Dim Sums: Agricultural Markets in China

Agricultural insurance and construction of infrastructure are two building blocks of China's rural financial system. So said Liu Shiyu, the vice-chairman of the Peoples Bank of China at a conference on the results of rural finance surveys held at Qinghua University on June 13. According to Liu, village mutual lending organizations generally have only about 300,000 yuan in capital, which means about 1,000 yuan per farmer in loans to support purchases of fertilizer and pesticides. Without agricultural insurance, loans can go unpaid in the event of a natural disaster. The reporter learned from company representatives that the Shaanxi Branch of Peoples Insurance Company and Anhui's Guoyuan Agriculural Insurance Company are among the companies exploring agricultural insurance business. Some products are already offered. The example given in the article is "facilities agriculture." Agriculture's water, electric, gas and road infrastructure need improvement. Subsidized a...

On June 1, the value added tax (VAT) rebate was raised for exports of 2600 labor-intensive, high-tech, and "deep processed" commodities. Included were corn starch and ethanol products, for which the rebate was raised from 0 to 5%, and apple juice and canned food, which now get a 15% rebate, up from 13%. Yogurt and butter get a full 17% rebate to support the limping post-melamine dairy industry. The Guangzhou Daily pointed out that this was the seventh round of VAT rebate increases since August 2008. A representative from the Guangdong Province trade bureau said this round of VAT increases was mostly in light industry and food processing, as the central government hopes these will create jobs and improve peoples' livelihoods. It is rumored in industry circles in Guangdong that the VAT rebate will be raised to its maximum of 17%. This is a reminder that the Chinese economy's main objective is to keep people producing things even if it means dumping the products on the f...

"Cooperatives" generally leave a bad taste in the mouths of Chinese farmers. The communes they were forced to join in the 1950s were called "cooperatives" although there was more coercion than cooperation. Farmers could not independently form their own cooperatives or associations until a new law was enacted in 2007. Now Chinese officials have resurrected the cooperative and are pushing them as the new mode for organizing small farmers in China. Each province has a web site listing cooperatives in the province and products they sell. Cooperatives get support from the government, and there is a supermarket-farmer linkage program in which supermarkets purchase (mostly vegetables and fruits) from farmer cooperatives or distribution centers. According to a June 4 article , warehouses in Shaanxi Province that purchase grain for central government reserves have been instructed to place orders with specialized farmer cooperatives in grain-producing areas. A notice issued b...

Chinese authorities have stockpiled huge amounts of nearly every commodity this year, mostly in an effort to prevent prices from falling. Now that farmers have sold most of their harvest from last fall, they're looking for the right time to unload their stash. In 2008, China's textile and apparel exports fell off a cliff. The weak demand translated to weak demand for cotton. China's State Council issued a document calling for policies to stabilize farmers' incomes and preventing downward pressure on farm prices that included buying cotton for reserves at a support price. The April cotton market report from the National Development and Reform Commission presents an optimistic picture after months of dismal news. According to customs statistics, April textile and apparel exports were $12.49 billion, down 12.6% from last year, but up 2.7% from the previous month. The report says exports have been warming up since March. Textile exports for the 2008 cotton year could be $1...

China's booming agricultural imports are dominated by soybeans and vegetable oils. Not all of this vegetable oil import is new demand; some of it is displacing rapeseed oil, the traditional oil consumed in central China. Corn oil, a byproduct of corn processing, is also prominent on China's supermarket shelves now. Rapeseed oil used to be the main oil consumed in Wuhan, capital of Hubei province. Yet an online article bemoans the fact that rapeseed oil now has virtually zero market share in Wuhan. Ten years ago, Wuhan people mainly consumed rapeseed oil, but it was unrefined, murky, and considered to be unhealthy. Now mixed oils, salad oil, soybean, palm, and corn oils dominate the market. Rapeseed oil is now mainly consumed in the countryside. It is said to be seldom used now in hot pot in Hubei and neighboring provinces and oil factories only include small amounts in mixed oils. The weak demand for rapeseed oil translates to weak demand for rapeseed and a lot of excess capaci...

A few days ago, the NDRC, MOF, MOA, Grain Bureau, ADBC, Sinograin jointly issued the “2009 minimum price procurement implementation plan for wheat”. Hebei, Jiangsu, Anhui, Shandong, Henan, Hubei the main wheat producing provinces minimum procurement price for 2009 produced wheat at 3rd-grade prices are white wheat: .87 yuan/500g; red and mixed wheat .83 yuan/kg. The time period for procurement prices is from May 21 to September 30. These prices were announced in October 2008. The minimum procurement price is paid to farmers directly delivering grain to warehouses. The price is for wheat produced in 2009. The price difference for different grades is .02 yuan. In other provinces besides the 6 identified above, it is up to the provincial governments to decide whether to offer the minimum price procurement. To prevent "circular grain" problems, the central and local grain reserve designated companies are not allowed to directly or indirectly purchase minimum-price grain that has...

In 2007, Chinese officials began sprinkling around subsidies for hogs and rolled out a series of schemes to engineer a recovery of the hog sector. A subsidy for sows was doubled to 100 yuan per head, a subsidy for sow insurance premiums was introduced, subsidy payments were made to counties that are big suppliers of pork, the corporate income tax was waived for enterprises in the hog business, big plans to build "livestock production zones" and massive integrated hog production complexes were rolled out. Thousands of breeding pigs were flown in from the United States. By the end of 2008, hog inventories and pork production were up more than 5%. The increase in pork production amounted to about 4.4 extra pounds for each person in China. The results of the policies are mixed. Officials are pleased that pork supplies have rebounded so fast, but supply has grown faster than demand. Prices have been in free fall most of this year, erasing profits. The Ministry of Agriculture's...