Dim Sums: Agricultural Markets in China

Last week, the Farmers Daily contained a long article explaining why vegetable prices increased in 2010 . The article notes that the rapid increase in prices attracted a lot of attention and prompted the central government to issue a series of 16 policies to address the issue. According to the authors, a clear understanding of the reasons for rising prices is necessary in order to make good policies. Many factors contributed to rising prices. While some regions had unusual weather last year and urbanization gobbled up land, the article insists that supply and demand are basically balanced. Ministry of Agriculture statistics show that acreage planted in vegetables went up 8 million mu last year. Rather, the article points to rising costs in each stage of the supply chain as the main reason. The author argues that rising costs are not unreasonable and points out that profits need to be spread evenly among the various actors--farmers, traders, retailers--to preserve a stable long-term sup...

An online posting lists trends for the feed industry over the next five years. It notes that China's feed industry has reached a stage of maturity following two decades of growth. The article describes the industry as one where everyone is trying to expand, resulting in keen competition that will lead to consolidation and a greater attention to raising capital. The article sees consolidation, more attention to raw material costs, forward-integration into livestock farming, and more attention to health, safety, and corporate responsibility. The article sees rapid consolidation in the industry. It predicts that 30% of feed companies will exit the market over the next five years. In 2009 alone 1321 feed companies disappeared, but there were still 12,291 companies left. The industry will transition from labor-intensity to capital-intensity. More firms will go into equity markets to raise capital. Small and medium companies will become merger targets. The feed industry will enter a ...

Last week the National Bureau of Statistics released its annual statistical communique with the first set of macroeconomic statistics for 2010. News reports focused on the CPI growth of 3.3% and food CPI growth of 7.2%. Food and agricultural products are certainly the main source of price growth in China. Farm prices rose at an even higher rate: 12%-to-13% for grains and oilseeds, 57% for cotton, vegetables 17%, fruit 19%. Hogs were about the only agricultural commodity whose price did not rise. Energy and metals prices also rose at rates similar to those of ag commodity prices. The housing component of the CPI was up 4.5% and health care up 3%. Outside of basic commodities there is not much inflation. Manufactured products showed little or no increase in prices. The CPI for clothing was down 1%, durable goods were down slightly, and household goods showed no change. A related factor is the composition of the 10.3% GDP growth. Fixed asset investment rose 23.8% and real estate investme...

While in Henan Province to inspect drought mitigation work, Premier Wen Jiabao dropped in to check on corn breeding at the municipal academy of agricultural sciences in Hebi City. In the institute's exhibition hall met with Mr. Cheng Xiangwen and his colleagues and ther he saw the evidence of their achivements: wooden bowls filled with golden corn seeds. So far, Cheng and his colleagues have developed 11 new corn varieties, including one that received a third-level national award. One variety, "Jundan 20," was developed by Cheng after 19 years of breeding. It is suitable for close planting, drought tolerant and high-yielding, reaching 700-800 kg per mu. In 2010, this variety was the second-most popular corn variety, planted on 47 million mu, mainly in Henan and other parts of the Huang-Huai region. Wen Jiabao heard this and exclaimed, “That’s not easy!” Wen encouraged Cheng: “Henan Province makes the most important contribution to national wheat production, and its contri...

While General Secretary Hu Jintao was engaged in international diplomacy in the United States, Premier Wen Jiabao was visiting parched wheat fields in Henan Province. Against the background of Henan's serious drought, Wen signaled that this year's big emphasis will be on improving irrigation infrastructure. Indications are that this will be the centerpiece of this year's "No. 1 Document" on rural policy to be released in February. This year northern China has been experiencing varying degrees of drought. On January 22, Premier Wen visited a high-yield wheat demonstration area in Hebi City of Henan to see the drought mitigation work being carried out there. Guo Tiancai, a professor at Henan Agricultural University, told Premier Wen that the area had a soaking rain in the fall and the soil moisture is not bad. However, after only 3 cm of precipitation in 100 days drought conditions are serious. An experts group convened to look at the issue thinks that there probabl...

The Shandong Province agricultural price information office reported that corn production costs were up 22% in 2010, yet farmers' profits still increased. Shandong is the second-leading corn-producing province, accounting for 12% of national production. The corn area has been stable since 2007 and the province has undertaken some yield-improvement programs. Corn output reached a record of 19.215 million metric tons (mmt) in 2009. In 2010, Shandong's corn production was up 1.3% from 2009, reaching an estimated 19.32 mmt, up 105,000 mt or .54% from the previous year. The yield was 438.76 kg per mu (6581 kg/ha), unchanged from last year. The article says demand for corn from both feed and industrial uses was strong. Price monitoring data show the Shandong price of corn rose from 1.8 yuan/kg in January to a peak of 2.08 yuan/kg in September. Prices fell 4.8% in October as new corn came on the market. Government price control measures kept the price from rising during November and D...

The Chinese government has begun to purchase corn to replenish its reserves. Normally, if the government were to go into the market to purchase it would have to compete with other purchasers and probably drive prices higher. To avoid this, the government has ordered corn processors to stop purchasing. Sinograin and its related "deep processing" factories stopped purchasing January 15. According to news from the market, all the major corn processors in Jilin Province have stopped buying corn one after another, making room for government purchases to proceed. The stockstar futures news says , "although reserve corn purchases have started, processors have left the market so there isn’t a lot of competition." That means all the corn being purchased now goes into state warehouses. Little grain is in commercial distribution channels, tightening the supply in the market. The article says fewer farmers are selling corn ahead of the spring festival. Another measure being con...