Dim Sums: Agricultural Markets in China

This is a translation of an online article. China's officials are planning to give subsidies of 150 yuan/metric ton to "deep processing" companies to induce them to buy corn from the huge 30 mmt stockpile held in State reserves. The first round will be about 5.8 mmt, with more possibly issued later. A similar subsidy for soybeans is reported under consideration. On August 25, Heilongjiang Province’s grain bureau released a notice which referred to another notice jointly issued by the National Development and Reform Commission, State grain bureau, Finance Ministry, and Agricultural Development Bank "Notice on Transfer of part of temporary state reserve corn by local sales." Industry insiders told reporters about the subsidy methods. A part of the over 30 mmt of State reserves will be transferred to provincial grain bureaus as local reserves. Then it can be prepared for local sale. Purchasers of the corn must be processing enterprises with capacity of 100,000 mt ...

In a ceremony July 26, plans for China’s first “vegetable factory” were unveiled . The vignette is a good example of China’s emphasis on high technology and the cozy relationship between government and business. Moreover, the incongruous the pairing of “factory farming” and organic agriculture is out of step with the Western organic agriculture movement. Products from projects like this are ending up in your “organic” food products, undermining the whole concept and prompting a turn toward “local” food. Beijing Zhonghuan Yida Horticulture Sci-tech Ltd. Co and Shenyang Liangma Group LLC signed an agreement to create China’s first “vegetable factory” in Xiaohan village. According to the agreement, Shenyang Liangma will invest 200 million yuan to build the factory and Beijing Zhonghuan will supply advanced technologies over a ten-year period. At the ceremony, Mr. Liu, vice-president of the Academy said the institute is looking for ways to disseminate its research accomplishments through p...

China's dairy industry is still reeling from the aftermath of last year's "Sanlu" melamine milk powder adulteration incident. The government has been busy trying to rectify the industry. Each province and county is doing its own thing with general guidance from the central government, but there are common themes. One major thrust is to eliminate competition among milk collection stations. In Inner Mongolia, raw milk supply has been carved up into territories, and each processing company is assigned a territory; they can't buy outside their territory--a monopsony. For example, Helin village in Inner Mongolia used to have 2 milk stations affiliated with Yili Company, 3 affiliated with Mengniu Co., and 3 bulk milk collection points. when milk was in short supply, companies would compete for supplies from these stations. Now everyone in Helin village sells to 2 of the Mengniu stations. A third station is being reorganized; the others have been closed down. Both Mengni...

A pilot program in Chongqing municipality in southwest China combines two new directions in restructuring Chinese agriculture: land transfers and cooperatives. Last October, a big meeting of China’s communist party encouraged leaders to explore new ways of transferring land between farmers. China is also emphasizing farmer cooperatives as a way to expand the scale of farm production while maintaining the collective ownership of farmland. Chongqing municipality has been singled out as a pilot area to try out innovative arrangements for forming cooperatives using land use rights as investment capital. In 2007, authorities in Chongqing began allowing farmers’ land use rights to be pooled and used as investment capital in an agricultural company (cash, physical assets, intellectual property, and other assets could also be used.) Now the emphasis is on forming “farmer professional cooperatives” in this manner and changing companies already established in this manner into cooperatives. A 200...

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...