Thursday, November 17, 2022

Puzzling Grain-Steel State-owned Tie-up

A puzzling tie-up between COFCO and Baowu Steel--Chinese state-owned food-trading and steel-making behemoths--was featured at a signing ceremony for 11 collaborative agreements between 15 central state-owned companies and 5 local state-owned companies held October 31. Short English summary here.

The ceremony, held immediately after the conclusion of the 20th communist party congress, is apparently a signal that newly-minted dictator-for-life Xi Jinping has endorsed state-owned companies as the core of his approach to economic management. 

The chairman of the State-owned asset supervision committee presiding over the ceremony promised formation of new enterprises that would "serve the new requirements of national strategic goals." The description of the ceremony emphasized interconnections between state-owned companies, including plenty of language about "collaboration," "linkages," "integration," and "industry chains."

The tie-up between COFCO and Baowu Steel is puzzling since the companies' businesses do not seem to overlap at all. It's not obvious what synergy is possible.

COFCO is China's premier state-owned food conglomerate that includes assets in grain, cotton and sugar-trading, edible oil processing, corn manufacturing, flour- and rice-milling, biofuels, milk, pork, wine, an e-commerce platform, and a joint venture with Coca Cola. Baowu Steel is a giant steel-maker based in Shanghai, a place that has virtually no agriculture.

COFCO has a history of absorbing other state-owned companies in cotton-trading, animal husbandry, and grain logistics in recent years. The party's decision to ramp up farm commodity imports in 2020 was a license to print money for COFCO since it controls most of the import quotas for grains, cotton, and sugar, allowing it to import at world prices and resell at high prices in China. 

Baowu Steel has a history of taking over under-performing steel companies from all over the country. In 2016, Shanghai's Baoshan Steel absorbed Wuhan Iron and Steel to become Baowu. Ten years ago Wuhan Iron and Steel famously made its own weird announcement that it was starting up a pig-farming venture.

COFCO's party secretary and chairman's comments about the "strategic cooperation" with Baowu Steel were limited to vague jargon about "professional integration projects," and "optimizing resource allocation." His promise to "focus on the core business of grain, oil, sugar, cotton, meat, and milk" seems at odds with this cooperation with a company that has absolutely nothing to do with these core businesses. Baowu Steel's party secretary/chairman spouted similar meaningless jargon about "integration."  

A different version of the article contained similarly vague jargon about "synergy", "joint development force," "industrial ecosystem," "low-carbon," "green" to build a world-class enterprise through the COFCO-Baowu collaboration.

A collaboration between China Rare Earth Group and Rising Holdings Group announced at the October 31 ceremony made more sense. Another strategy featured was integration of central-government-owned companies like Aviation Industry Group with provincial or local companies like Shenyang Aviation Industry Group (to focus on intelligent manufacturing). Another agricultural tie-up featured Yunnan Province's State Farm Group and China Southern Power Grid, also described as a model of "integration of central and provincial governments." 

The article on the October 31 signing ceremony quoted a report from the just-completed Party Congress promising to "deepen the reform of state-owned companies" to make state-owned enterprises bigger and stronger. The asset commission chairman said the 20th Party Congress had given state-owned enterprises new missions and tasks, including a focus on "strategic security, industrial leadership, national economy, peoples' livelihood, and public services" to serve national strategic goals. He reiterated the mantra of focusing on the core business.

Another official commenting on the ceremony said the main goal for upcoming state-owned enterprise reform is to establish a dominant position in the relevant industry chain. 

An essay on state-owned enterprise reform posted on COFCO's web site in September promised to focus on core business and highlighted the company's jettisoning of non-core businesses (like hotels and golf courses). 

The ascendance of COFCO was evident in state news media coverage of last week's 5th Shanghai Import Expo. Its eagerness to make purchase deals with other countries at the expo was played up by describing COFCO as the "world's shopping cart." COFCO promised to use the expo to make friends up and down the supply chain and to diversify China's imports. China Daily said COFCO signed $10 billion worth of purchase agreements with foreign partners at the November 5-11 expo in Shanghai. COFCO also reported an agreement with the U.S. Soybean Export Council to establish a Collaborative Soybean Innovation Center was signed at the expo.

No rationale was given for the link-up between COFCO and Baowu Steel. A link to the state media article on the agreement is the only mention of the deal evident on the COFCO web site.

Perhaps Baowu wants to take advantage of COFCO's port and logistics facilities acquired in its purchase of grain traders Nidera and Noble Agri six years ago to import raw materials. Or maybe the apparatchiks controlling one of the two companies are too closely affiliated with one of the communist party factions that are Xi's enemies and need to be watched carefully. 

Tuesday, October 25, 2022

Same Pork Output, Price Doubles

China's third-quarter pork output in 2022 was about the same as a year ago, yet prices are about twice as high. Something's wrong with this picture.

Data in the National Bureau of Statistics' Q3 2022 report indicate pork output was 12.1 million metric tons, almost the same as last year's Q3 output of 12 million metric tons. The number of hogs slaughtered during Q3 this year was almost identical to last year, at 154.5 million, and the inventory of hogs was slightly higher than a year ago. 

Data from National Bureau of Statistics quarterly reports.

The report claimed that the hog price was up 36 percent from a year ago. The September consumer price index also reported a 36-percent increase in consumer pork prices. However, these figures vastly understate the increase in prices indicated by Ministry of Agriculture price reports which show wholesale pork prices nearly twice as high as last October and hog prices are up nearly 140 percent from last October. 

Ministry of Agriculture and Rural Affairs weekly livestock and feed reports.

The National Bureau of Statistics raw material price report for mid-October showed an even larger increase in prices, reporting an average hog price of 26.5 yuan per kg, up 150 percent from 10.5 yuan a year ago. 

National Bureau of Statistics Raw Material Purchase prices.

Consumer demand is not driving up pork prices. Per-capita household expenditures so far in 2022 were up a paltry 1.5 percent from a year earlier, and urban expenditures were down -0.2 percent.

Sunday, October 23, 2022

Drought Hits China Rice Quality

Rice quality has been reduced by this year's drought conditions in south China. reports that hot, dry weather has resulted in low yields, low milling yields, and degraded quality that could affect the appearance, texture and taste of long grain rice. The problems have become apparent since the October 1 National Day. 

Rice with quality problems is fetching low prices, while supplies of good quality rice are tight. Grain and Oils News reported last month that the low quality of this year's crop was boosting demand for old crop long grain rice released from reserves. 

Authorities began purchasing long grain rice at minimum prices in Anhui, Jiangsu, and Henan Provinces this month. Such purchases are authorized only when market prices fall below the minimum price--set this year at 129 yuan per 50kg for single-season indica rice. Rice must meet grade-3 quality standards, and rice at higher grades gets a premium.

A communist party web site posted a Q&A on government intervention purchases of rice in Xiangtan City of Hunan Province emphasizing that rice they purchase must meet national quality standards, another indicator of concern about marketing of this year's rice crop. The Xiangtan City document said single-season long grain rice could be purchased at the minimum price from October 10 through January 31, 2022. The document reminded officials that rice they purchase must meet national standards for moisture, milling yield, and foreign material. They must purchase newly harvested rice for government reserves; in other words they can't buy up old rice to stock reserves. The document identified 5 state-owned companies in the local area that are eligible to purchase rice for reserves directly from farmers who deliver the grain to the warehouse. Rice cannot be purchased at minimum price from traders or other intermediaries. 

This year people delivering rice to granaries in Xiangtan will have to fill out a form with their name, i.d. card number, contact info, date of delivery, weight of the rice, registration number of trucks used to ship the rice, cadmium content, warehouse number, and the village, town and county where the rice was grown. The form is part of a new traceability system, apparently to trace the source of rice that has excessive cadmium detected. 

The Xiangtan City document reminded officials that stabilizing the grain market is especially important this year due to the communist party's 20th congress held this week, the struggle against the covid pandemic, and other world events. Each local government and enterprise must raise its political stance.

Monday, October 10, 2022

"Big Data" and Human Element in China's Livestock Statistics

China's National Bureau of Statistics blames its data problems on conspiratorial fraud between the local officials and companies that report data to Beijing. In a May 2020 campaign to crack down on fraudulent statistics an NBS official complained that fraud and fake reporting of data remained rampant in some regions and warned that inspectors are being sent out to local government offices and companies to catch the fraudsters. This was a continuation of a crackdown on statistical fraud and deceit ordered by Xi Jinping in 2021.

In July 2022 statistical inspectors were sent to China's agriculture ministry to root out fraud and falsification, punish perpetrators, and demand that all clerks and accountants take seriously the importance of quality statistics. This follows a visit last year. In August, an inspection team conducted a spot check of livestock statistical reporting in Jilin Province where they checked farm records, investigated the reporting system, and lectured local officials about their responsibilities. 

Statistical inspectors arrive at agriculture ministry. Shall I wear a white shirt or a blue one?

Statisticians are hopeful that developments in "big data" and "artificial intelligence" can cut out the human element in data collection. One example is a recent initiative for companies to set up an automated system to send data directly to Beijing, thus eliminating opportunities for local officials to massage the numbers. 

China's chaotic livestock industry is a longstanding statistical sore spot and a target of "big data" statistical automation. The Jilin livestock statistics investigators got a report on the "Jilin's cow cloud" --a key project--and checked in with a local livestock tech company. Another team visited Shandong Province to catch up on livestock "informatization" efforts, including a demo of the “Shandong province smart livestock industry big data platform” and "big data" capabilities. Jiangsu Province officials held a training seminar for managers of milk collection stations to automate reporting of milk marketing data.

Statistical inspectors lecture a livestock farmer in Jilin Province.
Source: National Animal Husbandry Station.

These "big data" efforts sound great, but progress is still undermined by the human element. Six years ago China's agriculture ministry kicked off a pilot program for an elaborate "consumption-guided whole-industry-chain hog monitoring" system that would take advantage of "big data", cloud computing, and internet-connected devices to collect real-time data from farm records, slaughterhouses, wholesale and retail markets and pork consumers. One of the "scientific" system's stated principles was to "reduce human interference." The system was expected to improve the accuracy, timeliness, and usefulness of pork industry statistics. Officials would use "deep data mining" to identify leading indicators to issue "early warnings" to help business entities make production plans and allow government officials to surgically intervene in the market to smooth out price gyrations. 

The hog statistics pilot launched in 2016 was expected to build the foundation for an improved swine statistical system within three years. Two years later--in 2018--an African swine fever epidemic swept through the country, wiping out at least a quarter of the national herd, severely crimping pork supplies. In early 2019 agricultural officials predicted that pork prices might rise 55 percent. Prices actually went up 120 percent later that year. At the peak of the pork shortage crisis, officials mostly stopped issuing pork statistics altogether as pork prices soared to unprecedented levels.  

Even pig statistics are inherently political in China. In August 2019, Vice Premier Hu Chunhua had ordered officials at all levels to restore pork supplies asap as a "political task." Thus, local and provincial officials had great incentive to hide data that highlighted pork shortages while inflating their pig production statistics to win plaudits from their superiors and demonstrate effects of massive subsidies. Provinces competed to outdo one another in showing big rebounds in hog numbers.

The hog statistics pilot promised to be "consumption driven," including special attention to rural pork  consumption using a 30-year-old agriculture ministry village monitoring survey. However, there has absolutely no discussion or analysis of pork consumption by government, academics or news media during the African swine fever crisis. Such discussion was probably banned to avoid embarrassment since Xi Jinping had announced China would reach "all-round relatively well-off society" status in 2020 and the communist party's centenary was in 2021. Statistics on rural pork consumption would have been especially embarrassing since anecdotal reports indicated that rural consumption plunged while urban consumption took a softer hit during the African swine fever-induced shortage. In 2019, Vice Premier Hu ordered news media to "shape public opinion" on the pork shortage, and Peoples Daily quoted the agriculture ministry as insisting that "the pork supply is assured" at the same time Hu was ordering officials to alleviate the shortage.

Puzzling pork consumption data buried in China Statistical Yearbook.

The hog statistics pilot also aspired to incentivize company participation in the data collection effort by offering "services" to companies, presumably access to statistical reports and analysis. However, there are still no statistical reports on the pork industry that would have any value to companies. Annual and quarterly reports--issued by companies for the benefit of investors--convey far more market information than do government reports. 

We are collecting "big data" inside these cardboard models of giant factories.

Instructions given by a team leader after last month's Shandong livestock informatization inspection reveal some problems in vacuuming up data from various private companies. The team leader ordered local officials to pay close attention to Internet security; to speed up data sharing and eliminate "information silos"; and to devise standardized codes for data items from various companies. 

The Internet security order was probably inspired by July's massive leak of data from a Shanghai Police web site. If government data sites are vulnerable to hackers, companies are not going to "share" their data with statisticians. The economic motivation for companies to compile and analyze "big data" is to gain an advantage over their competitors. Why would companies share valuable data that their competitors might exploit? Wouldn't statisticians in possession of proprietary company data be motivated to engage in insider trading or to accept bribes? Why would it be advantageous for slow-footed government bureaucrats to dictate data standards to fast-moving companies looking to profit from their proprietary data?

Echoing the 2016 hog statistics pilot, last month the leader of the Shandong inspector team ordered local cadres to "develop informatization service capability." In other words, government statisticians in China still have nothing of value to offer companies in exchange for the data they want them to share.

A "big data" platform demo in Shandong Province. Perhaps she's saying, "These pretty pictures based on garbage-in-garbage-out data will definitely upgrade China's livestock industry." Source: National Agricultural Husbandry Station.

Sunday, September 25, 2022

China Likes Big Techno-Farms

Chinese officials view scaled-up techno-farms as their farms of the future. Small-scale peasant farmers still blanket the countryside, but subsidies are gradually tilting toward big farms. 

business propaganda outlet Yicai proclaimed recently that scaling up farming operations is the key to addressing a crisis of chronic low earnings from grain production that undermine incentives. Yicai insisted further that small-scale farms of 10 mu could never improve rural living standards. The Yicai article featured the head of a "cooperative" who had acquired 19,200 mu of land through "land transfer" as a technologically adept farmer superior to the small-holder peasants who still dot China's countryside. The cooperative had boosted wheat yields and quality, linked up with a flour manufacturer, and had plans to expand his business even more.

Yicai cited a 5-year-old Farmers Daily article that found 60 percent of China's cropland is farmed by small-scale farmers with holdings of 10 mu or less, while only 20 percent was farmed by scaled-up farms (the other 20% was not accounted for).

A recent Economic Daily discourse on "Rationally Maintaining Farmers' Net Returns to Growing Grain" pointed out that crop yields are highest for farmers cultivating 500 mu of land--about 10 times the typical holdings of small-scale farmers. The article's China Agricultural University authors gave examples of efficient farm producers: a "specialized rice cooperative" in Heilongjiang's Jiamusi City and an "agricultural services" company in Shandong's Gaomi City that cultivate the cropland of entire villages, bring in new seed varieties, mechanize the entire process, and fly drones over the fields to spray pesticides.

The fragmented nature of China's grain farms is cemented in place by its outmoded land policy that distributed plots of land to every rural family based on the number mouths to feed and number of laborers. Land can be temporarily transferred to other farmers but it can't be sold to other farmers. 

In contrast, pig farms are mostly independent of land-holdings and have consequently scaled up at a furious pace. Chinese officials love big pig farms with high-rise barns, automated feeding and temperature control equipment, data collection and artificial intelligence. They also love that they can call company executives to Beijing to lecture them about policy priorities, trot them out on stages, and feature them as models loyal to the leadership. 

After dead pigs floated into Shanghai in 2013, officials were ready with a plan to shut down small pig farms and replace them with big ones. During years that followed aggressive environmental measures eliminated millions of pig farms. In 2019, a long list of subsidies and loans to restore pork supplies after the African swine fever epidemic were given mainly to scaled-up farms. Muyuan Foods--now the world's biggest pig farmer--got big tracts of farmland to build giant pig barns despite a crackdown on diverting farmland from grain production. China had 21 million pig farms in 2020, less than half the 50 million in 2014 and a fifth of the 105 million pig farms China had in 2002. 

Source: China livestock industry yearbooks.

Priority initiatives to reduce soybean imports show how China is marginalizing small-scale farms by featuring complex techno-farming initiatives that are beyond the grasp of peasants.

A corn-soybean strip-cropping pilot program--one of China's top farming initiatives in 2022--is meant to increase soybean output without sacrificing corn by planting fields that alternate 2-4 rows of corn with 2-6 rows of soybeans. The technique has complicated requirements for row spacing, varieties that can tolerate dense planting and are resistant to lodging and shade-tolerant, special herbicides and different application times are needed for the two crops in the same field. Specialized machinery (which doesn't seem to be even available now) is needed for seeding, chemical application and harvesting. 

Last month, Economic Daily reported that production costs for the corn-soybean strip-cropping technique are extraordinarily high due to complex field management, specialized inputs and machinery required. High subsidies of 200 yuan per mu (about $170 per acre, plus additional subsidies for equipment purchase costs) are available only to large-scale farmers, cooperatives, and companies engaged in strip-cropping. Small-scale farmers are ineligible. 

This week China's agriculture ministry held a seminar to demonstrate progress on low-protein soybean meal diets for livestock, another measure to reduce soybean imports. The seminar featured presentations from giant companies like New Hope Group and Muyuan Foods. Official talking points on this initiative scold small and medium-scale farmers for judging feed quality based solely on its soybean meal content rather than designing feed rations based on diets that set minimum amounts for a half-dozen unpronounceable amino acids, fermentation processes, and distinctions between metabolizable versus digestible protein. 

The problem is that big farms have high capital requirements, high costs, and cannot operate on a shoestring as small-scale peasant farmers have done for decades. The giant pig farms are losing billions of dollars. One promising pig farming company went bust in 2018, and the number-2 pig-farming company now appears on the brink of bankruptcy.

According to Economic Daily, farmers are not able to cover the costs for soy-corn strip-cropping even with the high subsidies.

The Economic Daily and Yicai articles pointed out that land rental costs are an obstacle to profitability for scaled-up farmers. Economic Daily authors said they learned that Heilongjiang Province land rental rates went up from 500-600 yuan per mu in 2020 to 700-800 yuan per mu in 2021, while rent in Henan Province on land used for wheat-corn crops is 800 yuan. 

The cooperative head interviewed by Yicai said the 800 yuan land rent currently paid was "reasonable" but claimed that he would not be able to make money if rent was boosted to 850 yuan. Another farmer in Inner Mongolia interviewed by Yicai rented 6000 mu of "sandy" land from animal herders to plant soybeans and sorghum. He complained about the high expenses of 900-950 yuan per mu for land rent plus inputs and services and the land's vulnerability to windstorms. He complained that the rent exceeds the cost of inputs for the crops and he only nets 170 yuan per mu. 

An Anhui farmer interviewed by Yicai warned that many entrepreneurs who ran restaurants, bathhouses and other businesses think they can easily make money in farming. He recalled a wave of such farmers 10 years ago who quickly went bust. The farmer commented that a new wave of 1000-mu and 10,000-mu farms has recently appeared, lured by rising corn prices and subsidies, loans and financial awards from local governments. The article warns that these farmers could encounter big losses if corn prices don't keep rising and if subsidies are not sustained permanently.

Yicai concluded that more subsidies are necessary. China will get around World Trade Organization limits on subsidies by using insurance programs that guarantee farmers a minimum income. Provincial and central governments will subsidize 70 percent of the premiums in most farming counties and 60 percent in rich eastern provinces. Agricultural insurance is considered a "green box" support measure that is exempt from WTO limits, so there is plenty of room for growth, Yicai said. The program is supposed to cover all major grain-producing counties this year.

China has been experimenting with subsidies for large-scale farms over the past decade. The "land fertility subsidy" created in 2016 by consolidating other subsidies has a chunk reserved for scaled-up farms. Some provinces have subsidies specifically for scaled-up farmers or "awards" to offset the expense of land rent. 

A new income insurance scheme, "insurance plus futures," is touted as China's new approach to subsidizing grain farmers. The mechanism involves subsidized premiums for insurance that pays farmers if crop prices fall below a certain target. It involves complex hedging in futures and options markets that are beyond the comprehension of nearly all Chinese farmers. 

Thursday, September 15, 2022

Gyrating Pork Prices Vex Chinese Officials

China's August 2022 CPI report said pork prices were up 22 percent from a year earlier, the largest increase of any component of the price index. The Statistics Bureau reckoned that the 10-percent increase for the broader meat category contributed 0.32 percentage points to the 2.5 percent year-on-year rise in consumer prices.

A year ago, the August 2021 CPI report said pork prices were down 44.9 percent from a year earlier, the largest decline of any component of consumer prices. In August last year, the meat component of the CPI pulled down the 0.9-percent CPI change by 1.2 percentage points. 

According to agriculture ministry wholesale market price monitoring, August 2022 pork prices averaged 33.88 yuan per kg (about $2.23 per lb). That was higher than any historical pork price excluding the once-in-a-lifetime prices during Sept 2019 to January 2021 when African swine fever cratered pork supplies. 

Data from China Ministry of Agriculture and Rural Affairs market monitoring.

Chinese officials have been spooked by the gyrations in pork prices. In a July macroeconomic analysis by the State Council's Development Research Center think tank, three economists investigated the lurking risk of a new rapid surge in pork prices. They zoomed in on the possibility that "excessive shedding of production capacity" due to rising feed costs, a broken financing chain for some large-scale hog producers (e.g. Zhengbang), and over-zealous environmental regulators shutting down pig farms.

The economists said another price spike was unlikely because big farms that can withstand cyclical pressures are squeezing out small independent farms. They were pleased to report that 

  • scaled-up farms producing 500 head or more had increased their share from 53% to 60% between 2019 and 2021. 
  • Sows held by scaled farms increased by 4.4% between April 2021 and June 2022 while sows held by small independent farmers had fallen 11.6%. 
  • High-productivity second-generation sows increased from 50% of the herd in May 2021 to 88 percent in February 2022 as low-productivity third-generation sows have been displaced.
Somewhat more alarming was the financial data for pork companies:
  • While 21 publicly listed hog companies produced 15% of hogs last year, 14 of them reported losses totaling 53.97 billion yuan
  • 20 companies posted losses in the first quarter of 2022 totaling 18.94 billion yuan
  • 14 companies have debt-asset ratios over 60%, and four have ratios over 80%.
  • The report singled out Zhengbang Sci-Tech, the no. 2 pig producer, for its particularly dire financial straits.
The DRC economists judged that the likelihood of a rise in pork prices is low since pork consumption is under pressure due to closure of food service during pandemic lockdowns and a general decline as consumption diversifies away from pork. They said per capita pork consumption fell from 42.6 kg to 40.1 kg between 2014 and 2021. 

After rolling out a dozen policies to accelerate recovery of pig production exactly 3 years ago, the economists now recommend another round of loans and other support policies to prevent excessive exit from the industry. They called for increasing the corn import quota and simplifying procedures to reduce feed prices. They also called for expanding imports of other feed grains like barley and sorghum, distillers dried grains, and oilseed meals while pursuing low-soybean meal feed rations.

What the DRC economists did not bother to ask is why pork prices have surged to an historical high when demand is decidedly lackluster. Doesn't it suggest a supply shortfall? 

The National Development and Reform Commission held meetings in the summer with big hog-producing and pork companies, industry associations and other government departments to warn against hoarding and price manipulation. Authorities learned that the current supply of fattened hogs is sparse due to a reduction of capacity when companies were losing money last year. Companies said they would have to slaughter immature pigs in order to ramp up supplies immediately. 

The NDRC's September meeting once again had an upbeat assessment, concluding that pork supplies are ample and prices will be stable. 

The DRC economists called for cracking down on false information, hoarding and speculation. They meant this for companies, but the government should also stop putting out fake statistics, rosy outlooks, and stop hoarding grain.

Tuesday, September 13, 2022

Indian Rice Replaced China's Expensive Corn...until now

China's expensive corn is upending agricultural markets in unexpected ways. India banned exports of broken rice last week and imposed a 20-percent export tax on most other types of rice to pre-empt food security risks. Booming demand for broken rice has been blamed on the war in Ukraine as importers sought out replacements for Ukrainian corn. That's true, but China's demand for broken rice has been on the rise for two years, driven by spiraling Chinese corn prices.

Customs data show a relentless growth in Chinese imports of broken rice--a type of grain typically used as an industrial or feed raw material and often imported by African nations. China's broken rice imports tripled from about 200,000 metric tons per quarter in 2020 to around 600,000 metric tons per quarter in 2021. With the onset of the Ukraine war, imports accelerated again to 800,000 metric tons in 2022 Q1 and over 1.2 million metric tons in 2022 Q2.

Back in 2020, China imported broken rice mainly from Vietnam, Myanmar, Thailand and Pakistan. Following an agreement to open China's market to Indian rice signed in 2018, China began importing broken rice from India for the first time in decades in December 2020. China's imports of Indian broken rice zoomed to over 1 million metric tons in 2021. This year, China imported 1.45 million metric tons in the first seven months of 2022. So far this year, nearly 60 percent of China's broken rice imports have come from India. 

China also cut its tariff on broken rice imports to 5 percent in 2018. That means Chinese importers can buy broken rice from abroad at a relatively low tariff without limit. In past years they had to beg the government for a tiny sliver of the annual tariff rate quota in order to buy any kind of foreign rice. 

China's taste for India's broken rice exactly corresponds to a price inversion between Chinese corn and imported broken rice. Chinese corn prices were $100 to $200 less than the unit value per ton of imported broken rice during 2019 when China was still dumping its massive corn reserves into the market. During 2020, Chinese corn prices began climbing while India offered discounts on broken rice sales. By early 2021, Chinese corn was about $40-$50 more expensive than imported broken rice, and the business boomed.

In a news report 6 months ago, Indian and Pakistani traders attributed China's "exceptionally vigorous" demand for broken rice to tight supplies of Black Sea corn and wheat. They cited Chinese demand for spurring a boom in prices for broken rice that inverted the spread between 100% and 25% broken rice. In late February, Indian 100% broken rice was quoted at $310 per ton fob, up $29 from the beginning of the year. Chinese corn was over $415 per ton at that time.