Dim Sums: Agricultural Markets in China

We have a pet hamster at my house. No matter how much food you add to his bowl, it all disappears. This gives the impression that the hamster is consuming vast quantities of food. But when we clean out the cage we discover hoards of food. We then realize that much of the food going into his bowl is not eaten--it's hidden away under the wood shavings. Like the hamster, Chinese officials are compulsive food-hoarders. They stash so much grain away in warehouses that the country often imports grain when it is actually producing more than it needs. Last week, China's Academy of Agricultural Sciences (CAAS) released its first ten-year projections of commodity supply and demand for the next ten years. The main feature that emerges from the blizzard of numbers is hamster-like compulsive stockpiling of grain. CAAS projects that carry-in stocks of wheat, rice and corn will rise from 217 million metric tons in 2014 to a plateau of 300 mmt from 2019 to 2023. CAAS t...

Chinese authorities have been fretting about "food security" and grain self-sufficiency. Suddenly, the country has a massive glut of grain--nearly a fourth of this year's grain harvest has been stashed in reserves to support prices. In January, Chinese authorities reported that grain reserves were at a record-high level . They were out of storage space and using temporary structures and rented space to store the grain. During 2013, authorities purchased 82.5 million metric tons of grain through support-price programs, 24 percent of the 345 mmt total purchases. The support price purchases were up from 31 mmt in 2012. Authorities auctioned off 34.8 mmt of grain into the market and arranged interprovincial transfers of grain inventories totaling 13.5 mmt during 2013. In the first three months of 2014, authorities continued to buy corn and rice aggressively to support prices. As of April 5, purchases of corn for the "temporary reserve" to support prices reache...

On August 8, 2013, Chinese authorities plan to auction 500,000 metric tons of northeastern soybean reserves. The soybean stockpiling plans for each season and the results of the auctions are regularly announced, but there are no complete official statistics. A July 23 Chinese microblog posting provides a chronology of the soybean stockpiling policy from 2008 to the present. The estimates have been organized in the table below: Estimated purchases and sales of Chinese soybean reserves Year Purchased Purchase Price Sold 1000 mt RMB/mt 1000 mt 2008-09 6,830 3,700 2009-10 2,760* 3,740 2,090 2010-11 3,080* 3,800 2,665 2011-12 3,140* 4,000 16 2012-13 810* 4,600 3,758 imported 2012 3,180 Total 19,800 8,529 *=unofficial estimates from a Chinese  microblog . Purchases are not always reported precisely and the microblogger has repor...

In April a nationwide check on grain inventories was ordered. I have found results from surveys of onfarm grain inventories from a random selection of local price bureaus online, but there is no compilation of national or even provincial data. There is not much about grain reserves either. Dimsums blog reviewed nine reports from counties in Shandong, Liaoning, Gansu, Jiangsu, Hubei, Henan, and Jiangxi. The reports are based on reports from samples that range from 9 farms to hundreds, and they include average grain inventories held by farm households as of April 1, 2011, production and sales of grain over the past year. It is impossible to generalize the results. The average grain inventory varied from 26 kg in Nanchang City of Jiangxi to over 2700 kg in Shanghe County in Shandong. Attitudes about holding grain are clearly in a state of flux. In Nanchang the report says local people have gotten used to selling their rice as soon as it's harvested. In some other places they say the f...

On March 7, Zhang Ping, the head of the National Development and Reform Commission, held a press conference at the Great Hall of the People where he announced that China has 100 million metric tons of wheat in reserve. He said this is about enough for an entire year's consumption, and he assured everyone that this big stockpile gives them the ability to stabilize prices. Mr. Zhang assures everyone that his agency has the ability to keep prices stable. He said that most industrial commodities are in a state where supply exceeds demand. As for grain, he said, "Let me give you a number." The normal amount of grain reserves recommended by the UN's Food and Agriculture Organization is 17-18 percent of a year's consumption. Well, China has 40 percent, more than double the normal stock level. Forty percent works out to over 200 million metric tons. At a price of $200 per ton, that's over $40 billion-worth of grain sitting in storage.

Wheat stocks-to-use ratio for China has been 40-to-45 percent in most years since 2005/06. Source: China grain net. "If you have grain in your hand, then your heart can be at ease." This proverb is constantly quoted in articles on the importance of grain policy. A China grain net article offers reassurance that the drought affecting wheat is no reason for panic because the government has built up big stocks of grain that it can use to stabilize the market. The government's big grain reserves are described as a "silent weapon" already in use in fighting the global "grain war." According to the article, China's stocks-to-use ratio for wheat has exceeded 40% in recent years, far above the global ratio. In 2010, the state's cumulative purchases of wheat, corn and rice for reserves totaled 24.58 mmt, and rapeseed and soybean purchases totaled 10.28 mmt. Since 2004 the wheat harvest has been good. In 2010, winter wheat output was 108.79 million met...

An article entitled, " Main characteristics of our country’s new-style grain reserve system ," seems to be aimed at assuring the Chinese citizenry that plenty of grain is on hand and the government is wasting much less money on storing it than in past years. The article says China must have "grain reserves with Chinese characteristics": massive grain reserves that are getting even bigger, stored in bins all over the country, and owned by the government. The article tells us that China needs these massive grain inventories because it has a big population, is in the midst of rapid industrialization and urbanization and because of the small-scale pattern of grain production. Reserves are needed to guarantee food security and intervene in the market to stabilize prices. Reserves are held by two levels of government: central and local. The central grain reserves are used to make interregional adjustments in grain markets under the State Council's instructions to cent...

In April 2009 the State Council ordered a nationwide check to find out the actual level of grain inventories. There were 10 government departments involved and thousands of provincial, prefecture, and county people involved. The check was carried out in response to rumors that warehouses supposedly filled with grain were actually empty. The results show that at the end of March 2009 national state-owned grain enterprises held inventories of 450.8 billion jin (225.4 million metric tons in unmilled grain). This is in line with figures revealed previously. The inventory surpassed half of the 2008 harvest (roughly 6 months of consumption). The March date was presumably chosen because it precedes the summer grain harvest and inventories would be near their seasonal low. This total appears to be central government reserves. There are also provincial and county-level reserves. It does not include private sector reserves (probably much smaller). Usually there are surveys of on-farm reserves c...

At a meeting on April 22, Premier Wen Jiabao announced that the central government will start giving farmers subsidies to build improved grain storage facilities . Most grain inventories are held by state-owned grain enterprises at different levels--national, provincial, and local--and commercial enterprises. According The amount of grain reserve storage reported by different departments varies. The Grain Bureau says 350 mmt; the Ministry of Agriculture says 300 mmt; the National Development and Reform Commission says 250 mmt. I think this is capacity, not amount in inventory. If facilities are near capacity, China has more than half a year's production/consumption in storage. The FAO guideline is 17-18%. According to Li Chenggui, a researcher at the China Academy of Social Sciences, about half of China's grain stocks have been held by farmers in recent years. After 5 consecutive big grain harvests and a big grain purchase program to support prices this year, storage facilities...