Dim Sums: Agricultural Markets in China

Is China running out of corn? Nobody knows since corn reserves are a state secret (see yesterday's post). On November 16, over 300,000 metric tons of corn from reserves were offered for sale at auctions in four northeastern provinces. Only about 30% of the corn was actually purchased--this is in contrast with the situation last summer when all corn put up for auction was sold. Corn was mostly from last year’s crop but included corn from as far back as 2006. Here's what was offered by year the corn was originally purchased: 4,102 mt from 2006 (99.7% sold at 1640 yuan/mt) 50,100 mt from 2007 (37% sold at 1629 yuan/mt) 44,400 mt from 2008 (30% sold at 1569 yuan/mt) 202,400 mt from 2009 (37% sold at 1617 yuan/mt) Interestingly, Jilin, the largest corn-producing province, only put up 20,000 mt and nearly all of it sold. In Heilongjiang and Inner Mongolia, larger amounts were offered and less than one-third sold. Maybe there is a spot shortage in Jilin. In Heilongjiang 141,400 mt (99...

According to government statistics, China has had seven straight increases in grain production from 2003 to 2010. The Farmers Daily online interviewed three of China's leading agricultural economists to ask them to explain the reasons behind this unprecedented string of big harvests. Guess what? All three stressed that the policies of the communist party and the government were the key factors behind the big harvests. Han Jun, a top rural policy advisor in the State Council's Development Research Center, said in his interview that China has gone through cycles in grain production over the past three decades, but the 7-straight increases are unprecendented. He calls this a "golden period" and says it is remarkable considering the challenges faced, including this year's bad weather, market volatility, and inflationary expectations. Han says two-thirds of the increase in production came from rising yields and one-third came from increased grain area. Ke Bingsheng, p...

This year's corn has been harvested and it looks like a more or less "normal" harvest, certainly better than last year's that was devastated by drought in parts of the northeast. Farmers have corn but they're not selling it. Prices have been rising in recent weeks, but the market is at a standstill, waiting to see if prices keep rising. Jilin Province--the major corn producer--announced a "three encouragement, one oversight" campaign for this year's corn marketing season. Encourage farmers to sell grain, to sell good grain at a good price. Farmers have grain on hand but they are hesitant to sell. Grain departments are to publish forecasts and market information so farmers know the actual situation. Encourage processors to buy grain according to state policies to solve their production raw materials problem. Financial organizations (banks) should make plenty of credit available to facilitate grain purchases. Encourage grain enterprises to go into the ...

We all try to keep secrets from time to time. But in China keeping secrets is a national policy that is the responsibility of every citizen. It's surprising to outsiders what is considered a state secret in China. And this is serious business: many dissidents have been jailed for "revealing state secrets." I happened to come across a message announcing that all employees of the Jilin Provincial Grain Exchange would be organized to study the revised national law on state secrets. A google search shows that all government organs were carrying out such activities in September of this year. The purpose was to "seriously implement the 'PRC preservation of state secrets law,' strengthen security secrecy consciousness, raise secrecy quality capability, spread the firm establishment of security concept and secrecy legal concept to all officials, protect national security and interests." Staff were instructed to design flexible, eye-catching propaganda and put i...

Earlier this year the Ministry of Commerce issued a plan for reorganizing the pork industry. Now provinces are putting it into action. In October, Jiangsu released its plan to consolidate slaughterhouses and set up a nice orderly system of four grades of slaughter and processing enterprises during 2010-15. Slaughter enterprises will be divided into four classes: 4-star: 1000 hogs or more per day capacity 3-star: 500-1000 hogs per day 2-star: 200-500 hogs per day 1-star: 50-200 hogs per day The government will give unspecified "policy support" to enterprises that can meet the standards for 3-star or higher and give them encouragement and guidance in developing cold-chain facilities and engage in interregional sales of pork. All new slaughter enterprises have to be at the three-star level or higher and have inspection capabilities and testing labs. Their layout, equipment and facilities must be at international standards. There will be two flagship four-star enterprises with ca...

Vice Minister of Agriculture, Chen Xiaohua, reported at a national meeting that China now has 310,000 farmer cooperatives with 26 million members, about 10 percent of the rural population. According to an agriculture ministry official, farmer cooperatives are intended to overcome the shortcoming of China's household responsibility system--small, scattered farmers need to enter a big agricultural market. A reporter for the 21st Century Economic Herald found that many of the cooperatives were agricultural companies that had converted themselves into cooperatives to take advantage of favorable policies. In Anhui Province, the reporter visited the Sanhe Village Tea cooperative that formerly had been a small tea company. In fact, it still had the former company's sign hanging in the courtyard. The cooperative was set up in 2008 and has 200 members and encompasses 200 mu of tea bushes. A vegetable cooperative in He County, Anhui Province. The cooperative was formed by a company that...

According to a brief article from China Securities News in October , the number of state-owned grain enterprises has fallen by nearly half since 2004. The reporter learned from the Grain Bureau that there were over 18,000 state-owned enterprises in the grain indsustry at the end of 2009, down more than 16,000 since a "property rights breakthrough" in 2004, with steady structural change and industry-upgrading as the objective. Since 1998, state-owned grain enterprises have shed 2.67 million employees, an 81% decrease. That doesn't mean the grain industry has been privatized. According to the report, from 2006 to 2009 state-owned enterprises accounted for 57.8% of national grain purchases. "After reform of the grain market...state-owned enterprises continue to play a leading role in grain purchase." Since the beginning of 2007 grain enterprises have earned good profits. State-owned grain enterprises' net assets (equity?) totaled 81.7 billion yuan at the end of...