan Province operated by the national grain reserve. Their contract specified that the rice had to be used as animal feed and could not enter the market for human food, but Zhu and Yan were accused of knowingl...

China subsidizes production and storage of wheat and rice stockpiles to preserve "food security" for humans, but inedible grain reserves are being auctioned to deflate a bull market for animal feeds. An article by China Grain Net  reported this week that adjustments to opening bids in grain auctions reveal officials' determination to dispose of surplus wheat and rice purchased from 2014 to 2019 under the country's price support program. According to the article, less than 50 million metric tons (mmt) of surplus wheat remains to be sold after a string of auctions held since last year. Over 100 mmt of surplus rice--mostly medium grain--is targeted for disgorgement from bloated reserves. China Grain Net is a grain market news service operated by Sinograin, China's Grain Reserve Corporation. The article focuses on the "huge effect" of an April 12 circular that raised the opening bid price for the wheat auctions by 60 yuan per metric ton. This move was interp...

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 ...

China's rice market is in for a very tough year, a "Three Rurals Filling Station" (or "Go Rural") reporter warned this week . The journalist was alarmed to learn from chats and phone calls with rice growers in Heilongjiang Province that sales of the northeastern province's rice has stalled due to a perfect storm of a poor quality crop, a delayed government purchase program, the coronavirus quarantine, and unusual weather. The reporter learned that the virus has spread quickly in Heilongjiang, villages are prohibiting movement of people, and some are using drones to monitor comings and goings. Rice marketing is nearly halted with the absence of traders and trucks. The reporter worried that rice still held by farmers may deteriorate, lose its flavor, and become moldy if held too long. This could result in unsold crops and plunging income, the reporter warned. Heilongjiang Province issued an emergency notice on rice procurement in December 2019 when sales ...

Chinese officials stockpiled more grain during 2019 to shore up sagging prices as a slow market undermined plans to jettison the stockpiles. With warehouses already bulging, it will be challenging for China to buy more American grain this year to meet its "Phase One" purchase commitment. Chinese state news media boasted that price support policies for wheat and rice raised Chinese farmers' income by 10 billion yuan (about $1.4 billion) in 2019. The news item claimed that programs to purchase wheat and rice at minimum prices have put money in farmers' pockets by preventing farm gate prices from falling below minimum levels set by the government. Rice and wheat stocks are at record levels and corn stocks are still "abundant" (despite a massive 3-year de-stocking program), according to a January 15 Ministry of Agriculture and Rural Affairs press conference . Grain prices are down, despite stockpiling efforts. The Ag Ministry said grain prices in December...

China's dissonant rice policy has prioritized maintaining domestic production at its current level while pondering how to dispose of massive reserves of old rice, much of it not even be fit for human consumption. One outcome appears to be China's sudden re-emergence as a rice exporter as it jettisons rice stocks in Africa. The Chinese government's top grain market analysis group has projected that China will flip from top importer to net exporter of rice in 2019/20. China's rice and wheat were designated as "crops that must be protected" (必保品种) in the communist party's  "Document Number one" issued early in 2019, and "absolute security in food grains" has been a recurring buzz word in official speeches this year. Shortly after the document was released, officials announced that the minimum purchase price for rice would be held steady this year after two years of reductions and much rhetoric last year about "marketizing" gra...