Dim Sums: Agricultural Markets in China

A National Grain Work Conference was held on January 20. The Grain Bureau chief, Nie Chengbang, noted that there is still downward pressure on prices since domestic prices are still above international prices and China had a big harvest this year. In this situation, Nie said China has to prevent excessive imported grain from flooding into the domestic market. Li Guoyang, from the Academy of Social Sciences, told the meeting that China can't restrict soybean trade because of its WTO commitments, but "corn requires more caution." Nie noted that the government had supported prices by announcing three rounds of temporary state reserve increases totaling 50.5 mmt. Most recently [on Jan. 12] a fourth round of 8 mmt procurement was announced [3 mmt northeastern soybeans and 8 mmt of southern rice]. A January 12 article lists the four rounds of procurement: Oct. 20, 16.5 mmt Dec. 1, 14 mmt Dec. 24, 10 mmt (corn) Jan. 12, 8 mmt The National Grain and Oils Information center'...

According to Chinese customs statistics, China’s imports of soybeans for calendar year (CY) 2008 (Jan-Dec): Volume up 32% (up 6.6 mmt to a CY2008 total 37.4 mmt) Value up 90% (up $10.35 bil to a CY2008 total $21.8 bil) China imports soybeans from the U.S., Brazil, and Argentina. CY2008 imports from Brazil were up only 10% by volume from CY2007 and were essentially the same as in CY2006. Imports from the U.S. were up 33% (3.8mmt) by volume in CY2008 and rose a cumulative 56% (5.5 mmt) from CY2006 to CY2008. The average unit value (average CIF price) of soybean imports from the U.S. was up 49% in CY2008, while the unit value for soybeans from Brazil was up 70% and 55% for soybeans from Argentina in CY2006 and CY2007 U.S. unit values (CIF prices) were close to those of Brazil and Argentina, but in CY2008 Brazilian unit value averaged 14.5% higher than U.S. unit value (Brazilian beans were more expensive), consistent with the shift of imports to U.S. sources.

Some commentators hailed the third plenum meeting last October as a major land reform that allows farmers to transfer land use rights and establish big farms. In fact, it has been possible to do this for some time. There are already arrangements to transfer and consolidate land in relatively rich areas of eastern China where people have alternatives to farming. A recent article describes the arrangements and government policies that have supported land transfers for several years. Cixi is an area in eastern Zhejiang Province that used to be a major rice-producing area but has now morphed into a center for industry. On average, each family is allocated about 2 mu of land (less than half-acre), usually split into multiple plots. The local government issued a document in 1999 that supported land use rights trading, and the local government allocated 2 million yuan per year from 2000 to 2003 to support land transfer infrastructure and services. A network of 289 village land transfer statio...

A dairy industry conference was held in Beijing on January 19 to “discuss” experiences and measures to address food safety problems. Although the conference was held by the “China Dairy Industry Association,” the head of the Ministry of Agriculture’s (MOA) Livestock Industry Office is listed as the first chairperson, followed by the head of the dairy association. The MOA official’s comments are featured in a paragraph followed by a paragraph of comments by the dairy industry association head. Listing the MOA official first is a reminder of government's centrality in food safety in China. (In many industries, even the “industry association” itself is a thinly disguised government planning bureau.) Representatives of the big dairy companies and regional associations were also present but their views are not revealed. Among dairy companies there have been two approaches to tightening up their supply chains. Guangming, Sanyuan, Yinqiao, and Flying Goose have concentrated on developing ...

The Chinese government has announced a new system for monitoring hog prices that specifies criteria for intervening in markets when prices fall below specified thresholds. They have a list of price indicators that they plan to monitor and manipulate through market interventions. Can China engineer its way out of the hog cycle? On January 9, 2009, the National Development and Reform Commission and Ministries of Finance, Agriculture, Commerce, Commercial Bureau, and AQSIQ jointly issued a document that announces China’s intention to iron out fluctuations in hog prices . The document affirms the leading role of market forces but with government control. The new system identifies a list of indicators that the government will watch to assess the state of the hog market. Indicators include live hog, grain, pork, feeder pig prices and hog inventories. The system aims at maintaining specified ratios between prices and minimum inventories of hogs. The chief indicator is the ratio of hog price t...

A Newsweek article "Give Them a Raise" hits on the fundamental problem creating huge economic imbalances that contribute to the financial crisis: the incredibly low wages paid to Asian laborers. The American consumer is being castigated for buying too much, but how can we resist buying when stuff is so cheap? When DVD players are $40 and a computer is $300, who can resist? Low wages are one of the factors (but not the only one) behind the bargain basement prices that we've come to expect. The article correctly points out that laborers with low wages can't afford to buy much. A century earlier, when the U.S. was the world's factory, we also had figured out how to turn out massive amounts of product, beyond the capacity of the market to absorb it. Henry Ford recognized the problem and raised wages so that his workers could afford the cars they made. The Newsweek writer, however, provides the wrong prescription. He calls for a pan-Asian minimum wage. This is unwork...

A 2008 China corn market report from the China Corn Net is mostly pessimistic. The corn harvest has been big 5 years in a row. This year it rose a lot (but no estimate given). The government announced three rounds of temporary corn procurement for state reserves to support prices (reported here in December). The 30 mmt would be nearly half of the reserves in the Northeast. Afterward, much of the grain would be in state hands. The procurement is boosting prices as processors and traders try to buy up corn. In parts of Hebei Province there is a scramble for grain as traders are competing for the grain while it's cheap. Processors and feed mills are increasing inventories, preparing for post-spring festival normal operations. Still, demand from industrial users is down. Paper and textile exports (significant users of corn starch) are down. Sugar prices are down, reducing demand for corn sweeteners. In 2008, it is estimated that starch production fell sharply, perhaps by 3%. During the...