Chinese authorities have announced a "provisional" minimum price for purchasing soybeans for government reserves. The price is 2 yuan per jin, or 4000 yuan per metric ton and applies to 3rd-grade domestic soybeans harvested in 2011 and purchased in Inner Mongolia and the three northeastern provinces (Heilongjiang, Jilin and Liaoning).
The China Oils Net explains that the provisional price has been raised each of the last three years. The price set in late 2008 was 3700 yuan per metric ton. According to the China oils net, this price didn't give farmers enough profit so they were not enthusiastic about selling. However, the dim sums blog recalls that the problem in 2008 was that no one wanted to buy Chinese soybeans at support prices since imported soybeans were cheaper.
The provisional support price was raised to 1.87 yuan/jin or 3740 yuan per metric ton beginning November 23, 2009. In 2010 the price was raised to 3800 yuan, but farmers didn't want to sell at that price. The market price was in the 3900-4000 yuan/mt range at that time.
The volume of domestic soybeans coming on the market is down this year since production has fallen. According to reports, the quality of soybeans is down this year. The oil content is only 14% in some areas.
With a limited supply the market price is up, so the support price may not have much effect. Private purchasers are setting prices of 1.98-2.00 yuan/jin, close to the support price.
The China Oils Net thinks the outlook for domestic soybean production next year is not favorable. Profits from soybeans are still not as good as those from competing crops. Moreover, at the current market price, soybeans from Heilongjiang Province do not have a price advantage versus imported soybeans by the time they are transported to coastal regions. Although policies have tried to raise yields and expand plantings on non-GMO soybeans, the China Oils Net writer thinks the market is still tilted in favor of imported soybeans due to their price advantage.
Tuesday, November 29, 2011
Vegetable Oil Prices Plunge
Commodity prices in China are still subject to the law of gravity. During the first eight months of this year Chinese officials worried about inflation ordered the biggest vegetable oil companies to keep a lid on prices despite strong upward pressure on prices. When the unofficial price controls were lifted in August, prices rose.
Now, just a few months later, vegetable oil prices are falling. The Shandong Commerce News reports that cooking oil prices in supermarkets are falling, some as much as 20 percent.
Mr. Zhao, a shopper in a Jinan supermarket, noticed that cooking oil brands that were rising in price during August and September are now a lot cheaper. Various brands, including Jinlongyu, Hujihua, Longda, and Xiyan, all were running special promotions. The price on a four-liter bottle of Longda peanut oil was cut from 96.8 yuan to 79.9 yuan, a 17% discount.
The reporter found that soybean and corn oils had the biggest price cuts. With the Jan. 1 New Year and the Spring Festival holidays coming up, shoppers were eager to stock up on cheaper oil. Some shoppers were stocking up because they worried that prices might go up again after the holiday period. The display area for soybean oil was mostly cleaned out, with only a few bottles left. A worker in the store said sales were about 30 percent more than before the promotion.
The decline in prices is not just a promotional phenomenon. A wholesaler interviewed by the reporter said falling retail prices reflect a recent decline in wholesale prices. Soybean oil and mixed salad oil have had the biggest declines. The reporter said the declining prices, in turn, reflect declining prices on the international market since about 70% of China's vegetable oil is imported.
Now, just a few months later, vegetable oil prices are falling. The Shandong Commerce News reports that cooking oil prices in supermarkets are falling, some as much as 20 percent.
Mr. Zhao, a shopper in a Jinan supermarket, noticed that cooking oil brands that were rising in price during August and September are now a lot cheaper. Various brands, including Jinlongyu, Hujihua, Longda, and Xiyan, all were running special promotions. The price on a four-liter bottle of Longda peanut oil was cut from 96.8 yuan to 79.9 yuan, a 17% discount.
The reporter found that soybean and corn oils had the biggest price cuts. With the Jan. 1 New Year and the Spring Festival holidays coming up, shoppers were eager to stock up on cheaper oil. Some shoppers were stocking up because they worried that prices might go up again after the holiday period. The display area for soybean oil was mostly cleaned out, with only a few bottles left. A worker in the store said sales were about 30 percent more than before the promotion.
The decline in prices is not just a promotional phenomenon. A wholesaler interviewed by the reporter said falling retail prices reflect a recent decline in wholesale prices. Soybean oil and mixed salad oil have had the biggest declines. The reporter said the declining prices, in turn, reflect declining prices on the international market since about 70% of China's vegetable oil is imported.
Monday, November 28, 2011
Patriotic Cabbage Campaign
The Ministry of Agriculture has issued an emergency notice on addressing the problem of unsellable napa cabbages. The program launches a "patriotic cabbage campaign" that involves twisting arms to make sure surplus cabbages get sold.
This follows the successful "patriotic potato campaign" held in mid-October. Around the time of the National Day holiday (Oct. 1) there was a large volume of potatoes with no buyers in Inner Mongolia, Gansu, and Shaanxi Province. In order to reduce farmers' losses, the Ministries of Agriculture and Commerce called on city people in Beijing, Tianjin, Guangzhou, Nanjing and other big cities to buy potatoes from Inner Mongolia. "Some people began calling this the 'patriotic potato campaign.'"
Following this great success, on November 24 the Ministry of Agriculture issued the new notice calling for measures to help farmers in Shandong and Hebei Provinces sell their unsold cabbages.
The notice calls for each province's agriculture, commerce, development and reform and finance departments to designate potatoes and cabbage as commodities to be held in government reserves and to establish a winter-spring vegetable reserve as soon as possible. Officials are also to encourage "dragon head enterprises" to buy up cabbages, participate in the farmer-direct supermarket purchase program, give government aid for stores selling cabbage at low prices, reduce entry fees, stall rents and warehouse rents in wholesale markets for vendors who sell cabbages, and encourage trading companies to buy up cabbages in producing areas.
According to the Ministry of Agriculture, wholesale markets in northern China are expected to sell 32 million jin of cabbages during the second half of November, up 90% from the first half of the month. This is as a result of the patriotic cabbage campaign.
This follows the successful "patriotic potato campaign" held in mid-October. Around the time of the National Day holiday (Oct. 1) there was a large volume of potatoes with no buyers in Inner Mongolia, Gansu, and Shaanxi Province. In order to reduce farmers' losses, the Ministries of Agriculture and Commerce called on city people in Beijing, Tianjin, Guangzhou, Nanjing and other big cities to buy potatoes from Inner Mongolia. "Some people began calling this the 'patriotic potato campaign.'"
Following this great success, on November 24 the Ministry of Agriculture issued the new notice calling for measures to help farmers in Shandong and Hebei Provinces sell their unsold cabbages.
The notice calls for each province's agriculture, commerce, development and reform and finance departments to designate potatoes and cabbage as commodities to be held in government reserves and to establish a winter-spring vegetable reserve as soon as possible. Officials are also to encourage "dragon head enterprises" to buy up cabbages, participate in the farmer-direct supermarket purchase program, give government aid for stores selling cabbage at low prices, reduce entry fees, stall rents and warehouse rents in wholesale markets for vendors who sell cabbages, and encourage trading companies to buy up cabbages in producing areas.
According to the Ministry of Agriculture, wholesale markets in northern China are expected to sell 32 million jin of cabbages during the second half of November, up 90% from the first half of the month. This is as a result of the patriotic cabbage campaign.
Sunday, November 27, 2011
Weak Corn Prices
According to Futures Daily, Chinese corn prices have been falling due to pressure from the new harvest, weak demand and worries about the fallout from the European debt crisis. The futures price fell below 2200 yuan per metric ton (about $14.75 $8.75/bu) and is threatening to break through 2100.
This year's record-breaking harvest, estimated at 184.5 million metric tons, has been coming on the market, putting seasonal downward pressure on prices. In northern China good weather encouraged farmers to sell, and the price fell 200-300 yuan/mt to 2160-2380 yuan. In the northeast the corn price is in the 2000-2050 yuan range. As prices start to fall, farmers become more eager to sell. Farmers tend to sell a lot of corn at the end of the year to raise money for the coming holidays.
The market is worried about the effects of the European debt crisis, and whether the crisis will spread outside Europe to the United States.
Demand has been weakened by the government's recent actions to rein in the industrial corn-processing sector. A new VAT regulation was issued for the fuel ethanol industry--instead of exempting fuel ethanol companies from VAT they must pay it first and then get a refund. Stricter environmental controls were announced for starch, sweetener and ethyl alcohol processors, raising their operating costs.
Livestock demand is not particularly robust either. The peak season for pork consumption in southern provinces has not arrived yet. The one bright spot is the poultry industry where prices and profits are still high and producers are stocking up on birds in anticipation of the January 1-Chinese New Year holiday season.
A big uncertainty is the level of state corn reserves. The article says it is "an indisputable fact" that reserves are low. Restocking of government reserves could add to demand and support prices, but the article says state-owned grain companies are buying "only 500,000 metric tons" compared with 29 million metric tons in 2010.
This year's record-breaking harvest, estimated at 184.5 million metric tons, has been coming on the market, putting seasonal downward pressure on prices. In northern China good weather encouraged farmers to sell, and the price fell 200-300 yuan/mt to 2160-2380 yuan. In the northeast the corn price is in the 2000-2050 yuan range. As prices start to fall, farmers become more eager to sell. Farmers tend to sell a lot of corn at the end of the year to raise money for the coming holidays.
The market is worried about the effects of the European debt crisis, and whether the crisis will spread outside Europe to the United States.
Demand has been weakened by the government's recent actions to rein in the industrial corn-processing sector. A new VAT regulation was issued for the fuel ethanol industry--instead of exempting fuel ethanol companies from VAT they must pay it first and then get a refund. Stricter environmental controls were announced for starch, sweetener and ethyl alcohol processors, raising their operating costs.
Livestock demand is not particularly robust either. The peak season for pork consumption in southern provinces has not arrived yet. The one bright spot is the poultry industry where prices and profits are still high and producers are stocking up on birds in anticipation of the January 1-Chinese New Year holiday season.
A big uncertainty is the level of state corn reserves. The article says it is "an indisputable fact" that reserves are low. Restocking of government reserves could add to demand and support prices, but the article says state-owned grain companies are buying "only 500,000 metric tons" compared with 29 million metric tons in 2010.
Saturday, November 26, 2011
Subsidies for Rural Governments
According to a preliminary announcement from China's Ministry of Finance, government spending on rural affairs will exceed 1 trillion yuan ($156 billion) for the first time next year.
Only 140 billion yuan ($22 billion) of the total is for subsidies to farmers. The article says grain subsidies are now 100 yuan per mu (about $38.50 per acre) and it is estimated that costs of inputs (fertilizer, pesticide, plastic sheeting, fuel, etc.) are about 300 yuan. So, the article says, the government pays about one-third of the production cost. (This doesn't include the cost of labor and land.)
This year the rhetoric has shifted from subsidies to farmers to subsidies to local governments and water projects. Chinese authorities have recognized that local officials also need incentives to implement central government policies. The operative term appearing in the Chinese literature this year is "dual incentives" (两个积极性）for local government officials and for farmers.
This year, nearly all official speeches and articles about grain subsidies include a phrase about subsidies "mobilizing the enthusiasm of local government and farmers" (in that order). This year, "awards" to major grain- and oilseed-producing counties (transfer payments) are to be increased to 22.5 billion yuan ($3.5 billion). On top of this, the central government will take over the province's contribution to "grain risk funds" that finance grain subsidies and policy purchases of grain. The new grain risk fund contribution totals 24.9 billion yuan ($3.9 billion) of central government funds.
An article, "Problems and Countermeasures for Raising Grain ProductionCapacity in Production Areas," published in the Chinese journal Macroeconomics published earlier this year seems to be part of a big propaganda campaign to push the new federalism strategy (causing one to question the value of academic journals in China, but that's another story). The article explains that local governments in rural areas are not inclined to make investments in agriculture since the returns are small and long-term in nature. Instead, they prefer to put money into high-profile factories or urban development projects, which leaves agricultural infrastructure neglected and deteriorating. A more fundamental problem is that rural governments are broke. They have a thin tax base to start with and the elimination of the "agricultural tax" narrowed the tax base even further.
One of the big concerns is that reservoirs and irrigation networks built in the 1950s and '60s have deteriorated and are no longer functional or are even dangerous. This reduces the ability to avert or cope with floods and droughts. Another big problem is the lack of safe drinking water in many rural communities.
The "grain risk fund" is said to be a burden on local governments. Rural governments complain that they are expected to sink funds into money-losing grain-procurement enterprises. In some cases local governments don't have enough funds to pay grain subsidies (half of "grain risk funds" must be used for subsidies to farmers).
The new federalism aims to take funds from rich coastal and urban regions and transfer them to poor rural regions. Presumably, tax funds collected from industrialized regions finance the central government "awards" and grain risk fund contributions.
The new federalism is included as a component of the big Henan development scheme. Perhaps not coincidentally, the author of the article explaining the concept is from a teachers' university in Nanyang, a small city in Henan.
Also as part of the big campaign, the local statistical bureau in Zhoukou, another agricultural region in Henan, also released a report on the topic this month reciting virtually all the same points as the article above but decorated with statistics from Zhoukou. (This article demonstrates that China's statistical system still exists to validate government policies, not to provide objective information). The Zhoukou report complained that cost of production surveys show that farmers still make little profit from planting grain despite subsidies of 80 yuan per mu. It cites weak infrastructure and lack of insurance that led to big losses from natural disasters in recent years. Elimination of the agricultural tax has tightened finances in Zhoukou. In 2003, Zhoukou got 48% of its tax revenue from the agricultural tax (compared with 0.21% in Guangzhou). Zhoukou's grain output is 13% of the province's total, but its financial revenue is only 2% of the provincial total. Its budget is half of the average for prefectures in Henan and only 2% of the average nationwide. The report helpfully recites a list of ideas for funneling more money into regions like Zhoukou.
China's new federalism reflects another interesting and difficult modernization for China. We tend to think of China as a single nation but it is going through a transition similar to that of 19th century Europe. The lack of integration has resulted in huge gaps in wealth and development. China's leaders are trying to mold a vast collection of more or less autonomous city-states into an integrated nation-state. Part of that way is struggling to find ways to funnel the riches from coastal provinces into the poor, broke hinterland.
Interesting that this is happening at the same time Europe is struggling to keep its continent-wide agglomeration together.
Only 140 billion yuan ($22 billion) of the total is for subsidies to farmers. The article says grain subsidies are now 100 yuan per mu (about $38.50 per acre) and it is estimated that costs of inputs (fertilizer, pesticide, plastic sheeting, fuel, etc.) are about 300 yuan. So, the article says, the government pays about one-third of the production cost. (This doesn't include the cost of labor and land.)
This year the rhetoric has shifted from subsidies to farmers to subsidies to local governments and water projects. Chinese authorities have recognized that local officials also need incentives to implement central government policies. The operative term appearing in the Chinese literature this year is "dual incentives" (两个积极性）for local government officials and for farmers.
This year, nearly all official speeches and articles about grain subsidies include a phrase about subsidies "mobilizing the enthusiasm of local government and farmers" (in that order). This year, "awards" to major grain- and oilseed-producing counties (transfer payments) are to be increased to 22.5 billion yuan ($3.5 billion). On top of this, the central government will take over the province's contribution to "grain risk funds" that finance grain subsidies and policy purchases of grain. The new grain risk fund contribution totals 24.9 billion yuan ($3.9 billion) of central government funds.
An article, "Problems and Countermeasures for Raising Grain ProductionCapacity in Production Areas," published in the Chinese journal Macroeconomics published earlier this year seems to be part of a big propaganda campaign to push the new federalism strategy (causing one to question the value of academic journals in China, but that's another story). The article explains that local governments in rural areas are not inclined to make investments in agriculture since the returns are small and long-term in nature. Instead, they prefer to put money into high-profile factories or urban development projects, which leaves agricultural infrastructure neglected and deteriorating. A more fundamental problem is that rural governments are broke. They have a thin tax base to start with and the elimination of the "agricultural tax" narrowed the tax base even further.
One of the big concerns is that reservoirs and irrigation networks built in the 1950s and '60s have deteriorated and are no longer functional or are even dangerous. This reduces the ability to avert or cope with floods and droughts. Another big problem is the lack of safe drinking water in many rural communities.
The "grain risk fund" is said to be a burden on local governments. Rural governments complain that they are expected to sink funds into money-losing grain-procurement enterprises. In some cases local governments don't have enough funds to pay grain subsidies (half of "grain risk funds" must be used for subsidies to farmers).
The new federalism aims to take funds from rich coastal and urban regions and transfer them to poor rural regions. Presumably, tax funds collected from industrialized regions finance the central government "awards" and grain risk fund contributions.
The new federalism is included as a component of the big Henan development scheme. Perhaps not coincidentally, the author of the article explaining the concept is from a teachers' university in Nanyang, a small city in Henan.
Also as part of the big campaign, the local statistical bureau in Zhoukou, another agricultural region in Henan, also released a report on the topic this month reciting virtually all the same points as the article above but decorated with statistics from Zhoukou. (This article demonstrates that China's statistical system still exists to validate government policies, not to provide objective information). The Zhoukou report complained that cost of production surveys show that farmers still make little profit from planting grain despite subsidies of 80 yuan per mu. It cites weak infrastructure and lack of insurance that led to big losses from natural disasters in recent years. Elimination of the agricultural tax has tightened finances in Zhoukou. In 2003, Zhoukou got 48% of its tax revenue from the agricultural tax (compared with 0.21% in Guangzhou). Zhoukou's grain output is 13% of the province's total, but its financial revenue is only 2% of the provincial total. Its budget is half of the average for prefectures in Henan and only 2% of the average nationwide. The report helpfully recites a list of ideas for funneling more money into regions like Zhoukou.
China's new federalism reflects another interesting and difficult modernization for China. We tend to think of China as a single nation but it is going through a transition similar to that of 19th century Europe. The lack of integration has resulted in huge gaps in wealth and development. China's leaders are trying to mold a vast collection of more or less autonomous city-states into an integrated nation-state. Part of that way is struggling to find ways to funnel the riches from coastal provinces into the poor, broke hinterland.
Interesting that this is happening at the same time Europe is struggling to keep its continent-wide agglomeration together.
A Grand Plan for Henan
In October, the State Council announced a grand scheme for Henan Province that is described as representing China's new model of economic and social development for the whole country.
The Council's "ideas on support for speeding up construction of a central economic region in Henan Province" is an all-encompassing plan for coordinating the development of agriculture, industry, urbanization and even culture. The plan encompasses nearly every aspect of the economy and society, but the plan has a central theme of raising grain production by upgrading irrigation and other rural infrastructure, upgrading technology, agriculture-industry links and breaking down the barriers between the rural and urban economies.
The plan emphasizes Henan Province's role as a major grain-producing region and its importance to national grain security. The plan aims to upgrade grain production capacity and mentions a goal of promoting the region's livestock production and processing industry (but there aren't a lot of details on meat in the plan). The plan includes all the standard buzz words of promoting "scale" production, mechanization, improved crop varieties, organization of farmers into cooperatives, high yields, efficiency, quality, safety, and ecological production. The plan puts a major emphasis on integrating agriculture with other sectors and viewing the Henan plan as radiating out to neighboring regions to boost the entire central China region. The plan includes development of logistics and construction of north-south transportation routes.
The plan does not mention the massive south-north water diversion project, but it may be related. The water diversion project begins south of Henan (in northern Hubei) and runs through Henan to north China. The plan's emphasis on water projects, north-south transportation networks, and reference to an economic region centered on the Yangtze River makes one wonder whether this plan is related to the water diversion project.
The plan is part of the broader national grain security plan for maintaining grain production capacity through 2020. The plan emphasizes "fall grain" (as opposed to wheat--the region's major crop which grows over the winter and is harvested in the summer). By 2020 Henan's grain production capacity is targeted at 65 mmt. Planting of wheat and corn for special uses, quality soybeans and rice will be promoted. The plan aims to add more grain fields that produce 1000 kg. Funds will be budgeted for water projects, to manage low-lying lands subject to flooding and water-logging, repairing dangerous reservoirs, construction of large-medium water irrigation projects, expanding large-scale pumping stations, and increasing ability to withstand droughts and floods.
Another paragraph calls for promoting other types of agriculture: livestock, horticultural crops, fruit and flowers. Four prefectures in Henan are designated as national-level model modern agriculture districts, and two others are to be "scientific agriculture areas."
Following this year's standard rhetoric the plan calls for increased spending on subsidies both for farmers and for local governments. It promises to arrange deals for purchasing grain between consuming and producing regions, improve agricultural insurance and set up pilot projects for improving rural financial services.
The plan also has a nationalist element. It emphasizes the historical culture of the Henan region (the capital of ancient dynasties were based there) and makes an appeal to Chinese nationalism. The plan describes Henan as a new region for Chinese history and culture that utilizes the resources and strengthens the cohesion of the Chinese people worldwide by creating an innovative cultural development district.
The plan invokes a new slogan of "three huas" (三化) that is even harder to translate than the "san nong" or "three rurals" or "three agricultures" that became an official slogan a decade ago (and is also invoked in the plan). ("Hua" refers to the Chinese practice of adding the suffix "hua" (化) to a word to make into a new word that denotes a process. One klunky approach would be to translate "three huas" as "three -zations": industrialization (gongye-hua), urbanization (chengzhen-hua), and agricultural modernization (nongye xiandai-hua). The basic idea is to "coordinate" these three related processes that are at the heart of the transformation of the Chinese economy and society in the current era. The 12th five-year plan that begins this year seems to be viewed as a the entrance into this new era. The "three huas" entail "flexible" policy measures, the orderly resettlement of rural population, tight control over land conversion, more efficient and intensive use of land, and reform of administrative management.
This plan raises the question of the role of government in resource allocation. Nearly everything in China can be bought and sold freely, but the key factors of production--land and capital--are are still allocated by the state. Land is owned by the state or by collectives and can't be bought or sold without officials acting as brokers or middlemen. Interest rates are fixed and bank executives receive lending orders from the communist party. While labor is allocated by market forces, the household registration system constrains rural-urban migration. Thus, the government still has a major say in allocation of the major factors of production and views itself as filling a vital role as coordinator and facilitator.
The Council's "ideas on support for speeding up construction of a central economic region in Henan Province" is an all-encompassing plan for coordinating the development of agriculture, industry, urbanization and even culture. The plan encompasses nearly every aspect of the economy and society, but the plan has a central theme of raising grain production by upgrading irrigation and other rural infrastructure, upgrading technology, agriculture-industry links and breaking down the barriers between the rural and urban economies.
The plan emphasizes Henan Province's role as a major grain-producing region and its importance to national grain security. The plan aims to upgrade grain production capacity and mentions a goal of promoting the region's livestock production and processing industry (but there aren't a lot of details on meat in the plan). The plan includes all the standard buzz words of promoting "scale" production, mechanization, improved crop varieties, organization of farmers into cooperatives, high yields, efficiency, quality, safety, and ecological production. The plan puts a major emphasis on integrating agriculture with other sectors and viewing the Henan plan as radiating out to neighboring regions to boost the entire central China region. The plan includes development of logistics and construction of north-south transportation routes.
The plan does not mention the massive south-north water diversion project, but it may be related. The water diversion project begins south of Henan (in northern Hubei) and runs through Henan to north China. The plan's emphasis on water projects, north-south transportation networks, and reference to an economic region centered on the Yangtze River makes one wonder whether this plan is related to the water diversion project.
The plan is part of the broader national grain security plan for maintaining grain production capacity through 2020. The plan emphasizes "fall grain" (as opposed to wheat--the region's major crop which grows over the winter and is harvested in the summer). By 2020 Henan's grain production capacity is targeted at 65 mmt. Planting of wheat and corn for special uses, quality soybeans and rice will be promoted. The plan aims to add more grain fields that produce 1000 kg. Funds will be budgeted for water projects, to manage low-lying lands subject to flooding and water-logging, repairing dangerous reservoirs, construction of large-medium water irrigation projects, expanding large-scale pumping stations, and increasing ability to withstand droughts and floods.
Another paragraph calls for promoting other types of agriculture: livestock, horticultural crops, fruit and flowers. Four prefectures in Henan are designated as national-level model modern agriculture districts, and two others are to be "scientific agriculture areas."
Following this year's standard rhetoric the plan calls for increased spending on subsidies both for farmers and for local governments. It promises to arrange deals for purchasing grain between consuming and producing regions, improve agricultural insurance and set up pilot projects for improving rural financial services.
The plan also has a nationalist element. It emphasizes the historical culture of the Henan region (the capital of ancient dynasties were based there) and makes an appeal to Chinese nationalism. The plan describes Henan as a new region for Chinese history and culture that utilizes the resources and strengthens the cohesion of the Chinese people worldwide by creating an innovative cultural development district.
The plan invokes a new slogan of "three huas" (三化) that is even harder to translate than the "san nong" or "three rurals" or "three agricultures" that became an official slogan a decade ago (and is also invoked in the plan). ("Hua" refers to the Chinese practice of adding the suffix "hua" (化) to a word to make into a new word that denotes a process. One klunky approach would be to translate "three huas" as "three -zations": industrialization (gongye-hua), urbanization (chengzhen-hua), and agricultural modernization (nongye xiandai-hua). The basic idea is to "coordinate" these three related processes that are at the heart of the transformation of the Chinese economy and society in the current era. The 12th five-year plan that begins this year seems to be viewed as a the entrance into this new era. The "three huas" entail "flexible" policy measures, the orderly resettlement of rural population, tight control over land conversion, more efficient and intensive use of land, and reform of administrative management.
This plan raises the question of the role of government in resource allocation. Nearly everything in China can be bought and sold freely, but the key factors of production--land and capital--are are still allocated by the state. Land is owned by the state or by collectives and can't be bought or sold without officials acting as brokers or middlemen. Interest rates are fixed and bank executives receive lending orders from the communist party. While labor is allocated by market forces, the household registration system constrains rural-urban migration. Thus, the government still has a major say in allocation of the major factors of production and views itself as filling a vital role as coordinator and facilitator.
Tuesday, November 22, 2011
Chinese Feed Mogul on Benefits of WTO
Liu Yonghao, the chairman of New Hope Group--China's largest feed company--was interviewed by 21st Century about how his company has benefited from China's WTO accession 10 years ago. Liu said New Hope was one of the biggest beneficiaries, citing WTO for providing his company with a stable channel for importing raw materials.
New Hope looked into investing in mature markets like the U.S., Europe, Japan and South Korea, but felt they didn't have any advantage there since big multinationals dominate these markets. New Hope is now focusing on Southeast Asian countries like Vietnam, Cambodia and the Philippines. CP, the Thai company, is the leading feed miller in these countries, but New Hope has experience going up against them in China. New Hope operates a dozen mills in Southeast Asia: five in Vietnam, four in the Philippines, one in Cambodia, two in Indonesia.
The company's main overseas market is Vietnam. CP and Willmar have mills there, but Liu describes the feed industry in Vietnam as very weak.
In Vietnam, Liu says, they have to offer steep discounts to get livestock producers to buy their feed. The Vietnamese tell them all other Chinese products like motorcycles and apparel are sold at a fraction of the price of Japanese, American or European products, so they New Hope has to sell its feed at half-price in Vietnam.
Liu says Chinese exports and the quality of exported goods has improved since WTO accession. In Vietnam, the discount on Chinese goods is narrowing. It used to be 50%, but Chinese goods now sell for 70%-80% of the price of other goods.
The company hopes that after using their feed several years customers will gain confidence in their quality. Liu says New Hope is now one of the top three feed products in Vietnam. He says their after-tax earnings in Vietnam were 100 million yuan last year.
New Hope has plans to expand in Sri Lanka, Egypt and South Africa. They have ten plants under construction overseas. New Hope recently set up an overseas investment company in Singapore and plans to double foreign investment every year.
New Hope's home base in Sichuan, the largest hog-producing province. Liu says the biggest challenge in producing feed is sourcing raw materials. In the early days, feed mills had to set up importing channels in Shenzhen to procure amino acids and vitamins that were not available domestically. When the government monopolized grain they had to collect ration tickets and devise other arrangements with farmers to get grain they could process into feed.
He recalls traveling all over the country during the 1980s trying to convince grain warehouses and oil-crushing mills to sell him corn and soymeal. As a Sichuan native, he spent much of his time in the northeastern provinces buying grain. During Chinese New Year holiday, the hotels closed down but he was still trying to find grain to buy. At that time it was hard to get grain, the prices fluctuated and were not in line with international prices.
Before WTO accession, plant-based protein was imported but was scarce. After WTO accession, imports of soybeans boomed. Last year, China's soybean imports were over 50 mmt. Liu says his company uses 3-to-4 million metric tons (mmt) of soybeans to make 15 mmt of feed. Imported soybeans are crushed to make vegetable oil and soy meal for feed--most of the value of those beans is for feed.
Turning to the topic of foreign investment, Liu recalls that multinational companies like CP, Willmar, and Purina were dominant in the China market during the early years after "reform and opening." Now New Hope is one of the leading feed companies, selling 15 mmt annually.
Turning to the topic of foreign investment, Liu recalls that multinational companies like CP, Willmar, and Purina were dominant in the China market during the early years after "reform and opening." Now New Hope is one of the leading feed companies, selling 15 mmt annually.
Liu observes that China is the world's largest meat, egg, and dairy country. Since entering WTO, the manufacturing sector has grown rapidly, urbanization has increased, many small-scale "back yard" farmers have quit farming to work elsewhere, and consumption of meat, eggs, and milk rose. Liu said his company became a world-class company by the fourth year after WTO accession.
Liu says his company is growing by integrating from feed milling into the entire industry chain: breeding, livestock production, slaughter and processing. New Hope has set up a livestock technical services company, a loan guarantee company, and farmer cooperatives. The company sees itself as an intermediary with the "government above," "farmers below," a domestic "dragon head" company and a multinational company overseas.
The 21st Century interviewer asked Liu about his company's earlier plan to import feed and export meat products after WTO accession. Liu responded that China doesn't have enough meat products and does export any. Instead New Hope company is investing overseas. Liu asks rhetorically, "Foreign companies have invested in China, so why can't we invest overseas?"
Liu says his company is growing by integrating from feed milling into the entire industry chain: breeding, livestock production, slaughter and processing. New Hope has set up a livestock technical services company, a loan guarantee company, and farmer cooperatives. The company sees itself as an intermediary with the "government above," "farmers below," a domestic "dragon head" company and a multinational company overseas.
The 21st Century interviewer asked Liu about his company's earlier plan to import feed and export meat products after WTO accession. Liu responded that China doesn't have enough meat products and does export any. Instead New Hope company is investing overseas. Liu asks rhetorically, "Foreign companies have invested in China, so why can't we invest overseas?"
New Hope looked into investing in mature markets like the U.S., Europe, Japan and South Korea, but felt they didn't have any advantage there since big multinationals dominate these markets. New Hope is now focusing on Southeast Asian countries like Vietnam, Cambodia and the Philippines. CP, the Thai company, is the leading feed miller in these countries, but New Hope has experience going up against them in China. New Hope operates a dozen mills in Southeast Asia: five in Vietnam, four in the Philippines, one in Cambodia, two in Indonesia.
The company's main overseas market is Vietnam. CP and Willmar have mills there, but Liu describes the feed industry in Vietnam as very weak.
In Vietnam, Liu says, they have to offer steep discounts to get livestock producers to buy their feed. The Vietnamese tell them all other Chinese products like motorcycles and apparel are sold at a fraction of the price of Japanese, American or European products, so they New Hope has to sell its feed at half-price in Vietnam.
Liu says Chinese exports and the quality of exported goods has improved since WTO accession. In Vietnam, the discount on Chinese goods is narrowing. It used to be 50%, but Chinese goods now sell for 70%-80% of the price of other goods.
The company hopes that after using their feed several years customers will gain confidence in their quality. Liu says New Hope is now one of the top three feed products in Vietnam. He says their after-tax earnings in Vietnam were 100 million yuan last year.
New Hope has plans to expand in Sri Lanka, Egypt and South Africa. They have ten plants under construction overseas. New Hope recently set up an overseas investment company in Singapore and plans to double foreign investment every year.
Monday, November 21, 2011
Resettling Dairy Cows
Chinese officials in a far-flung outpost of Inner Mongolia have initiated a plan to entice cow-herders to move their cattle into new dairy-farming communities. This seems to be another expression of Chinese officialdom's vision of creating a "modern" agriculture that adapts the industrialized concentrated western model to a crowded Chinese countryside.
This year officials in Inner Mongolia’s Hulunber Banner, Old Barag Town plan are planning a dairy cattle resettlement project. The plan for building demonstration "dairy communities" (奶牛养殖示范小区) was formulated in 2010 with planned investment of 76.6 million yuan (about $12 million). An initial set of five barns with related equipment with capacity to hold 500 cattle were constructed in June. Eleven barns, each holding 100 cows, are scheduled to be completed by the end of November.
Herders who move their cattle into the communities this year will be given free housing, free water and electricity and cattle bedding as inducements and a worker will be available to feed the cattle and maintain the equipment. The milk price will be kept slightly higher than the market price.
This year officials in Inner Mongolia’s Hulunber Banner, Old Barag Town plan are planning a dairy cattle resettlement project. The plan for building demonstration "dairy communities" (奶牛养殖示范小区) was formulated in 2010 with planned investment of 76.6 million yuan (about $12 million). An initial set of five barns with related equipment with capacity to hold 500 cattle were constructed in June. Eleven barns, each holding 100 cows, are scheduled to be completed by the end of November.
Herders who move their cattle into the communities this year will be given free housing, free water and electricity and cattle bedding as inducements and a worker will be available to feed the cattle and maintain the equipment. The milk price will be kept slightly higher than the market price.
Sunday, November 13, 2011
China's Nongrain Ethanol Push
China's "Renewable Energy Plan" for the 12th five-year plan period aims to increase ethanol production by 1.2 million metric tons (mmt) to reach 3 mmt by 2015. The propaganda coming out now indicates a push to meet that goal by stepping up non-grain ethanol production.
An article from the "industry research net" posted on several websites several days ago pronounces that it's already clear that China must "take the nongrain ethanol road." The article cited remarks by Premier Wen Jiabao at last month's China-Southeast Asia exposition which attributed recent rises in corn and wheat prices to international market influences but nevertheless called for control of corn-based processing. That presumably includes ethanol. The article then cites a foreign scientist who extols the advantages of non-grain biofuels and lists vague "breakthroughs" made recently in the four grain-based ethanol plants authorized in 2004. The Jilin Ethanol Co. has launched an ethanol project using sweet sorghum stalks which has apparently yielded promising results from experimental trials. The ethanol companies in Anhui and Henan are also said to be making progress in making ethanol from crop stalks.
Not mentioned are the joint venture sweet sorghum project that collapsed several years ago, nor the regular reports from Henan that farmers persist in illegally burning wheat and corn stalks in the fields because it is too troublesome and time-consuming to collect them.
Another news reports says the Ministry of Environmental Protection is completing the environmental assessment of a new fuel ethanol plant that will be built by PetroChina at Danshan, an island in Zhejiang Province. This project was approved by the State Council in July, and is part of a massive industrial and logistics project planned for the islands off the coast of Zhejiang Province.
The Danshan ethanol plant will cost over 3.2 billion yuan (about $500 million). It will produce 300,000 mt of ethanol--one-fourth of the planned increase in ethanol production--from imported cassava chips. By my calculation this would take nearly 1 mmt of cassava imports. Currently imports exceed 3 mmt. About 80% of China's cassava imports come from Thailand and other sources are Vietnam and Indonesia. According to the Chinese Academy of Agricultural Sciences experts consulted by the reporter, cassava is the most economic raw material for producing ethanol.
Grain-based ethanol projects came in for criticism in recent years as grain prices increased. In an interview last year Cheng Guoqiang, a policy advisor from the State Council's Development Research Center, argued that "cars eating grain" is not in accord with China's national conditions.
Ethanol production requires large subsidies. In the 2010 interview, Cheng said the subsidy was 1375 yuan per ton of ethanol and a total of 1.35 billion yuan in subsidies are paid to four ethanol producers. Ethanol producers are also exempt from taxes.
Another article from 2010 reported that the subsidy was originally set at 1880 yuan/mt in 2004. The Anhui plant's subsidy had been cut 20% from 2055 yuan/mt in 2009 to 1659 yuan/mt last year and was expected to be cut again this year. This article estimated that the corn used to produce one ton of ethanol cost 6275 yuan and the total cost of production was 8000-9000 yuan. The writer pointed out that this amount of money could buy two tons of oil. He estimated that the Anhui plant received 163 million yuan in subsidies to produce 410,000 mt of ethanol.
The article noted that the State Council had announced in 2007 that no more grain-based ethanol project would be approved. However, many are eager to build such projects given the high subsidies available.
Chinese corn prices have risen about 20% since last year, so the cost has continued to escalate, making grain-based ethanol even less cost-efficient. This may explain the urgency attached to non-grain ethanol.
An article from the "industry research net" posted on several websites several days ago pronounces that it's already clear that China must "take the nongrain ethanol road." The article cited remarks by Premier Wen Jiabao at last month's China-Southeast Asia exposition which attributed recent rises in corn and wheat prices to international market influences but nevertheless called for control of corn-based processing. That presumably includes ethanol. The article then cites a foreign scientist who extols the advantages of non-grain biofuels and lists vague "breakthroughs" made recently in the four grain-based ethanol plants authorized in 2004. The Jilin Ethanol Co. has launched an ethanol project using sweet sorghum stalks which has apparently yielded promising results from experimental trials. The ethanol companies in Anhui and Henan are also said to be making progress in making ethanol from crop stalks.
Not mentioned are the joint venture sweet sorghum project that collapsed several years ago, nor the regular reports from Henan that farmers persist in illegally burning wheat and corn stalks in the fields because it is too troublesome and time-consuming to collect them.
Another news reports says the Ministry of Environmental Protection is completing the environmental assessment of a new fuel ethanol plant that will be built by PetroChina at Danshan, an island in Zhejiang Province. This project was approved by the State Council in July, and is part of a massive industrial and logistics project planned for the islands off the coast of Zhejiang Province.
The Danshan ethanol plant will cost over 3.2 billion yuan (about $500 million). It will produce 300,000 mt of ethanol--one-fourth of the planned increase in ethanol production--from imported cassava chips. By my calculation this would take nearly 1 mmt of cassava imports. Currently imports exceed 3 mmt. About 80% of China's cassava imports come from Thailand and other sources are Vietnam and Indonesia. According to the Chinese Academy of Agricultural Sciences experts consulted by the reporter, cassava is the most economic raw material for producing ethanol.
Grain-based ethanol projects came in for criticism in recent years as grain prices increased. In an interview last year Cheng Guoqiang, a policy advisor from the State Council's Development Research Center, argued that "cars eating grain" is not in accord with China's national conditions.
Ethanol production requires large subsidies. In the 2010 interview, Cheng said the subsidy was 1375 yuan per ton of ethanol and a total of 1.35 billion yuan in subsidies are paid to four ethanol producers. Ethanol producers are also exempt from taxes.
Another article from 2010 reported that the subsidy was originally set at 1880 yuan/mt in 2004. The Anhui plant's subsidy had been cut 20% from 2055 yuan/mt in 2009 to 1659 yuan/mt last year and was expected to be cut again this year. This article estimated that the corn used to produce one ton of ethanol cost 6275 yuan and the total cost of production was 8000-9000 yuan. The writer pointed out that this amount of money could buy two tons of oil. He estimated that the Anhui plant received 163 million yuan in subsidies to produce 410,000 mt of ethanol.
The article noted that the State Council had announced in 2007 that no more grain-based ethanol project would be approved. However, many are eager to build such projects given the high subsidies available.
Chinese corn prices have risen about 20% since last year, so the cost has continued to escalate, making grain-based ethanol even less cost-efficient. This may explain the urgency attached to non-grain ethanol.
Thursday, November 10, 2011
Hog Prices Declining: Why?
Chinese pork prices have been at record-high levels this year, but now they've started to fall. The Ministry of Commerce price-monitoring system reported that retail pork prices fell seven weeks in a row beginning in mid-September. By the first week of November, the average pork price had fallen 5.4%.
A reporter for Southern Rural News investigated the reasons for falling pork prices by interviewing farmers, feed producers and others in the hog industry. There is no clear reason for the decline, and, as usual, it's a complicated story.
The reporter said there is lots of talk of disease problems, but he found that mortality rates are not higher than normal and disease outbreaks are too limited to cause a national decline in prices. At best, he says, disease is the catalyst setting off price declines, not the fundamental cause.
The supply of piglets was exceedingly tight earlier in the year. The main reason was an outbreak of diarrhea that affected piglets. It began last December and continued through March, spreading from north China to the south. The barns on some farms had nearly 100% mortality, with new-born piglets affected the most. Many sows aborted or had stillborn piglets.
According to the reporter's assessment, once the diarrhea threat was over, pork prices were exceedingly high and farmers were eager to expand production. Large number of sows farrowed at the same time. Then, last summer disease problems were unusually rare and survival of the big crop of pigs born in the spring was unusually high. Consequently, large numbers of pigs came on the market in September. This large supply drove prices down.
However, the reporter said people in the feed industry disagreed with his assessment. The feed people said their sales of hog feed had been slow in recent months, contradicting the theory of swelling hog inventories.
The reporter then warns that a "panic selling" explanation cannot be discounted. As hog producers see prices start to fall, they sell hogs as fast as possible to avoid getting caught by further decreases in prices in future weeks and months.
The Ministry of Commerce data shows that most food prices have stopped rising and some others are falling. Vegetable prices fell 11.3% over four weeks. Eggs, fish, flour, and soy oil are down, while rice and peanut oil and rapeseed oil prices are steady.
Whatever the cause, the reporter observes that risk for hog producers has increased.
A reporter for Southern Rural News investigated the reasons for falling pork prices by interviewing farmers, feed producers and others in the hog industry. There is no clear reason for the decline, and, as usual, it's a complicated story.
The reporter said there is lots of talk of disease problems, but he found that mortality rates are not higher than normal and disease outbreaks are too limited to cause a national decline in prices. At best, he says, disease is the catalyst setting off price declines, not the fundamental cause.
The supply of piglets was exceedingly tight earlier in the year. The main reason was an outbreak of diarrhea that affected piglets. It began last December and continued through March, spreading from north China to the south. The barns on some farms had nearly 100% mortality, with new-born piglets affected the most. Many sows aborted or had stillborn piglets.
According to the reporter's assessment, once the diarrhea threat was over, pork prices were exceedingly high and farmers were eager to expand production. Large number of sows farrowed at the same time. Then, last summer disease problems were unusually rare and survival of the big crop of pigs born in the spring was unusually high. Consequently, large numbers of pigs came on the market in September. This large supply drove prices down.
However, the reporter said people in the feed industry disagreed with his assessment. The feed people said their sales of hog feed had been slow in recent months, contradicting the theory of swelling hog inventories.
The reporter then warns that a "panic selling" explanation cannot be discounted. As hog producers see prices start to fall, they sell hogs as fast as possible to avoid getting caught by further decreases in prices in future weeks and months.
The Ministry of Commerce data shows that most food prices have stopped rising and some others are falling. Vegetable prices fell 11.3% over four weeks. Eggs, fish, flour, and soy oil are down, while rice and peanut oil and rapeseed oil prices are steady.
Whatever the cause, the reporter observes that risk for hog producers has increased.
Sunday, November 6, 2011
China as Pork Importer: The New Normal?
China's imports of pork have surged during the last few months, prompted by high domestic prices. China’s imports of pork and related products during January-September reached 870,000 mt, an increase of 44.6% from last year. Is China at a tipping point where it becomes a permanent pork importer?
An article last week in the Southern Daily reported the views of some industry analysts who are grappling with fundamental changes in China's pork industry. Some say imports of "foreign pork" could be a normal occurrence in coming years.
The consensus among analysts is that high prices reflect a shortage of pork in China, and "that shortage is very big," according to one prominent pork analyst, Feng Yuhui.
Analysts have observed that China's pork imports tend to surge during periods of high domestic prices. Imports spiked during 2008, the last time prices were at record-high levels, and fell off during 2010 when Chinese prices were low.
Analysts say this cycle may be different from the last one. This time, large numbers of small-scale "backyard" farmers have chosen to quit the industry in large numbers. There are multiple reasons cited. Although pork prices are high, feed costs are escalating, cutting into profits. Farmers are scared off by the risk posed by disease outbreaks. Moreover, the analysts cite the large number of other opportunities--farmers can find other jobs or business opportunities, so they are quitting hog production.
Meanwhile, large-scale hog production is increasing, but not fast enough to offset the loss of "backyard" producers. This time around Chinese hog producers are "more rational" and are not expanding as vigorously as they did in 2008. Feng Yuhui--the analyst--says that the still-short supply of sows is reflected in very high prices of young feeder pigs.
Wang reports that world pork trade now totals about 6 mmt. However, it would not be hard, he says, to expand trade to 8 mmt since farms in the U.S. and other countries have capacity to expand output.
Feng observes that U.S. hog producers have a cost advantage because the Chinese farms have to import expensive corn and soybeans. He estimates the U.S. cost advantage to be 1.5 yuan per jin (about 21 U.S. cents/lb).
China's pork imports come predominantly from the United States, but the article reports that a parade of merchants are coming to China looking for pork business. A Southern Rural News article reports that a Mexican delegation recently came to Beijing to meet with government groups on pork trade cooperation and China recently approved Mexican pork for import. Another delegation from Finland recently signed a protocol on pork quarantine and veterinary health.
Another analyst, Wang Xiaoyue, notes that large companies like COFCO and New Hope Group are entering the hog-production sector in a big way, but it will take some time for their new capacity to come on-line. In the meantime, he thinks China will have a pork supply deficit of 1-to-2 million metric tons annually until 2015 and imports of "foreign pork" to fill the deficit will be normal. However, these imports are not that big in the context of China's 50-million-metric-tons of annual pork consumption.
And he implies that after 2015 expansion by big Chinese companies will return the market to self-sufficiency.
An Academy of Social Sciences researcher, Li Guoyang, quoted in the Southern Rural News article notes the interchangeability of feed and meat imports. He thinks pork production could push China to import 10-to-20 mmt of corn, an eventuality that would threaten China's "grain security." Why not instead import that grain in the form of pork? He observes that importing pork would be less "sensitive" than importing large amounts of grain. With peoples' incomes and living standards rising, elasticity of demand decreasing, and pressure from rising costs and disease, he suggests that importing pork is important.
An article last week in the Southern Daily reported the views of some industry analysts who are grappling with fundamental changes in China's pork industry. Some say imports of "foreign pork" could be a normal occurrence in coming years.
The consensus among analysts is that high prices reflect a shortage of pork in China, and "that shortage is very big," according to one prominent pork analyst, Feng Yuhui.
Analysts have observed that China's pork imports tend to surge during periods of high domestic prices. Imports spiked during 2008, the last time prices were at record-high levels, and fell off during 2010 when Chinese prices were low.
Analysts say this cycle may be different from the last one. This time, large numbers of small-scale "backyard" farmers have chosen to quit the industry in large numbers. There are multiple reasons cited. Although pork prices are high, feed costs are escalating, cutting into profits. Farmers are scared off by the risk posed by disease outbreaks. Moreover, the analysts cite the large number of other opportunities--farmers can find other jobs or business opportunities, so they are quitting hog production.
Meanwhile, large-scale hog production is increasing, but not fast enough to offset the loss of "backyard" producers. This time around Chinese hog producers are "more rational" and are not expanding as vigorously as they did in 2008. Feng Yuhui--the analyst--says that the still-short supply of sows is reflected in very high prices of young feeder pigs.
Wang reports that world pork trade now totals about 6 mmt. However, it would not be hard, he says, to expand trade to 8 mmt since farms in the U.S. and other countries have capacity to expand output.
Feng observes that U.S. hog producers have a cost advantage because the Chinese farms have to import expensive corn and soybeans. He estimates the U.S. cost advantage to be 1.5 yuan per jin (about 21 U.S. cents/lb).
China's pork imports come predominantly from the United States, but the article reports that a parade of merchants are coming to China looking for pork business. A Southern Rural News article reports that a Mexican delegation recently came to Beijing to meet with government groups on pork trade cooperation and China recently approved Mexican pork for import. Another delegation from Finland recently signed a protocol on pork quarantine and veterinary health.
Another analyst, Wang Xiaoyue, notes that large companies like COFCO and New Hope Group are entering the hog-production sector in a big way, but it will take some time for their new capacity to come on-line. In the meantime, he thinks China will have a pork supply deficit of 1-to-2 million metric tons annually until 2015 and imports of "foreign pork" to fill the deficit will be normal. However, these imports are not that big in the context of China's 50-million-metric-tons of annual pork consumption.
And he implies that after 2015 expansion by big Chinese companies will return the market to self-sufficiency.
An Academy of Social Sciences researcher, Li Guoyang, quoted in the Southern Rural News article notes the interchangeability of feed and meat imports. He thinks pork production could push China to import 10-to-20 mmt of corn, an eventuality that would threaten China's "grain security." Why not instead import that grain in the form of pork? He observes that importing pork would be less "sensitive" than importing large amounts of grain. With peoples' incomes and living standards rising, elasticity of demand decreasing, and pressure from rising costs and disease, he suggests that importing pork is important.
Friday, November 4, 2011
Officials Infected with Brucellosis
According to the China Youth Daily, as many as 100 animal quarantine personnel in a county of Inner Mongolia were infected with brucellosis, a serious disease that can be transmitted from animals to humans.
The incident occurred about six months ago during a campaign to test sheep for the disease. Animal quarantine personnel were drawing blood from hundreds of sheep all day long, using only rudimentary tools and no protective clothing. The workers said they were issued one pair of gloves and mask per day and they had to keep using the same ones if the gloves broke while drawing blood.
In April, quite a few of the personnel began experiencing pain in their backs and legs and joint discomfort, dizziness and other symptoms. The county animal husbandry bureau confirmed through testing that several persons were infected with brucellosis.
The China Youth Daily asked the head of the local animal husbandry bureau whether the multiple cases of brucellosis among workers were related to the testing work carried out in the spring.
The director replied, "I don't know and I don't know whether any other people know."
The reporter pressed on, "Is there any other spokesman on the disease prevention activities?"
The director, "Well, there's only me and I can't talk to you about it. This is confidential (机密)."
The reporter: "So did blood testing on sheep take place this spring?"
The director: "Whether it did not not doesn't matter. The point is it's confidential."
The reporter then went to the county center for disease control and asked, "In April and May were there a number of people infected with brucellosis? Were they animal quarantine workers?"
The disease control worker replied without reservation, "Ai-ya! Quite a few, a hundred in all."
The brucellosis-testing campaign is in response to a spike in cases of the disease centered in Inner Mongolia. According to the Minister of Health, Inner Mongolia reported 16,551 cases of brucellosis in 2009, 46% of all cases nationwide.
According to a center for disease control expert, "During the 1950s and '60s, there were serious outbreaks of human infections with brucellosis, but it was mostly wiped out in the 1980s and 90s. However, since the 1990s it has returned and is now one of the fastest-growing reported infectious diseases among humans."
In 2006, an investigation by the Ministries of Health and Agriculture carried out in parts of Liaoning, Jilin, Heilongjiang, and Inner Mongolia found that the disease is found in a widening area that covers northeastern, northwestern, and north China, with the number of infections increasing.
One of the workers involved in the sheep testing said brucellosis is a new concern in the last couple of years. He said, "In the past we just watched for foot and mouth disease. Just in the past few years we started giving injections to sheep and this year is the first time we've drawn blood to test for brucellosis. This time disease prevention work has become a lot more risky."
There were 219 reported cases of brucellosis in 1992 and the reporter found 33,772 were reported in 2010. During June, two workers testing animals in a slaughterhouse in Ningbo, Zhejiang Province--far from Inner Mongolia--were also infected with brucellosis. The Beijing Youth Daily reported in September that students and faculty at Northeastern Agricultural University were infected with brucellosis.
In April 2009, the disease control center in Shijiazhuang City warned people that they should avoid eating roast mutton at small street stalls during the summer months due to the risk of brucellosis or other infections.
A professor Wu at China Agriculture University describes the brucellosis situation as "serious." In some cases it has been caught by drinking unboiled water, pasteurized milk, and sheep meat.
The incident occurred about six months ago during a campaign to test sheep for the disease. Animal quarantine personnel were drawing blood from hundreds of sheep all day long, using only rudimentary tools and no protective clothing. The workers said they were issued one pair of gloves and mask per day and they had to keep using the same ones if the gloves broke while drawing blood.
In April, quite a few of the personnel began experiencing pain in their backs and legs and joint discomfort, dizziness and other symptoms. The county animal husbandry bureau confirmed through testing that several persons were infected with brucellosis.
The China Youth Daily asked the head of the local animal husbandry bureau whether the multiple cases of brucellosis among workers were related to the testing work carried out in the spring.
The director replied, "I don't know and I don't know whether any other people know."
The reporter pressed on, "Is there any other spokesman on the disease prevention activities?"
The director, "Well, there's only me and I can't talk to you about it. This is confidential (机密)."
The reporter: "So did blood testing on sheep take place this spring?"
The director: "Whether it did not not doesn't matter. The point is it's confidential."
The reporter then went to the county center for disease control and asked, "In April and May were there a number of people infected with brucellosis? Were they animal quarantine workers?"
The disease control worker replied without reservation, "Ai-ya! Quite a few, a hundred in all."
The brucellosis-testing campaign is in response to a spike in cases of the disease centered in Inner Mongolia. According to the Minister of Health, Inner Mongolia reported 16,551 cases of brucellosis in 2009, 46% of all cases nationwide.
According to a center for disease control expert, "During the 1950s and '60s, there were serious outbreaks of human infections with brucellosis, but it was mostly wiped out in the 1980s and 90s. However, since the 1990s it has returned and is now one of the fastest-growing reported infectious diseases among humans."
In 2006, an investigation by the Ministries of Health and Agriculture carried out in parts of Liaoning, Jilin, Heilongjiang, and Inner Mongolia found that the disease is found in a widening area that covers northeastern, northwestern, and north China, with the number of infections increasing.
One of the workers involved in the sheep testing said brucellosis is a new concern in the last couple of years. He said, "In the past we just watched for foot and mouth disease. Just in the past few years we started giving injections to sheep and this year is the first time we've drawn blood to test for brucellosis. This time disease prevention work has become a lot more risky."
There were 219 reported cases of brucellosis in 1992 and the reporter found 33,772 were reported in 2010. During June, two workers testing animals in a slaughterhouse in Ningbo, Zhejiang Province--far from Inner Mongolia--were also infected with brucellosis. The Beijing Youth Daily reported in September that students and faculty at Northeastern Agricultural University were infected with brucellosis.
In April 2009, the disease control center in Shijiazhuang City warned people that they should avoid eating roast mutton at small street stalls during the summer months due to the risk of brucellosis or other infections.
A professor Wu at China Agriculture University describes the brucellosis situation as "serious." In some cases it has been caught by drinking unboiled water, pasteurized milk, and sheep meat.
Low Sow Productivity: Don't Skimp on Vaccines
A speech given at a veterinary conference in August zeroes in on a key constraint to productivity in China's hog industry: Chinese sows don't produce enough piglets.
According to the speaker U.S. sows produce an average of 24.35 pigs per year, far higher than the average of about 15 for Chinese sows. In Denmark the average is over 27. The key to improving productivity and reducing costs is to increase the number of pigs per sow.
The speaker observes that U.S. farms have high costs of facilities and labor that they have to spread over larger numbers of pigs to bring down unit costs. The breakeven number of pigs per sow for U.S. farms, he says, is 19. He reports that two big American companies increased the number of finished hogs produced while cutting back on the number of sows.
According to the speaker, the breeds and feeds (corn-soy meal) are similar in the U.S. and China, so why should Chinese sows be less productive? He says the big problem is weaker disease control and prevention in China. Diseases have the most effect on sows and young pigs. He says most Chinese sows produce no more than 15 pigs a year since their reproduction is affected by blue ear disease, circovirus, pseudorabies, classical swine fever, sow’s reproduction. Sows can be in production less than 4 years, and culling rates are relatively high, raising the cost of producing meat animals. Loss of gilts makes it hard to re-stock sow inventories.
He says that most U.S. farms reduced their mortality rates by 40% or more by using a new circovirus vaccine. However, he says few Chinese farmers vaccinate against circovirus because they don't want to pay for the vaccine. He points out that the vaccine is cost-effective: the extra income from reducing mortality by 3 pigs per litter would more than offset the expense of vaccine and the extra income would be substantial spread over a 1000-sow operation, each producing 2 litters per year.
According to the speaker U.S. sows produce an average of 24.35 pigs per year, far higher than the average of about 15 for Chinese sows. In Denmark the average is over 27. The key to improving productivity and reducing costs is to increase the number of pigs per sow.
The speaker observes that U.S. farms have high costs of facilities and labor that they have to spread over larger numbers of pigs to bring down unit costs. The breakeven number of pigs per sow for U.S. farms, he says, is 19. He reports that two big American companies increased the number of finished hogs produced while cutting back on the number of sows.
According to the speaker, the breeds and feeds (corn-soy meal) are similar in the U.S. and China, so why should Chinese sows be less productive? He says the big problem is weaker disease control and prevention in China. Diseases have the most effect on sows and young pigs. He says most Chinese sows produce no more than 15 pigs a year since their reproduction is affected by blue ear disease, circovirus, pseudorabies, classical swine fever, sow’s reproduction. Sows can be in production less than 4 years, and culling rates are relatively high, raising the cost of producing meat animals. Loss of gilts makes it hard to re-stock sow inventories.
He says that most U.S. farms reduced their mortality rates by 40% or more by using a new circovirus vaccine. However, he says few Chinese farmers vaccinate against circovirus because they don't want to pay for the vaccine. He points out that the vaccine is cost-effective: the extra income from reducing mortality by 3 pigs per litter would more than offset the expense of vaccine and the extra income would be substantial spread over a 1000-sow operation, each producing 2 litters per year.