China's Hog Farms Move South

China's pig companies have been withdrawing from northern China and shifting production to southern provinces, according to a recent feed information net article. Consequently, mature hogs are being shipped from southern farms to northern provinces for slaughter. 

The article reported that Tianbang company cleared out some of its farms in the northern province of Shandong and northern parts of Anhui and Jiangsu Provinces due to disease epidemics during 2023 and 2024 that reduced productivity and raised costs. New Hope Group had focused its investment in northern provinces Shandong and Hebei during the 2021 recovery from the major African swine fever epidemic. However, New Hope also began winding down production capacity in the region as they also encountered new ASF outbreaks and faced competition from other companies that invested in northern provinces. Zhengbang Technology--successfully reorganized under bankruptcy protection--also withdrew from the north. Aonong Biological has announced its intention to leave the Shandong market as well. 

Companies are shifting production capacity to southern provinces like Guangdong, Guangxi, Jiangxi, Hubei, Hunan, and Fujian. Southwestern provinces such as Sichuan and Yunnan are also seeing many investments in large-scale pig farms. According to the article, southern regions have advantages in climate, environment and other aspects. Pigs are being shipped to Liaoning, Shandong, and Henan Provinces for slaughter and secondary fattening. Shandong (in the north) has now surpassed Guangdong (in the south) as the province with the largest net inflow of pigs. Yunnan, Guangxi, and Hubei are the top provinces in outflows of pigs to other provinces. 

This "southern pigs to the north" geographic transportation pattern reverses the Chinese agriculture ministry's now-forgotten plan to shift hog production northward to curb manure pollution of the many rivers, streams and lakes in the southern region. In 2015 the Ministry of Agriculture and Rural Affairs declared that hog farm production was beyond its carrying capacity in the Pearl River watershed (including Guangdong) and the Yangtze River delta and at carrying capacity around the Dujiangkou reservoir (the starting point of the central south-to-north water transfer channel) in northern Hubei Province. The Ministry judged that northern regions had some room for development. 

The growing shipment of hogs across the country appears inconsistent with a second plan to create compartmentalized hog production regions to reduce disease transmission during the ASF epidemic recovery.

The southern shift of pig fattening is also favorable for feed imports. Southern and Southwestern Provinces are far from China's corn- and soybean-producing regions in the northeast.

Chinese farmers "break the law every day"

A Chinese video posted on Youtube in September voices the frustration of China's underclass with the accumulation of unseen regulations that effectively make every farmer in China a lawbreaker. 

Man dressed as a farmer complains that he breaks the law every day just by being a farmer. Video posted on Youtube.

Here's a rough translation of the gentleman's 1-minute discourse:

"I thought that as long as I didn’t steal, didn’t worship foreigners, and didn’t sell out the country, I was a good citizen. But as a farmer, I break the law every day."

"Burning straw--illegal."

"If I cut down a tree I planted myself--illegal."

"Selling my melons on the roadside--illegal because they haven't been tested."

"If I kill a pig and sell some of the meat to relatives and friends--illegal."

"Save seed from my harvested grain to plant next year--illegal."

"It's illegal to build a pig sty or a toilet."

"Get water from the well outside my door--illegal."

"It's illegal to kill a wild boar that comes down from the mountain to eat my crops."

"Setting off fireworks to celebrate the new year--illegal."

"And all kinds of illegal activities that I have never seen before."

"They are all experts whom we all look up to, making various regulations tailored for us farmers that we have never seen before. As long as I' am alive I'll be breaking the law."

Based on his diction and appearance the farmer speaking in the video may not be an actual Chinese peasant from Chongqing as stated. A similar list of 10 things that are illegal for farmers was posted last December. Both posts are on overseas anti-communist web sites, but the rules they list are real. 

The communist party's "number 1 document" this year had 7850 characters instructing officials to carry out dozens of rural initiatives and programs. It called for integrating urban and rural development [eliminate distinctions between cities and countryside], "optimizing the layout of villages" [razing small, backward villages and moving the population into large modern ones], and strengthening rural fertility support and infant care services [a few years ago rural people were threatened with punishment for having too many kids].

The video does reflect a fundamental clash between the Chinese rulers' attempts to regulate and standardize everything in the countryside versus the Chinese peasantry's longstanding practical approach to life signified by "The hills are high and the emperor is far away." 

China's Soybean Revitalization Fizzles

As China's 2024 harvest for soybeans kicks off with prices plummeting it is clear that authorities in China are losing a years-long battle to reduce reliance on imported soybeans. 

China's Ministry of Agriculture and Rural Affairs' 2021-25 five-year plan set a target of boosting soybean production to 23 million metric tons (mmt) by 2025, a feat that officials predicted would raise China's soybean self-sufficiency by 6-to-7 points. However, the Ministry's October CASDE supply & demand estimates indicate that 2024 production reached only 20.45 mmt, slightly less than last year's output and 2.5 mmt short of the 2025 target. CASDE estimates this year's soybean area at 10.16 million hectares, also short of the 10.667 million hectare target for 2025.

CASDE estimates China's soybean imports in the 2024/25 marketing year at 94.6 mmt. Combined with the production estimate this implies a 17.8-percent self-sufficiency rate. That's higher than the 4 years only because CASDE has a low-ball estimate of imports. (CASDE has a history of underestimating imports: CASDE's forecast for 2023/24 soybean imports made a year ago was about 5-mmt under the actual number.)

Another MARA monthly agricultural market situation report said that Chinese soybean prices are weakening as newly harvested beans hit the market in northeastern China while output in the U.S. and Brazil puts downward pressure on international prices. The report noted that USDA estimates world soybean output in 2024/25 is up 8.7 percent year-on-year alongside record-high inventories. 

According to the report, 

• Domestic Chinese soybeans delivered to processors in Shandong Province averaged RMB 5,100 per metric ton, down 11.3 percent from a year earlier. 
• Imported soybeans C&F prices including duties averaged RMB 3,880 per metric ton, down 19.7 percent year-on-year.

Procurement prices compiled from China's National Administration of Food and Commodity Reserves indicate a steep drop in soybean prices in the first half of October 2024. The average soybean procurement price on October 23 (RMB 3835/mt) was 22 percent less than a year ago and 35 percent below the price in October 2022. 

Data from China National Administration of Food and Commodity Reserves.

China has wasted huge amounts of money and resources achieving a marginal increase in soybean output that has plummeted in actual value. 

The 2019 "number one document" declared a soybean revitalization plan, followed by a Ministry of Agriculture and Rural Affairs plan that called for setting soybean producer subsidies to incentivize production, disseminating high-yielding varieties, building high-standard fields, and forging close links between processors and growers.

The communist party's 2022 "number one document" instructed officials to implement the project to raise soybean and oilseed production capacity by offering soybean producer subsidies, promoting corn-soybean intercropping, switching from rice to soybeans in parts of Heilongjiang Province, and planting soybeans on saline soil. 

In 2023, Xi Jinping issued special instructions demanding an increase in soybean output with "measurable results." The 2023 "number one document" called for intensified efforts to expand soybean production. Four government departments offered a "combination punch" policy package of farm subsidies, transfer payments to major soybean producing counties, construction of soybean industry parks, soybean financing and credit, pilot insurance covering the full cost of production, procurement for reserves, to "send a clear signal" motivating farmers to plant soybeans. 

Earlier this year Heilongjiang Province said its 2024 soybean subsidy would be RMB 350 per mu. Subsidies in Jilin Province were said to be even higher: between 460 and 550 yuan per mu in various localities, while subsidies in Inner Mongolia were reported to be 314 to 340 yuan per mu.

At the October 16 procurement price 3896 yuan/metric ton with a yield of 130 kg per mu, the subsidy for Heilongjiang soybean farmers would comprise about 40 percent of their revenue.

In 2020 Heilongjiang also introduced a subsidy for soybean processing enterprises to reverse declining output and idle production capacity. The subsidy was given for processing soybeans produced in Heilongjiang or for soybeans imported from Russia (700,000-800,000 mt of soybeans are imported annually), subsidized working capital loans, capital investments, and funds for local governments. 

The provincial grain bureau's investigation to justify the subsidy found that Heilongjiang enterprises crushed 1.2 million metric tons of soybeans for oil and processed 1.75 mmt for tofu and other food products in 2019. The total of 2.95 mmt soybeans processed in Heilongjiang in 2019 was just 38 percent of the 7.8 mmt produced in the province that year. 

This year Chinese propagandists have been trying to paint a picture of optimism for China's soybean industry, a sure sign that things are not going well. 

On October 17 Economic Daily gushed over the "bright prospects" of the market for Chinese soybeans, citing growing demand for soy-based foods as people seek healthier diets, broadening the market space for development of China's soybean industry chain. However, MARA's monthly market situation report said the average price for food-grade soybeans in Heilongjiang Province dropped 9 percent year-on-year in September 2024. 

On October 25 Farmers Daily reported on strategies to expand China's soybean industry despite facing competition from low-priced imported soybeans: a mechanized 400-hectare operation that farms land on behalf of dozens of villagers, massive State Farms, aggressive procurement by government reserves with financial backing from the government's policy bank, a pest- and disease-resistant strain developed by the seed-breeding arm of Heilongjiang's State Farm system.

 

Suddenly Xi Wants American Friendship

Xi Jinping really wants to be friends with Americans. Don't let the relentless hacking, unprecedented espionage, censoring of foreign news, election interference, planting of spies in politicians' offices, arrests of business consultants, and belligerent stunts in fighter jets fool you. Xi is a friendly guy!

Last week Chinese state news media featured Xi Jinping's "story of deepening friendship between the Chinese and American people. According to a "congratulatory letter" sent to the awards dinner of the National Committee on U.S.-China Relations, Chairman Xi wants "more exchanges, more communication, and steadily deepening mutual cooperation" between Chinese and American people. 

Xi's message to the dinner was received October 15. That was the same day the news media breathlessly covered the arrival of a new set of pandas at Washington DC's National Zoo--obviously meant to be part of the "friendship with America" blitz. This appears to be a course change after Xi recalled all but 2 pandas from America zoos last year in a fit of anger.

According to Chinese news media Xi has sent "warm and affectionate congratulatory letters to American people in all walks of life" since his visit to San Francisco in November 2023.  

However, Chinese State media had trouble coming up with any recent examples. It dug up decades-old obscure examples of Xi's friendships with Americans by highlighting visits with a trio of people linked to Xi's visit to Muscatine Iowa 39 years ago when he was a young county apparatchik. Xi praised the World War II-era Flying Tigers who defended the Republic of China from Japan 85 years ago. (China's English-language news media and the Chinese ambassador to the U.S. all promoted "the spirit of the flying tigers" last month). Also featured was the elderly wife of a deceased American professor who was somehow linked to youth exchanges. The article shamelessly exploited American children invited to visit China to be used as pawns in his propaganda game. 

On the other hand, it's not hard to find examples of Xi making friends with America's enemies. 

In 2022, Xi declared a "friendship without limits" with Putin's Russia just before the invasion of Ukraine.

Xi overcame his distaste for Islam, beards and 7th-century lifestyles by making friends with the Taliban immediately after the American withdrawal from Afghanistan.

Xi, an avowed atheist, also found fellowship with Iran's President Raisi.

Last year, after the October 7 attack on Israel, Xi attempted to upstage the Americans by becoming a peacemaker in the Middle East. China has disappeared from the scene as the situation deteriorated.

Unfortunately, these friends are not going to bring investment to rescue China from its economic freefall. He needs Americans to fill empty office buildings in Shanghai and he needs their cash to recharge depleted bank reserves. Hence, Xi's new-found need for American friendship.

China's Infant Formula Market Shrinks as Births Decline

China's market for infant formula is shrinking along with the number of babies. According to China's National Bureau of Statistics, the number of births fell by half between 2016 and 2023, from 18.7 million to about 9 million. Customs data show that China's imports of infant formula (HS code 190110) peaked in 2019 and fell 33% by 2023. Imports for January-August 2024 are down another 20% from the same period in 2023.

Source: China National Bureau of Statistics and Customs Administration.

Many Chinese companies import milk powder in bulk to manufacture infant formula and all kinds of other milk products in China. Customs data show that imports of bulk milk powder peaked in 2021 and fell 40% by 2023. Bulk milk powder imports are also down 20% in January-August 2024 from a year earlier. 

A January 2023 article noting the decline in dairy imports quoted a food industry analyst who blamed China's sustained decline in births for a "crisis" in the industry. The analyst surmised that a decline in dairy imports is the inevitable result of the "loss of the demographic dividend." 

Perhaps it would be more apt to describe this as payment of a demographic debt. 

An August China Business Herald article pointed to double-digit declines in infant formula imports during the first half of 2024 as an indicator that China's milk powder business is becoming increasingly difficult. This article contrasted positive growth reported in financial reports of European dairy companies with the shrinking volume of China's infant formula imports. According to an industry analyst quoted by China Business Herald, the Chinese infant formula market is consolidating as leading foreign companies do well while medium and small companies--both domestic and foreign--are struggling. 

However, it will still be a crowded market for a while. Chinese authorities recently required infant formula manufacturers to pass a second round of registration audits to certify compliance with China's unique standards for infant formula. China Business Herald reported unofficial data showing that 409 infant formula products manufactured by 93 companies were registered by July. Twenty percent of the registered facilities were overseas. 

 

China's beef & dairy farmers running out of money

Last week's meeting of the standing committee of China's State Council called for relief policies to help beef and dairy farmers who are in financial straits. According to a report on the meeting cattle and sheep farms have seen shrinking profits due to falling prices and rising costs. The Ministry of Agriculture and Rural Affairs (MARA) has organized several meetings since August to address dairy and beef issues. An August 21 meeting concluded that the industry faces a dire situation with large losses for farmers and companies due to poor dairy and beef prices and pressure from imports. 

MARA data indicate that China's beef prices have been on a downward trend over the past two years. The average September 2024 price is down 23 percent since the decline began in January 2023. The current average beef price is about the same as in 2019.

Source: Wholesale price data compiled from China's Ministry of Agriculture and Rural Affairs.

China's milk prices have been on a similar downward trend. The average Chinese wholesale milk price in September is down 24 percent since early 2023. The current milk price is lower than it was 12 years ago.

Source: Wholesale price data compiled from China's Ministry of Agriculture and Rural Affairs.

According to a September 10 commentary in Economic Daily China's livestock industry has "oversupply troubles" that result in depressed prices and difficulties for many business entities. The commentator asserted that livestock producers should be advised to slow down their expansion of livestock production capacity--by advising them to cull old low-yielding cows, for example. Yet the commentator also worried that production capacity might decline as extended financial losses put farms out of business. To avoid this, he called for the government to intervene to prevent an excessive decline in capacity. 

Dairy and beef farms in China are apparently under severe financial pressure. The Economic Daily commentator and the State Council meeting both brought up shortages of working capital as key problems facing the industry. These farms rely on financing due to the fixed costs of sheds and barns, need for funds to buy feed and other inputs, and the long production cycle for beef cattle. The only concrete measures proposed in the State Council meeting were prodding banks to lend to cattle farms, accepting cattle as loan collateral, and subsidizing insurance for beef cattle. These recommendations presume that Chinese banks have plenty of money to lend, but the banks may have financial troubles of their own after the implosion of China's property sector.

Feed costs are the biggest problem, according to the Economic Daily commentator. "Not enough grass" constrains cattle and sheep farming competitiveness, as China supplies only 70% of forage needs for cattle and sheep, according to the commentator. He faults local officials for not allowing enough hay and forage crops to be planted because they "misunderstand" the demands of China's food security law which dictates that cropland should by planted in grain crops.

The Economic Daily commentator pointed to environmental protection conflicts. He thinks business entities will increase investment in manure treatment and utilization as fertilizer--again assuming they have the money to do so. He faults local officials for prohibiting livestock farming in their jurisdiction as an environmental protection measure (this seems inconsistent with his excess capacity story).

China's plummeting beef prices are out of step with international prices. U.S. beef prices have been on the rise. Brazilian prices dropped in 2022 and have been low and declining slightly during 2023-24. 

Sources: China Ministry of Agriculture and Rural Affairs; USDA/ERS; FAO.

Are imports to blame for China's excess supply? China's beef imports have risen 65% since 2019 despite the onset of the pandemic in 2020, COVID decontamination and segregation requirements for meat imports, and zero covid lockdowns during 2022. Imports were stable at a record level during 2023 despite the drop in beef prices that seems to indicate shrinking demand. 

Official Chinese data indicate that China's beef output has increased every year since 2016, a cumulative increase of 1.6 million metric tons (a 26% increase). USDA's PS&D dataset shows that China's imports grew 3.1 million metric tons during 2016-23--almost twice as much as the growth in China's output. 

Source: USDA Production, Supply & Distribution database.

China can't blame its oversupply of beef on the Americans or Australians, though. All of the growth in beef imports has come from Brazil and other South American sources which together supply about three-fourths of China's imported beef. 

China's official data also report increases in milk production every year since 2017, a cumulative increase of 38%. Imports of milk powder--China's predominant dairy import--have declined sharply since peaking in 2019. USDA's forecast for 2024 will be about half the 2019 peak volume. 

Source: USDA Production, Supply & Distribution database.

China's media manipulation in the open

In a visit to the offices of Farmers Daily, last week China's Agriculture Minister instructed the news media outlet to shape public opinion in order to promote the Chinese communist party's rural revitalization policies. His instructions reveal the game plan for China's use of journalism to manipulate public opinion and render its news outlets irrelevant to everyone except party officials. 

Agriculture Minister Han Jun instructed Farmers Daily staff to publicize the Party Central Committee's rural policies and to explain and preach (宣讲) General Secretary Xi Jinping's important discourses on rural issues. The paper must deepen its comprehensive and strict governance by the party and integrate political consciousness into all speaking and writing. Han reminded the staff that "it is necessary to carefully guide public opinion" on rural issues. 

China's Minister of Agriculture inspects Farmers Daily's use of new media
to issue communist party propaganda. Source: MARA Press Office.

Rural officials are Farmers Daily's main readers. Han pointed out that it is especially important that party cadres in the rural system need an accurate understanding and grasp of the party's "historic achievements." Han explained that cadres need to know the specific requirements, bottom lines and "red lines" of rural policy so they can implement and spread the policies.

Reporting should manipulate events to "tell the story of rural revitalization in the new era," Han told Farmers Daily staff. In other words, they should show that the party's rural policies are succeeding. When investigating "hot events" they should do a good job in refuting "rumors." "Correct orientation and content are king," Han said.

Han told the journalists they should stay in touch with farmers by talking with them and eating with them so they don't become too distant from their interests. They should give farmers a voice and be aware of public concerns. 

Today's Farmers Daily web site is entirely filled with propaganda as instructed by the minister. It features a banner on Xi Jinping's important discourse on rural work, another on studying Xi Jinping's thought on Socialism with Chinese Characteristics for a New Era, and 4 more Xi articles. The news feed includes Xi's "big food concept" of diversifying food sources, China on the brink of becoming an "agricultural power", Xi's inspection of Lanzhou City, a beautiful woman teaching children to make mooncakes, the bumper corn harvest in a county of Henan Province, rural industry in Xinjiang, the achievements of building 10 billion mu of high-standard fields, etc. The Statistics Bureau says the fall harvest is normal, pig farms are returning to profitability, and a good oilseed harvest is expected in Hebei Province.

An example of an article directed at local officials is "Why we need to establish a coordinated compensation mechanism between grain producing areas and grain consuming areas." No one else would be interested in reading this turgid article that quotes a central communist party decision and recites grain output and land statistics to explain why rich provinces need to pay poor provinces. The article's purpose is to prod officials in grain-consuming provinces to support the program. Another article warns local officials not to use public funds for banqueting during this week's moon festival by detailing 3 cases of officials in Yunnan Province who were arrested for "illegal eating and drinking."  

Typhoons in eastern China appear to be actual news of interest to farmers, but the article on this topic is buried in the web page and focuses on video conferences held by government departments and their deployment of personnel to prevent floods.

Even articles that appear to reveal scandals are carefully manipulated to show the communist party as problem solver while evil lawbreakers and corrupt local officials--usually in small obscure cities--are always the villains.

Last month "Egg World" released a report about antibiotic-laced eggs sold in Linhai City of Zhejiang Province that had residues of 4 antibiotics that were 40 times the allowable amount. Testing by market supervision authorities in Linhai in September 2023 discovered the "problem eggs," and authorities traced them back to a chicken farming cooperative in Liaoning Province who had supplied a dealer in Linhai. The eggs were accompanied by a fake testing report that declared them free of antibiotics. The agriculture ministry declared that testing did not comply with their standards. By July 11 people had been prosecuted, including egg farmers and dealers, according to the report.

The report on eggs did not mention that China's agriculture ministry has been trying to cut back on excessive antibiotic use in poultry and livestock for at least 7 years and banned use of antibiotics in feed 4 years ago. Nor did the report wonder if the Liaoning farms who sold eggs to Linhai--the two places are over 2000 km apart--might have supplied many other locations. Nor did they question whether other farms might also be abusing antibiotics. Indeed, the real purpose of the article may have been to "kill the chicken to scare the monkey" to send a message to local officials, farmers and egg dealers; the government has noticed that the bans on antibiotics are widely violated, local officials had better crack down on it, and there will be punishments for violators.

A July 2 report by The Beijing News (Xinjing Bao, run by the Beijing communist party's propaganda department), caused a stir when it reported that a tanker truck hauled petrochemicals across the country, then filled them with vegetable oil to haul back to their origin without cleaning the truck. The reporter claimed to have followed a tanker truck across the country from Xi'an to Hebei Province and back again. It was said that the practice hauling food-grade oil in chemical trucks without cleaning was an "open secret" in the industry. 

In August another party-controlled media outlet, China Central TV, published an "investigation" of the dirty cooking oil trucks apparently meant to tamp down the latest food safety scandal. CCTV mostly regurgitated the same material that was in the original report and blamed cost-cutting drivers and lack of cleaning facilities. The communist party itself was not blamed. CCTV blamed inept municipal officials and "extremely bad illegal behavior" by truck and warehouse owners. The government was presented as a hero by reporting that it arrested and prosecuted 5 people found responsible, listing laws and regulations violated, promising to require trucks be dedicated to transporting vegetable oil and stepping up enforcement of regulations. While the original report said the practice of contaminated vegetable oil trucks was an "open secret", the August report pronounced that no other cases of dirty trucks were found.

The absence of news media reports on a problem does not mean it has gone away. There were many news media reports of farmers feeding restaurant waste to pigs until 2020 when it was blamed for spreading African swine fever and consequently banned. Since 2020 there have been no news media reports of swill feeding. Does that mean the problem has been wiped out by the ban? Probably not. Indeed, it may be encouraged: a commentary in Economic Daily last week reported new efforts to promote use of table scraps to feed livestock as a strategy for reducing use of soybean meal in feed. This year news media have been reporting on China's exports of "gutter oil" to the United States for use as biofuel. Gutter oil is usually obtained by cooking down restaurant waste, the process that produces swill used for feeding pigs. 

Now that most foreign journalists have been kicked out of China, the communist party media are the only ones left to "tell China's story." And that may be by design. We are returning to the Mao era when we knew nothing of China except what the communist party wants us to know. During the 1960s journalists and diplomats used to watch China from Hong Kong, try to interpret newspapers and interview refugees, but now even Hong Kong is not available.