Dim Sums: Agricultural Markets in China

Ironically, Chinese communist leaders may be the leading proponents of take-no-prisoners capitalism in the world today. China's dairy industry is an example: officials prescribe structural adjustment through market competition for the industry to escape its depressed state--basically a shake-out of weak players. Communist party officials adopted a somber tone at a China dairy industry association meeting held earlier this month  at a national dairy expo in Qingdao. They described the industry as facing "the most difficult stage since the melamine adulteration incident in 2008." Looking ahead, however, the officials expressed confidence that the discipline of vicious market competition is producing a core of lean, mean companies that will ensure a brighter future for the industry. Officials speaking at the meeting cited three major problems plaguing the Chinese dairy industry: falling prices, difficulty selling milk, and big losses. The pr...

Agricultural officials in China will launch a series of soybean technique demonstration sites as part of their broader structural adjustment initiative. Agricultural extension officials will introduce techniques designed to raise soybean yields and reduce use of chemical fertilizer and herbicides. The program will budget 5.6 million yuan ($860,000) to fund dozens of 2000-mu (310 acre) sites in the country's frigid northeast and the Yellow River-Huai region of eastern China. The "green high-yielding technology integrated demonstration" projects will encourage farmers to plant high-protein non-GMO soybean varieties for food use. The project hopes to make soybeans more profitable by raising yields and reducing expenses. By cutting chemical applications the project hopes to reduce expenses for farmers and make soybeans more environmentally-friendly. The document describing the program doesn't mention that chemical fertilizer use for soybeans is much lower than for corn...

Agricultural policy officials in China say their country will move toward a system of market-driven pricing supplemented by farmer subsidies decoupled from prices, starting with the reform of corn policy announced in March. Officials acknowledge that tinkering with prices has created an expensive problem, but they also acknowledge that their "target price" subsidy experiments have not succeeded yet. The comments were made in an article from Business Reference News that was posted on many government-sponsored web sites in China today. Officials explain that the government began setting floor prices for rice and wheat after the grain market was liberalized in 2004. Minimum prices were meant to act as a floor under market prices to protect farmers from downside risk. "Temporary" or "provisional" reserves were established for corn, soybeans, rapeseed, sugar, and cotton as officials fretted about unstable prices during 2007-08. Top ag policy advisor Chen X...

China's giant state-owned food company, COFCO,  has begun a $75 million investment in a Ukrainian port facility to cement its growing share of grain trade in the Black Sea region. This follows COFCO's announcement earlier in May that it plans to import a minimum of 1-to-2 million tons of Russian wheat to China in coming years. The facility in the southern Ukraine port of Nicolaev will reportedly have capacity to handle 2.5-million metric tons of grain annually, with 143,000 metric tons of storage. The Ukrainian port will be wholly owned and operated by COFCO for its exports of corn and other grains. According to the description of the investment, this is part of COFCO's "13th five-year plan" strategy to achieve an "unmatched global layout" covering "the entire industry chain." COFCO's expansion is in concert with China's national "one-road, one-belt" strategy of projecting its influence in a string of countries from its ...

Officials in China are pushing ahead with a nationwide campaign to shut down pig farms in populated and environmentally-sensitive areas. The shut-down plan appears to be cutting pig numbers at a time when a short supply of pork is causing prices to soar. "arrest warrant" for a pig satirizes the campaign to close or move pig farms. source: toutiao.com A series of laws and regulations issued by Chinese officials over the last two years appear to signal a new era in which pigs will be physically segregated from the human population, a major undertaking in a society where the species have lived together for thousands of years. Local bans on pig farms began in 2013 following the embarrassment caused by thousands of swine carcasses that floated down the river into Shanghai.  In January 2014, regulations were issued to prevent pollution from waste emissions of "scale" livestock and poultry farms; the regulat...

China's 2016 wheat harvest is getting under way. With a near-record output estimated at 130 million metric tons and with demand sluggish, the government is expected to step in and buy up even more wheat than it did last year. However, innovative bakers can't get enough of the high-gluten wheat they need for their flour. One assessment of the prospects for the 2016 wheat market sees a big surplus of low-quality wheat that farmers in some areas may have trouble selling. Wheat is being harvested in the southern end of the wheat belt in central China, and it will move north through Jiangsu, Anhui, Henan, Shandong and Hebei Provinces over the next month. Weather conditions have varied widely across wheat-growing areas, and the quality of the crop is expected to be uneven. There is not much good quality old grain available, and the price is high. The 2016 minimum price for wheat is set at 2360 yuan/ton. Big flour mills are buying small volumes of good quality new wheat at 2300-2...

The following story actually happened. I have statistics to prove it.    ************************************************** A Martian Interplanetary Task Force on agricultural commodity markets recently landed on the Earth. A team member assigned to China set out for the city of Dalian, where that country's most active futures market is located.   As our Martian friend approached the Dalian Commodity Exchange, he came upon two Chinese men in animated conversation, each holding a sheaf of papers in his hand. The Martian stopped to listen. “They’re up to their tricks again!” One man exclaimed. “USDA and ABCD—different letters, but the same game! They won’t stop until they own our entire country!” The second replied. “What can be done to stop them?” The first man waved the paper held in his sweaty hand. The curious Martian sidled up the two men. “May I ask what you’re discussing?” The Martian ventured. “Haven’t you read the U.S. Departme...