According to Futures Daily, industry rumors say that Chinese authorities may terminate their soybean price support by the end of 2013. The soybean price support, called a "temporary reserve", was first introduced in 2008 with a floor price of 1.85 yuan/500g and was raised each year to reach 2.3 yuan/500g for the 2012/13 market year. The program only operates in China's northeastern provinces.
The policy is intended to increase returns to producers and encourage them to grow soybeans. However, it also makes domestic soybeans more expensive than imported soybeans. According to a soybean trader quoted in the Futures Daily article, the cost of domestic soybeans has been about 4200 yuan per metric ton, but processors using beans they have imported have a cost of less than 4000 yuan. He says soymeal and oil from coastal processors using imported soybeans is now being sold in domestic soybean-producing areas like Heilongjiang Province. Consequently, he says domestic soybean processors have been mostly idle.
Despite the policy's intent to encourage farmers to grown soybeans, production has been falling. The China National Grain and Oils Information Center estimates that Chinese soybean area declined 14 percent in 2012. CNGOIC estimates that 2012 soybean output was 12.8 million metric tons, its lowest level since 1991.
The article speculates that a "target price" subsidy will replace the "temporary reserve" program. Strategic plans for long-term food security and grain production formulated in 2008 and 2009 called for exploring a target price program. This has been rumored since last year and there were reports that a trial program would begin for soybeans this year.
Tuesday, July 30, 2013
Sunday, July 28, 2013
China's Soil Survey Boondoggle
Yesterday, The Wall Street Journal reported on China's serious soil pollution problems and the government's refusal to release the results of a national soil survey six years after it was begun and two years after it was completed.
In December 2012, Southern Weekend published a report of its extensive investigation of the soil survey. The details of the soil survey reveal that Chinese officialdom, for all its talk about a "scientific outlook on development," clings to Chinese government tradition of reporting only statistics that show its policies in a good light and hiding any results that are embarrassing. Furthermore, the slapdash approach to implementing gigantic programs, infighting and chaotic organization make it virtually impossible to produce reliable statistics in China.
For decades, officials have been cognizant of problems with soil contamination and potential for vegetables and rice to absorb the pollutants. The 2006 official Chinese government announcement of the soil survey said China faced "serious" soil pollution problems that affected 150 million mu of land (about 8 percent of the total) and 12 million metric tons of grain annually. The survey was intended to make a nationwide map showing areas contaminated with heavy metals, pesticide residue, and organic pollutants and use the results to guide remediation efforts.
However, the Chinese government is not really interested in objective science. Results of the survey--completed in 2010--were never announced. A Chinese citizen's information requests filed with the Ministry of Environmental Protection were denied for reasons of "stability" and "international image." The results were potentially embarrassing and were thought to potentially harm the reputation of Chinese agricultural exports. A Southern Weekend reporter attended a meeting in 2012 where results of the survey were discussed, but he said the meeting was hastily concluded when it was learned that a journalist was present.
Southern Weekend reporters interviewed numerous scholars and environmental protection officials who participated in the survey. Participants could not discuss the survey results since they had signed a confidentiality agreement. One scholar couldn't fathom why the results weren't revealed since he thought the extent of pollution it showed was not that alarming. Another participant speculated that the government couldn't release the results without having a plan in place to deal with the problem.
Another purported reason for withholding the survey results was the unreliability of the data due to numerous problems in carrying out the survey. The Environment and Land Ministries were to contribute 500 million yuan each to fund it, but the Ministry of Land Resources only came up with half of its share. The survey was delayed as organizers waited for funding to come in. Guangdong Province conducted its survey with only half of the funds planned and reduced the number of sampled sites from the planned number of 4800 to 3000.
The survey divided the entire country's land area into grids and chose samples. However, the grids were larger than planned, partly due to short budgets. For cropland, the grids were supposed to be 8 square km in most regions and 4 square km in coastal regions. However, 16-square-km grids were used, so large that they would not yield meaningful information.
According to Southern Weekend, the survey was conducted by local environmental monitoring stations. The personnel were not scientists and may have altered methods for convenience, cost, or perhaps pressure from local officials or industry. In remote areas with complex geography the local officials substituted their own sample sites or, in some cases, reported data from old surveys carried out in previous decades. An official from Sichuan Province's environmental protection bureau told the Southern Weekend reporter that the survey doesn't reflect the actual situation.
Statistical data are useless if they can't be interpreted. A Chinese Academy of Agricultural Sciences (CAAS) researcher points out that there are multiple potential pollutants in the soil, they are absorbed by different crops to varying degrees, and pollution can't be measured with a single indicator. Without a standard for contamination, it's impossible to judge which sites are polluted. "Without criteria for interpreting the data, what do the numbers really tell us?" asked the CAAS researcher.
Although they declined to release statistics, the state council made a statement in October 2012 calling attention to the contamination of soil by industry, mining, agriculture and household waste. Experts have stitched together fragmentary information to characterize the situation. Heavy metal contamination is the number one killer of soil and is more serious in regions south of the Yangtze River. The most concentrated pollution is in the Chengdu plain, and the Yangtze and Pearl River deltas. Parts of Yunnan, Guizhou, and Guangxi Provinces are heavily contaminated, especially around chemical, electroplating and pesticide factories. Heavy metal pollution is gradually strengthening, covering a widening area, and includes an increasing range of elements. Cadmium, mercury and lead are the most common pollutants. One Chinese expert who has been doing soil testing since the 1980s remarked that problems are getting worse and pollutants include organic pollutants, pesticides, plasticizers, as well as heavy metals.
A study in the Journal of Immigrant and Refugee Studies found elevated levels of lead, cadmium, and mercury in the blood of mainland Chinese immigrants to New York. The study also found the Chinese immigrants were less fat and had good HDLs, which the study speculated could be due to their consumption of vegetables and seafood. The study noted that cadmium and lead persist in the body for decades and could have come from exposure when they were in China. The study caused an uproar in China, and a dark joke circulating in online forums said that Chinese people could set off airport metal detectors even when unclothed due to the high levels of heavy metals in their bodies.
Again demonstrating its practice of reacting to problems rather than solving them, the government announced a new soil survey in June following the negative publicity about cadmium contamination of rice in May. This survey is reportedly using a more dense sampling scheme, but there has been no commitment to publicize the results. The South China Morning Post reported that some Chinese scientists were skeptical about the vague details given about the study's design. One researcher asked why there wasn't a follow-up to the "secret" survey instead of starting over with a new one.
In December 2012, Southern Weekend published a report of its extensive investigation of the soil survey. The details of the soil survey reveal that Chinese officialdom, for all its talk about a "scientific outlook on development," clings to Chinese government tradition of reporting only statistics that show its policies in a good light and hiding any results that are embarrassing. Furthermore, the slapdash approach to implementing gigantic programs, infighting and chaotic organization make it virtually impossible to produce reliable statistics in China.
For decades, officials have been cognizant of problems with soil contamination and potential for vegetables and rice to absorb the pollutants. The 2006 official Chinese government announcement of the soil survey said China faced "serious" soil pollution problems that affected 150 million mu of land (about 8 percent of the total) and 12 million metric tons of grain annually. The survey was intended to make a nationwide map showing areas contaminated with heavy metals, pesticide residue, and organic pollutants and use the results to guide remediation efforts.
However, the Chinese government is not really interested in objective science. Results of the survey--completed in 2010--were never announced. A Chinese citizen's information requests filed with the Ministry of Environmental Protection were denied for reasons of "stability" and "international image." The results were potentially embarrassing and were thought to potentially harm the reputation of Chinese agricultural exports. A Southern Weekend reporter attended a meeting in 2012 where results of the survey were discussed, but he said the meeting was hastily concluded when it was learned that a journalist was present.
Cartoon from Southern Weekend: observers wonder why soil pollution survey results
remain locked in a vault--because they are "not scientific" or "not public"?
Southern Weekend reporters interviewed numerous scholars and environmental protection officials who participated in the survey. Participants could not discuss the survey results since they had signed a confidentiality agreement. One scholar couldn't fathom why the results weren't revealed since he thought the extent of pollution it showed was not that alarming. Another participant speculated that the government couldn't release the results without having a plan in place to deal with the problem.
Another purported reason for withholding the survey results was the unreliability of the data due to numerous problems in carrying out the survey. The Environment and Land Ministries were to contribute 500 million yuan each to fund it, but the Ministry of Land Resources only came up with half of its share. The survey was delayed as organizers waited for funding to come in. Guangdong Province conducted its survey with only half of the funds planned and reduced the number of sampled sites from the planned number of 4800 to 3000.
The survey divided the entire country's land area into grids and chose samples. However, the grids were larger than planned, partly due to short budgets. For cropland, the grids were supposed to be 8 square km in most regions and 4 square km in coastal regions. However, 16-square-km grids were used, so large that they would not yield meaningful information.
According to Southern Weekend, the survey was conducted by local environmental monitoring stations. The personnel were not scientists and may have altered methods for convenience, cost, or perhaps pressure from local officials or industry. In remote areas with complex geography the local officials substituted their own sample sites or, in some cases, reported data from old surveys carried out in previous decades. An official from Sichuan Province's environmental protection bureau told the Southern Weekend reporter that the survey doesn't reflect the actual situation.
Statistical data are useless if they can't be interpreted. A Chinese Academy of Agricultural Sciences (CAAS) researcher points out that there are multiple potential pollutants in the soil, they are absorbed by different crops to varying degrees, and pollution can't be measured with a single indicator. Without a standard for contamination, it's impossible to judge which sites are polluted. "Without criteria for interpreting the data, what do the numbers really tell us?" asked the CAAS researcher.
Although they declined to release statistics, the state council made a statement in October 2012 calling attention to the contamination of soil by industry, mining, agriculture and household waste. Experts have stitched together fragmentary information to characterize the situation. Heavy metal contamination is the number one killer of soil and is more serious in regions south of the Yangtze River. The most concentrated pollution is in the Chengdu plain, and the Yangtze and Pearl River deltas. Parts of Yunnan, Guizhou, and Guangxi Provinces are heavily contaminated, especially around chemical, electroplating and pesticide factories. Heavy metal pollution is gradually strengthening, covering a widening area, and includes an increasing range of elements. Cadmium, mercury and lead are the most common pollutants. One Chinese expert who has been doing soil testing since the 1980s remarked that problems are getting worse and pollutants include organic pollutants, pesticides, plasticizers, as well as heavy metals.
A study in the Journal of Immigrant and Refugee Studies found elevated levels of lead, cadmium, and mercury in the blood of mainland Chinese immigrants to New York. The study also found the Chinese immigrants were less fat and had good HDLs, which the study speculated could be due to their consumption of vegetables and seafood. The study noted that cadmium and lead persist in the body for decades and could have come from exposure when they were in China. The study caused an uproar in China, and a dark joke circulating in online forums said that Chinese people could set off airport metal detectors even when unclothed due to the high levels of heavy metals in their bodies.
Again demonstrating its practice of reacting to problems rather than solving them, the government announced a new soil survey in June following the negative publicity about cadmium contamination of rice in May. This survey is reportedly using a more dense sampling scheme, but there has been no commitment to publicize the results. The South China Morning Post reported that some Chinese scientists were skeptical about the vague details given about the study's design. One researcher asked why there wasn't a follow-up to the "secret" survey instead of starting over with a new one.
Tuesday, July 23, 2013
China's livestock support policies 2013
China's support for its livestock industry is ambitious and nuanced. The government's 2013 guidance for livestock work included an exhausting list of objectives:
A March 2013 Farmers Daily article summarized the different policy support measures available to livestock farms. China has quite a few programs to support the livestock industry, but subsidies are relatively small--especially in comparison with grain subsidies--and most are designed to transform livestock production from a backyard extensive activity to an intensive industrialized mode of farming.
1. Subsidies for improved breeding stock (1.2 billion yuan, or $194 million) which covers swine, dairy and beef cattle, sheep, and yaks. This subsidy was introduced in 2005, but authorities had been importing and propagating breeding animals by different means since the 1970s. Owners of sows can get a subsidy of 10 yuan for each artificial insemination attempt using semen from improved breeds of boars (2 attempts for 2 breedings per year). Dairy cattle AI subsidies are 30 yuan for holsteins and jerseys and 20 yuan for other breeds, and 10 yuan for beef cattle. Subsidies for buying male breeding stock are 800 yuan for sheep and 2000 yuan for yaks.
The livestock work guidance also reflects discomfort with the vast import of animal genetics that has been accelerated by the improved breed subsidy. The guidance emphasizes work on the genetic improvement plan which focuses on protecting native species of livestock and poultry (many in are in danger of extinction) and ensuring the quality and pedigree of breeding animals.
2. "Award" payments for major hog-producing counties (3.5 billion yuan, or $564 million). This is a sort of block grant given to about 400 counties to improve their hog industry. The funds can be used for subsidies to build new commercial-scale hog farms, buy breeding stock, or to subsidize loans for feed or purchase of animals, loans for processors or marketing, or to subsidize insurance for pigs. The counties are chosen by a competitive process using a weighted score based on hog production, inventories, and sales outside the county.
3. Support for "scale" livestock and poultry farms. Begun in 2007 to "transform" the industry, this program gives cash grants to build farms of certain sizes. Funds can be used for water, electricity, road improvement, manure management, disease prevention, milking facilities, quality testing and other related infrastructure. In 2007, it began with an annual allocation of 2.5 billion yuan ($400 million) for hog farms. In 2008, 200 million yuan ($32 million) was added for dairy farms and that was increased to 500 million yuan in 2009 ($80 million). In 2012, another 100 million yuan was added for beef cattle and sheep farms in eight western provinces. That seems to make a total of 2.5 billion + 500 million + 100 million = 3.1 billion yuan ($500 million).
4. Aid for animal disease prevention (780 million yuan, or $125 million). The government gives free vaccines for highly pathogenic avian influenza (poultry); foot and mouth disease, highly pathogenic blue ear disease, classical swine fever (pigs); and ovine rinderpest (goat plague, in Xinjiang). Funds are used to procure vaccines from manufacturers at the provincial level and distribute vaccines to farms through the government's veterinary system. Costs of vaccines are shared by central and local authorities without compulsory fees for farmers. Funds support personnel costs for village veterinary stations. They support aid for culling diseased animals from HPAI, FMD, HP blue ear disease, and ovine rinderpest. Farms raising 50 or more pigs can get an 80-yuan subsidy to dispose of diseased animal carcasses.
5. Grassland ecological protection aid (15 billion yuan, or $2.4 billion). This program began in eight western provinces in 2011 with dual objectives of reducing stocking density on over-grazed land and pushing a transition from nomadic herding to intensive production of sheep and cattle. On severely degraded grasslands, herders are prohibited from grazing animals for five years--they get a 6-yuan-per-mu (about $6 per acre) subsidy as compensation. On grazing land where herders maintain a "reasonable" stocking density of animals, they get a subsidy of 1.6 yuan per mu. Herders can also get an improved breed subsidy (see no. 1 above), a 10-yuan-per-mu subsidy for planting improved varieties of forage on grassland, and a 500-yuan-per-family subsidy for input costs. In 2012, the program was expanded to include pastoral areas in five additional provinces (Shanxi, Hebei, Jilin, Liaoning, and Heilongjiang) and funding was increased from 13.6 billion yuan to the current 15 billion yuan.
6. Rural biogas construction. China has for many years been subsidizing village-level facilities to generate biogas from animal manure and other wastes. In 2013, "respecting the wishes and needs of farmers" the program will concentrate on poor areas in hilly and mountainous regions that lack gas supply. It promises to improve the service network.
7. "Green channel" marketing. Trucks carrying livestock products to markets are included in the "green channel" program which waives tolls on roads, bridges, and tunnels for vehicles transporting fresh and live farm products. Toll booths have to have a special booth to expedite their passage.
8. "Vegetable basket" product support policy (1 billion yuan, or $161 million). The vegetable basket system was set up in 1989 to guarantee supplies of meats, milk, vegetables and fish to cities. It entails building networks of farms, agribusiness companies, market facilities and testing labs. In 2012, the central government will allocate 800 million yuan in aid to support upgrades of 2,067 standardized livestock and poultry farms upgrades (576 hog farms, 477 egg farms, 227 meat poultry farms, 347 beef farms, 440 sheep farms). It will spend 200 million yuan on aquaculture operations.
9. Subsidized agricultural insurance. National agricultural insurance began as a pilot program in 2007. Among the livestock included are breedable sows, dairy cattle, finishing hogs, Tibetan sheep, and yaks. In 2013 the scope will be expanded to aquaculture.
10. The article doesn't mention this, but there has been a hog price stabilization program since 2009. Basically, this program entails government purchases and storage of frozen pork to support the price when the ratio of hog and corn prices falls below 5.5:1 for several weeks. Strict implementation of this program was one of the first points in the 2013 livestock work guidance document.
- Ensure an adequate supply of livestock products
- Strictly monitor product safety
- Protect the environment using comprehensive measures
- Focus on pushing the industry's scale, standards, industrialization and information dissemination
- Strengthen dairy and feed quality and safety oversight
- Make a big push to protect the ecology of grasslands
A March 2013 Farmers Daily article summarized the different policy support measures available to livestock farms. China has quite a few programs to support the livestock industry, but subsidies are relatively small--especially in comparison with grain subsidies--and most are designed to transform livestock production from a backyard extensive activity to an intensive industrialized mode of farming.
1. Subsidies for improved breeding stock (1.2 billion yuan, or $194 million) which covers swine, dairy and beef cattle, sheep, and yaks. This subsidy was introduced in 2005, but authorities had been importing and propagating breeding animals by different means since the 1970s. Owners of sows can get a subsidy of 10 yuan for each artificial insemination attempt using semen from improved breeds of boars (2 attempts for 2 breedings per year). Dairy cattle AI subsidies are 30 yuan for holsteins and jerseys and 20 yuan for other breeds, and 10 yuan for beef cattle. Subsidies for buying male breeding stock are 800 yuan for sheep and 2000 yuan for yaks.
The livestock work guidance also reflects discomfort with the vast import of animal genetics that has been accelerated by the improved breed subsidy. The guidance emphasizes work on the genetic improvement plan which focuses on protecting native species of livestock and poultry (many in are in danger of extinction) and ensuring the quality and pedigree of breeding animals.
2. "Award" payments for major hog-producing counties (3.5 billion yuan, or $564 million). This is a sort of block grant given to about 400 counties to improve their hog industry. The funds can be used for subsidies to build new commercial-scale hog farms, buy breeding stock, or to subsidize loans for feed or purchase of animals, loans for processors or marketing, or to subsidize insurance for pigs. The counties are chosen by a competitive process using a weighted score based on hog production, inventories, and sales outside the county.
3. Support for "scale" livestock and poultry farms. Begun in 2007 to "transform" the industry, this program gives cash grants to build farms of certain sizes. Funds can be used for water, electricity, road improvement, manure management, disease prevention, milking facilities, quality testing and other related infrastructure. In 2007, it began with an annual allocation of 2.5 billion yuan ($400 million) for hog farms. In 2008, 200 million yuan ($32 million) was added for dairy farms and that was increased to 500 million yuan in 2009 ($80 million). In 2012, another 100 million yuan was added for beef cattle and sheep farms in eight western provinces. That seems to make a total of 2.5 billion + 500 million + 100 million = 3.1 billion yuan ($500 million).
4. Aid for animal disease prevention (780 million yuan, or $125 million). The government gives free vaccines for highly pathogenic avian influenza (poultry); foot and mouth disease, highly pathogenic blue ear disease, classical swine fever (pigs); and ovine rinderpest (goat plague, in Xinjiang). Funds are used to procure vaccines from manufacturers at the provincial level and distribute vaccines to farms through the government's veterinary system. Costs of vaccines are shared by central and local authorities without compulsory fees for farmers. Funds support personnel costs for village veterinary stations. They support aid for culling diseased animals from HPAI, FMD, HP blue ear disease, and ovine rinderpest. Farms raising 50 or more pigs can get an 80-yuan subsidy to dispose of diseased animal carcasses.
5. Grassland ecological protection aid (15 billion yuan, or $2.4 billion). This program began in eight western provinces in 2011 with dual objectives of reducing stocking density on over-grazed land and pushing a transition from nomadic herding to intensive production of sheep and cattle. On severely degraded grasslands, herders are prohibited from grazing animals for five years--they get a 6-yuan-per-mu (about $6 per acre) subsidy as compensation. On grazing land where herders maintain a "reasonable" stocking density of animals, they get a subsidy of 1.6 yuan per mu. Herders can also get an improved breed subsidy (see no. 1 above), a 10-yuan-per-mu subsidy for planting improved varieties of forage on grassland, and a 500-yuan-per-family subsidy for input costs. In 2012, the program was expanded to include pastoral areas in five additional provinces (Shanxi, Hebei, Jilin, Liaoning, and Heilongjiang) and funding was increased from 13.6 billion yuan to the current 15 billion yuan.
6. Rural biogas construction. China has for many years been subsidizing village-level facilities to generate biogas from animal manure and other wastes. In 2013, "respecting the wishes and needs of farmers" the program will concentrate on poor areas in hilly and mountainous regions that lack gas supply. It promises to improve the service network.
7. "Green channel" marketing. Trucks carrying livestock products to markets are included in the "green channel" program which waives tolls on roads, bridges, and tunnels for vehicles transporting fresh and live farm products. Toll booths have to have a special booth to expedite their passage.
8. "Vegetable basket" product support policy (1 billion yuan, or $161 million). The vegetable basket system was set up in 1989 to guarantee supplies of meats, milk, vegetables and fish to cities. It entails building networks of farms, agribusiness companies, market facilities and testing labs. In 2012, the central government will allocate 800 million yuan in aid to support upgrades of 2,067 standardized livestock and poultry farms upgrades (576 hog farms, 477 egg farms, 227 meat poultry farms, 347 beef farms, 440 sheep farms). It will spend 200 million yuan on aquaculture operations.
9. Subsidized agricultural insurance. National agricultural insurance began as a pilot program in 2007. Among the livestock included are breedable sows, dairy cattle, finishing hogs, Tibetan sheep, and yaks. In 2013 the scope will be expanded to aquaculture.
10. The article doesn't mention this, but there has been a hog price stabilization program since 2009. Basically, this program entails government purchases and storage of frozen pork to support the price when the ratio of hog and corn prices falls below 5.5:1 for several weeks. Strict implementation of this program was one of the first points in the 2013 livestock work guidance document.
Friday, July 19, 2013
State Farms Cultivate Overseas Land
China's Ministry of Agriculture announced that the country's state farm system will cultivate 3.5 million mu (575,000 acres) of farmland overseas by the end of 2013. That includes 3 million mu of grain and oilseeds, with production of 1 million metric tons. Another major overseas crop is natural rubber which was grown on 300,000 mu of overseas farms, including 50,000 mu of newly-acquired land.
By comparison, China has nearly 1.8 billion mu of domestic farmland. Its domestic grain, tuber and soybean output was 589 mmt last year and imports totaled 70 mmt. So this accounts for a tiny share of China's food supply so far.
The article describes China's state farm system as the country's "national team" in agricultural production. Its output grew 10.8 percent last year (more than double the growth of overall agricultural output). It claims $4.4 billion of exports last year, up 11.8 percent. It claims to have a 12-million head inventory of pigs, up 13.6 percent in the first half of 2013.
The state farm system , the "reclamation bureau" in Chinese because the farms were started in remote areas--usually along borders with Russia and other countries--where they "reclaimed" barren land. The largest component is in Heilongjiang Province near the Russia border. Other concentrations are on Hainan Island and provinces bordering southeast Asia.
A May Xinhua article reports that Anhui province's state farm system set up a joint venture with the Zimbabwe government for "general agricultural development." It operates 3 farms directly and 1 on an agency basis, a total of 5000 hectares. It grows wheat, corn, soybeans, and tobacco. Seeds and machinery were imported from China and yields are similar to those in China. In 2012 the company signed a contract for the next stage of the project which will expand to 50,000 hectares with investment of 1.5 billion yuan (over $240,000). In a third stage, it plans to expand even more.
It is said this project has gotten a lot of attention from government and companies. The Zimbabwe project is described as part of China's 12th five-year plan. There is no mention of where the output of the project goes. The project is reported to employ 600 local people (8 hectares per person) and holds training classes.
Another article describes the Guangxi state farm system's project in Vietnam that makes cassava starch with raw materials from Vietnam, Laos and Cambodia. The project has faced challenges from unreliable electricity and water infrastructure and bad weather. The Guangxi group also has had a project to grow sisal and cassava in Burma since 2006.
By comparison, China has nearly 1.8 billion mu of domestic farmland. Its domestic grain, tuber and soybean output was 589 mmt last year and imports totaled 70 mmt. So this accounts for a tiny share of China's food supply so far.
The article describes China's state farm system as the country's "national team" in agricultural production. Its output grew 10.8 percent last year (more than double the growth of overall agricultural output). It claims $4.4 billion of exports last year, up 11.8 percent. It claims to have a 12-million head inventory of pigs, up 13.6 percent in the first half of 2013.
The state farm system , the "reclamation bureau" in Chinese because the farms were started in remote areas--usually along borders with Russia and other countries--where they "reclaimed" barren land. The largest component is in Heilongjiang Province near the Russia border. Other concentrations are on Hainan Island and provinces bordering southeast Asia.
A May Xinhua article reports that Anhui province's state farm system set up a joint venture with the Zimbabwe government for "general agricultural development." It operates 3 farms directly and 1 on an agency basis, a total of 5000 hectares. It grows wheat, corn, soybeans, and tobacco. Seeds and machinery were imported from China and yields are similar to those in China. In 2012 the company signed a contract for the next stage of the project which will expand to 50,000 hectares with investment of 1.5 billion yuan (over $240,000). In a third stage, it plans to expand even more.
It is said this project has gotten a lot of attention from government and companies. The Zimbabwe project is described as part of China's 12th five-year plan. There is no mention of where the output of the project goes. The project is reported to employ 600 local people (8 hectares per person) and holds training classes.
Another article describes the Guangxi state farm system's project in Vietnam that makes cassava starch with raw materials from Vietnam, Laos and Cambodia. The project has faced challenges from unreliable electricity and water infrastructure and bad weather. The Guangxi group also has had a project to grow sisal and cassava in Burma since 2006.
Retreat From Small-Scale Dairying in China
China's dairy production never really took off until dairy companies started recruiting small farmers in the hinterland to milk cows a few at a time. Until then, most dairy farms were on city outskirts where feed was scarce and costs were high. But now, the Chinese industry appears to be reversing course to a large-scale farming model.
Milk production in China never really took off until ultra-high temperature (UHT) technology permitted milk to be produced in the hinterland by millions of scattered herdsmen and transported to urban markets without spoiling. That didn't end well, though. Scattered production and frenetic growth with thin margins and no control led to the melamine incident in 2008 which ground the industry's growth to a halt.
Following the melamine incident there has been a
surge of investment in large-scale dairy farms that has reversed the strategy
that created frenetic growth during the last decade. Government authorities have pushed processors to procure milk from
company-owned farms or from a fixed aggregation of farmers who keep their cows
together in a centralized location. The surge of investment is reversing the course of dairy development, moving it back toward big, high-overhead operations.
A scan of news reports and project
descriptions shows a surge of large investments in farms with thousands of cows.
The examples below are mostly in western provinces and farms range from 2000 to
5000 head with planned investment per cow works out to about $3200-$6000, not
that high by western standards. But the tens of millions of dollars freezes out small farmers. Most of the projects are led by local animal husbandry
bureaus and are recruiting investors who probably have little or no knowledge
of farming. Several projects mention that land for the farms has been leased
from farmers. In effect, dairy farming in China has returned to a large-scale
employee-operated mode of operation similar to the poorly-run state farms of
past decades.
Sample Chinese dairy farm projects announced during 2012-13
|
Location
|
Number of cattle
|
Investment
|
|
Gansu, Jingyuan County
|
5000
|
RMB 120 millon
|
|
Gansu, Minhe County
|
2000
|
RMB 180 million
|
|
Inner Mongolia, Hohhot, Yuquan District
|
3000
|
RMB 62 million
|
|
Heilongjiang, Harbin
|
2000
|
NA
|
|
Qinghai, Huzhu County
|
3000
|
RMB 60 million
|
|
Shaanxi, Weinan Prefecture
|
2000
|
RMB 50 million
|
|
Shandong, Dongying
|
3000
|
US$ 15 million
|
|
Inner Mongolia, Tuzuo Banner
|
5000
|
RMB 145.3 million
|
|
Ningxia State Farm System
|
Add 100,000 by 2015
|
NA
|
|
Shaanxi, Heyang County
|
7000
|
RMB 280 million
|
|
Source: Chinese news reports and project descriptions.
|
||
Most projects include thousands of cows, a barn, one or more milking parlors, storage for feed and silage, manure handling and gasification facilities. They mostly don’t mention anything about sources of feed. Two projects mention that they have several hundred mu of land (about 50 to 100 acres) which doesn’t seem adequate for thousands of cattle.
One ambitious county-wide project in Shaanxi Province plans to
build two 1000 head farms, four 500-head farms, and ten 300-head farms plus a
dairy processing project from 2012 to 2017. The county is on a shopping spree for
Australian cattle. In 2012 they brought in 2000 head with a total subsidy of
11,200 yuan each (split between the province, prefecture and county). They plan
to bring in another 10,000 australian cattle by 2016.
The county promises investors access to a dizzying array of subsidies. There is a 500-yuan annual interest subsidy per farm for a loan
of 10,000 yuan. Grants for farms of varying sizes are approximately 500 yuan
per head. Farms get a 50-yuan-per-mu subsidy for buying alfalfa seed if they
can consolidate a 500-mu parcel of land.
Farms in the county can also benefit discounted water and electricity rate
and from various rural construction subsidy programs for roads, drinking water,
and electricity. Machinery purchases are subsidized by the national program. Other policy support includes an artificial insemination subsidy
of 100 yuan per attempt and a one-time 2000-yuan subsidy to set up an on-farm
frozen semen station. Insurance for cattle is subsidized and organized by the
county. There are free mandatory immunizations and testing for brucellosis and
tuberculosis.
An October 2012 article in a veterinary publication paints a
grim picture of the dairy farming industry in China since the melamine crisis. Rising
feed and labor costs have crimped farm profits, as have disease problems. When cows
get sick you have to stop milking them for ten days or more. Meanwhile, milk
prices have been stagnant and many farmers complain that milk sells for the
same price as bottled water.
The article says most Chinese dairy farmers lack scientific and
specialized knowledge, and have a hard time controlling disease. It calls for a
consolidation of the dairy processing industry by “guiding” companies through
mergers and acquisitions to “weed out” excess capacity and foster more “dragon
head” enterprises. The author thinks government guidance, the price lever and
other methods can be used to lower enterprise cost and to raise the China dairy
industry’s influence and competitiveness.
Thursday, July 18, 2013
Aid For Poultry Recovery
On July 11, the Ministry of Finance issued 300 million yuan in funds to help the poultry industry recover from the downturn caused by avian influenza earlier this year. The funds are targeted for interest rate subsidies for short-term working capital loans for companies engaged in breeding poultry and processing of poultry meat and eggs. The purpose of the subsidies is to support and protect poultry production capacity, protect farmer profits, and help the poultry industry "weather the storm."
This tranche of subsidies follows an earlier injection of 300 million yuan to subsidize purchases of grandparent breeding stock. That makes a cumulative total of 600 million yuan (nearly $100 million). The Ministry of Agriculture and other departments have implemented other measures to help the poultry industry recover from its depressed state during this year's avian influenza epidemic.
This tranche of subsidies follows an earlier injection of 300 million yuan to subsidize purchases of grandparent breeding stock. That makes a cumulative total of 600 million yuan (nearly $100 million). The Ministry of Agriculture and other departments have implemented other measures to help the poultry industry recover from its depressed state during this year's avian influenza epidemic.
Saturday, July 13, 2013
China Below 90 Percent Self-Sufficiency in 2012
China has entered an era as a net importer of grain, according to a report circulating this month.
During calendar year 2012, China's imports of grains totaled 70 million metric tons (mmt), the largest volume ever. Imports included 58.4 mmt of soybeans, 3.4 mmt of wheat, 5.1 mmt of corn, and 2.1 mmt of rice.
For a number of years, Chinese officials have set a minimum threshold of 95-percent self-sufficiency in grain, which includes cereal grains, soybeans, and tubers. Soybeans and potatoes are included, anachronistically, because they were traditionally staple food grains. Given domestic grain output of 589 mmt in 2012, the self-sufficiency rate is being reported as 89.4 percent, well below the 95% threshold. Domestic production increased 3.2 percent--nearly 19 mmt--so the decline in self-sufficiency resulted from imports outpacing the increase in domestic output.
A researcher quoted by the article said the decline in self-sufficiency shows that China's agriculture faces serious competitiveness problems. He worries that the threat to food security is a threat to the very foundation of the economy.
The article cites a price gap between China and the world market as the main reason for the surge of imports. Using rice as an example, it quotes the boss of a Hunan rice mill who said the price of rice from Vietnam, Pakistan, and Myanmar rice is 172 yuan per 50 kg, while Hunan rice is 180-190 yuan. The rice mill boss explained, “Domestic companies facing this kind of price are not competitive."
Rice imports are larger than official statistics indicate. A May 23 Huaxia Times report quoted a rice industry analyst who estimated that rice imports totaled 3 mmt during 2012--50 percent more than customs statistics report--due to "rampant smuggling" of rice into provinces bordering southeast Asian countries (Guangxi and Yunnan). This total would make China the world's largest rice importer in 2012.
Moreover, the gap between China's commodity prices and world prices seems to be widening as global prices fall. A National Development and Reform Commission report on commodity imports for January-May of 2013 notes that the average price of imported vegetable oil and corn each fell 11.5 percent and the price of imported rice fell 4.2 percent. Imported sugar's price was down 21.9 percent and cotton was down 18.9 percent. The NDRC probably sees an international conspiracy in these price declines (at the same time Chinese officials claim to have discovered foreign companies conspiring to raise prices of milk powder).
Professor Li Guoxiang of the Chinese Academy of Social Sciences wrote on a microblog that low international prices are making it hard for some Chinese farmers to sell their (more expensive) rice. Rice mills can earn a bigger profit from importing rice than buying it locally, creating "disorder" in the market, says Professor Li.
The real cause of chaos in the market is a policy of raising prices even when global prices are falling. Huaxia Times reported that the minimum price for early indica rice--a type of rice that no one likes to eat--was raised 71.4 percent from 2008 to 2013. The minimum price for japonica rice was raised 82.9 percent over the past five years.
The Huaxia Times report quotes the boss of a liquor company in Hangzhou (are region known for its rice wine) who says domestic rice costs 1000 yuan per ton more than imported rice of equivalent quality. This increases the company's expenses by 5 million yuan annually, says the liquor boss.
During calendar year 2012, China's imports of grains totaled 70 million metric tons (mmt), the largest volume ever. Imports included 58.4 mmt of soybeans, 3.4 mmt of wheat, 5.1 mmt of corn, and 2.1 mmt of rice.
For a number of years, Chinese officials have set a minimum threshold of 95-percent self-sufficiency in grain, which includes cereal grains, soybeans, and tubers. Soybeans and potatoes are included, anachronistically, because they were traditionally staple food grains. Given domestic grain output of 589 mmt in 2012, the self-sufficiency rate is being reported as 89.4 percent, well below the 95% threshold. Domestic production increased 3.2 percent--nearly 19 mmt--so the decline in self-sufficiency resulted from imports outpacing the increase in domestic output.
A researcher quoted by the article said the decline in self-sufficiency shows that China's agriculture faces serious competitiveness problems. He worries that the threat to food security is a threat to the very foundation of the economy.
The article cites a price gap between China and the world market as the main reason for the surge of imports. Using rice as an example, it quotes the boss of a Hunan rice mill who said the price of rice from Vietnam, Pakistan, and Myanmar rice is 172 yuan per 50 kg, while Hunan rice is 180-190 yuan. The rice mill boss explained, “Domestic companies facing this kind of price are not competitive."
Rice imports are larger than official statistics indicate. A May 23 Huaxia Times report quoted a rice industry analyst who estimated that rice imports totaled 3 mmt during 2012--50 percent more than customs statistics report--due to "rampant smuggling" of rice into provinces bordering southeast Asian countries (Guangxi and Yunnan). This total would make China the world's largest rice importer in 2012.
Moreover, the gap between China's commodity prices and world prices seems to be widening as global prices fall. A National Development and Reform Commission report on commodity imports for January-May of 2013 notes that the average price of imported vegetable oil and corn each fell 11.5 percent and the price of imported rice fell 4.2 percent. Imported sugar's price was down 21.9 percent and cotton was down 18.9 percent. The NDRC probably sees an international conspiracy in these price declines (at the same time Chinese officials claim to have discovered foreign companies conspiring to raise prices of milk powder).
| China Jan-May 2013 average price of imported commodities | ||
| Commodity | Avg Price | Change from 2012 |
| Dollars per metric ton | Percent | |
| Vegetable oils | 1024 | -11.5 |
| Corn | 295 | -11.5 |
| Rice | 474 | -4.2 |
| Sugar | 493 | -21.9 |
| Cotton | 1915 | -18.6 |
| Source: China National Development and Reform Commission | ||
Professor Li Guoxiang of the Chinese Academy of Social Sciences wrote on a microblog that low international prices are making it hard for some Chinese farmers to sell their (more expensive) rice. Rice mills can earn a bigger profit from importing rice than buying it locally, creating "disorder" in the market, says Professor Li.
The real cause of chaos in the market is a policy of raising prices even when global prices are falling. Huaxia Times reported that the minimum price for early indica rice--a type of rice that no one likes to eat--was raised 71.4 percent from 2008 to 2013. The minimum price for japonica rice was raised 82.9 percent over the past five years.
The Huaxia Times report quotes the boss of a liquor company in Hangzhou (are region known for its rice wine) who says domestic rice costs 1000 yuan per ton more than imported rice of equivalent quality. This increases the company's expenses by 5 million yuan annually, says the liquor boss.
However, imported rice from Vietnam and Pakistan is lower in quality than most Chinese rice. That's why it is used for liquor or other industrial uses where taste is not so important or it is mixed with Chinese rice. A rice mill boss explained to Huaxia Times that Chinese mills mix no more than 25 percent imported rice with domestic rice in order to preserve taste. She figures the market could import up to 7 million metric tons of rice--equivalent to 10 mmt of paddy rice or less than 5 percent of China's current output.
Chinese officials just announced a nearly 6-percent increase in the corn price support for this fall's crop while the industry is expecting world prices to plunge after the U.S. harvests one of its largest corn crops ever. This is likely to create increasing confusion in the corn market as Chinese buyers use subterfuge to gain access to cheap U.S. corn later this year.
Imports are still only about 2 percent of China's rice supply, but the upward trajectory of imports amplifies worries about increasing dependence on imports. If China allowed market forces to determine production and trade, imports could easily rise to an equilibrium point of 5 percent of consumption and stop there as Chinese and international prices equilibrate. China's demand would bring gains in income to poor farmers in places like Vietnam, Burma, and Pakistan.
Instead, most Chinese officials and analysts ignore the realities of the market and raise improbable alarmist all-or-nothing scenarios of China's production completely disappearing. They raise these canards to insist on their policies that create distortions and real confusion and chaos in the marketplace.
Friday, July 12, 2013
Wheat Harvest Statistics are Not Information
Are "statistics" and "information" the same thing? No, statistics can be--and often are--misleading and useless as information if they are reported in a mechanical fashion without interpretation. Today, the National Bureau of Statistics reported a 1.3 percent increase in 2013 wheat production, another big harvest that suggests optimism for China's self-sufficiency in grain. However, the report fails to mention a quality problem that will substantially reduce the volume of wheat available to flour mills.
NBS attributed the increase in wheat output to a 1.5-percent increase in yields due to near-ideal growing conditions in most production areas, recovery from a rust problem that afflicted the crop in some regions last year, and a pesticide-spraying campaign. Area planted in wheat declined slightly, by 0.2 percent.
Source: China National Bureau of Statistics, July 12, 2013.
Wheat output was estimated at 115.67 million metric tons, an increase of 1.48 mmt from last year. Overall summer grain output rose 19.6 mmt to 131.89 mmt in 2013. There was a 3.1 percent increase in production of minor summer grains. The only non-wheat crop mentioned specifically was an increase in potato production on idle winter land in Guangxi and southwestern provinces. Of the 11 major summer grain producing provinces, output increased in seven and fell in four. The report said dry conditions reduced yields 10% in Shanxi, 9% in Gansu, and 8% in Yunnan and Shaanxi.
The report attributed the increase in production to the "correct policy guidance and close attention of the communist party central committee and state council." Authorities spent 1.7 billion yuan ($278 million) on a "one spray, three preventions" (prevent effects of insects, dryness/heat/wind, and lodging) program that drenched fields with insecticide and poured water on crops. Another 800 million yuan was budgeted for disease and pest prevention costs. Disease and pests in the main wheat producing areas were generally light. NBS said area affected by wheat scab was down 85.2% (it was unusually high last year), stripe rust was down 51.7%, aphids affected 22.3% less area, spiders were down 9.6%, and midges were down 13.2%.
The report includes only one sentence on the most important event--heavy rains in many regions before and after the harvest period. The report said cold temperatures and heavy rain during April and May caused lodging, reducing production "to a certain degree" in western Jiangsu, eastern and northern Anhui, eastern and parts of southern Henan and parts of southwest Shandong.
More seriously, the extremely wet conditions caused sprouting of wheat in many areas, rendering the grain unsuitable for flour milling. An early July report estimated that 10 mmt (8 percent) of the 2013 wheat harvest has sprouting problems. On July 9, the National Development and Reform Commission announced that standards for wheat purchased for the minimum price program would be loosened. In parts of Jiangsu, Anhui, Henan, and Hubei, the national reserve purchases will buy wheat with up to 20% sprouted kernels and provinces will be "responsible" for buying wheat with more than 20% sprouting.
The sprouting phenomenon will reduce the amount of wheat available to flour mills--despite the increased harvest number reported by NBS. The sprouted wheat will mostly be substituted for corn as animal or poultry feed. This may alleviate a tight supply of quality corn--also affected by wet conditions in northeastern provinces after last fall's harvest. According to the early July report, the government is preparing a program to transfer 5 mmt of corn reserves from northeastern warehouses to southern provinces, and the quality of this corn is unknown, said the report.
The apparent success of the report of a bigger harvest may have unseen costs. Much of the pesticide sprayed on fields washes into soil and water. What are the effects on soil fertility and erosion of planting crops on "idle" land during the winter?
NBS attributed the increase in wheat output to a 1.5-percent increase in yields due to near-ideal growing conditions in most production areas, recovery from a rust problem that afflicted the crop in some regions last year, and a pesticide-spraying campaign. Area planted in wheat declined slightly, by 0.2 percent.
| China summer grain production, 2013 | |||
| Item | Wheat | All summer grain | |
| Production | mil mt | 115.67 | 131.89 |
| Change | mil mt | 1.48 | 19.60 |
| Change | percent | 1.3 | 1.5 |
| Area planted | 1000 ha | 22,440 | 27,588 |
| Change | mil ha | -41 | 0 |
| Change | percent | -0.2 | 0 |
| Yield | kg/ha | 5,154 | 4,781 |
| Change | kg/ha | 76 | 71 |
| Change | percent | 1.3 | 1.5 |
Wheat output was estimated at 115.67 million metric tons, an increase of 1.48 mmt from last year. Overall summer grain output rose 19.6 mmt to 131.89 mmt in 2013. There was a 3.1 percent increase in production of minor summer grains. The only non-wheat crop mentioned specifically was an increase in potato production on idle winter land in Guangxi and southwestern provinces. Of the 11 major summer grain producing provinces, output increased in seven and fell in four. The report said dry conditions reduced yields 10% in Shanxi, 9% in Gansu, and 8% in Yunnan and Shaanxi.
The report attributed the increase in production to the "correct policy guidance and close attention of the communist party central committee and state council." Authorities spent 1.7 billion yuan ($278 million) on a "one spray, three preventions" (prevent effects of insects, dryness/heat/wind, and lodging) program that drenched fields with insecticide and poured water on crops. Another 800 million yuan was budgeted for disease and pest prevention costs. Disease and pests in the main wheat producing areas were generally light. NBS said area affected by wheat scab was down 85.2% (it was unusually high last year), stripe rust was down 51.7%, aphids affected 22.3% less area, spiders were down 9.6%, and midges were down 13.2%.
The report includes only one sentence on the most important event--heavy rains in many regions before and after the harvest period. The report said cold temperatures and heavy rain during April and May caused lodging, reducing production "to a certain degree" in western Jiangsu, eastern and northern Anhui, eastern and parts of southern Henan and parts of southwest Shandong.
More seriously, the extremely wet conditions caused sprouting of wheat in many areas, rendering the grain unsuitable for flour milling. An early July report estimated that 10 mmt (8 percent) of the 2013 wheat harvest has sprouting problems. On July 9, the National Development and Reform Commission announced that standards for wheat purchased for the minimum price program would be loosened. In parts of Jiangsu, Anhui, Henan, and Hubei, the national reserve purchases will buy wheat with up to 20% sprouted kernels and provinces will be "responsible" for buying wheat with more than 20% sprouting.
The sprouting phenomenon will reduce the amount of wheat available to flour mills--despite the increased harvest number reported by NBS. The sprouted wheat will mostly be substituted for corn as animal or poultry feed. This may alleviate a tight supply of quality corn--also affected by wet conditions in northeastern provinces after last fall's harvest. According to the early July report, the government is preparing a program to transfer 5 mmt of corn reserves from northeastern warehouses to southern provinces, and the quality of this corn is unknown, said the report.
The apparent success of the report of a bigger harvest may have unseen costs. Much of the pesticide sprayed on fields washes into soil and water. What are the effects on soil fertility and erosion of planting crops on "idle" land during the winter?
Sunday, July 7, 2013
Interpreting China's Corn Price Support Increase
On July 3, 2013, China's National Development and Reform Commission announced increased corn price supports for this fall's crop. The increase of 5-to-6 percent locks in high prices for Chinese corn this year while global prices are facing downward pressure due to an expected record U.S. corn crop.
The "temporary reserve" program will operate--as usual--in China's three northeastern provinces and Inner Mongolia Autonomous Region. Support prices for corn are set at 1.13 yuan/500g for Liaoning and Inner Mongolia, 1.12 yuan/500g for Jilin, and 1.11 yuan/500g for Heilongjiang Province. The prices are .06 yuan higher than those set for the 2012/13 crop.
The support price for Liaoning/Inner Mongolia is approximately $369 per metric ton or $9.36 per bushel at the current exchange rate. According to the USDA/AMS weekly grain report, the Chicago futures price for September corn is $5.25 per bushel and December corn is $4.91 per bushel.
Reported prices for corn at Liaoning ports on July 5 were $380-382. Corn from northeastern China at Guangdong ports in southern China were in the $404-406 range.
The announcement comes much earlier than in previous years--normally the support price for corn is announced after the harvest sometime in November-January. The price increase and the early announcement were anticipated in May when Premier Li Keqiang called for a "reasonable increase" in the corn price.
According to NDRC, the announcement is intended to benefit farmers and increase their enthusiasm for planting grain. However, the price support won't directly affect this year's corn output since the crop has already been planted.
Why announce an increase in the price support two months before the crop is harvested? A commentary from China corn net surmises that the government wanted to send a strong signal to the market that prices should be higher. The commentary describes China's current corn market as "seriously distorted"--in other words, it suggests that market prices are artificially low due to the impacts on feed demand during the first half of 2013 stemming from the downturn in the pork market and effects of avian influenza on poultry production.
The commentary also speculates that the early price-support announcement is calculated to smooth out corn price fluctuations at the beginning of the market year. Normally, corn prices drop following the harvest as new corn becomes available. Farmers then hold on to their corn, waiting for higher prices. Corn marketing is then spread out over the succeeding months as purchasers try to pry corn loose from farmers hoping for higher prices. The commentary suggests that the early price support announcement will establish a minimum price early in the season.
The commentary also hints that the price support may be intended to benefit Sinograin, the company that holds grain inventories on behalf of the government. Sinograin bought grain at relatively high prices early in the 2012/13 market year and has been stuck with it due to weak prices in the first half of 2013. Note also that 30 mmt of corn--much of it poor quality--was purchased at support prices during 2012/13. Authorities are now preparing to auction off the stockpiled corn and shift 5 mmt of northeastern corn inventories to southern China. The commentary suggests that the announcement of a higher 2013/14 support price will push up prices for old-crop corn already in inventories, making it easier to sell at a profit.
The "temporary reserve" program will operate--as usual--in China's three northeastern provinces and Inner Mongolia Autonomous Region. Support prices for corn are set at 1.13 yuan/500g for Liaoning and Inner Mongolia, 1.12 yuan/500g for Jilin, and 1.11 yuan/500g for Heilongjiang Province. The prices are .06 yuan higher than those set for the 2012/13 crop.
The support price for Liaoning/Inner Mongolia is approximately $369 per metric ton or $9.36 per bushel at the current exchange rate. According to the USDA/AMS weekly grain report, the Chicago futures price for September corn is $5.25 per bushel and December corn is $4.91 per bushel.
Reported prices for corn at Liaoning ports on July 5 were $380-382. Corn from northeastern China at Guangdong ports in southern China were in the $404-406 range.
| China minimum prices for corn, 2008-13 | ||||
| Year | Announce ment |
|||
| Heilong jiang |
Jilin | Liaoning, Inner Mongolia | ||
| Yuan per metric ton | ||||
| 2008 | Late Oct | 1480 | 1500 | 1520 |
| 2009 | Nov 27 | 1480 | 1500 | 1520 |
| 2010 | Jan 17, 2011 | 1780 | 1800 | 1820 |
| 2011 | Dec 14 | 1960 | 1980 | 2000 |
| 2012 | Nov 15 | 2100 | 2120 | 2140 |
| 2013 | July 3 | 2220 | 2240 | 2260 |
The announcement comes much earlier than in previous years--normally the support price for corn is announced after the harvest sometime in November-January. The price increase and the early announcement were anticipated in May when Premier Li Keqiang called for a "reasonable increase" in the corn price.
According to NDRC, the announcement is intended to benefit farmers and increase their enthusiasm for planting grain. However, the price support won't directly affect this year's corn output since the crop has already been planted.
Why announce an increase in the price support two months before the crop is harvested? A commentary from China corn net surmises that the government wanted to send a strong signal to the market that prices should be higher. The commentary describes China's current corn market as "seriously distorted"--in other words, it suggests that market prices are artificially low due to the impacts on feed demand during the first half of 2013 stemming from the downturn in the pork market and effects of avian influenza on poultry production.
The commentary also speculates that the early price-support announcement is calculated to smooth out corn price fluctuations at the beginning of the market year. Normally, corn prices drop following the harvest as new corn becomes available. Farmers then hold on to their corn, waiting for higher prices. Corn marketing is then spread out over the succeeding months as purchasers try to pry corn loose from farmers hoping for higher prices. The commentary suggests that the early price support announcement will establish a minimum price early in the season.
The commentary also hints that the price support may be intended to benefit Sinograin, the company that holds grain inventories on behalf of the government. Sinograin bought grain at relatively high prices early in the 2012/13 market year and has been stuck with it due to weak prices in the first half of 2013. Note also that 30 mmt of corn--much of it poor quality--was purchased at support prices during 2012/13. Authorities are now preparing to auction off the stockpiled corn and shift 5 mmt of northeastern corn inventories to southern China. The commentary suggests that the announcement of a higher 2013/14 support price will push up prices for old-crop corn already in inventories, making it easier to sell at a profit.
Army Worm Battle Heats Up in 2013
On July 2, 2013, China's Ministry of Agriculture issued an emergency notice to step up efforts to control the spread of army worms, a caterpillar that affects corn and other crops.
Army worms appear during the hot summer months of July and August and strip the leaves off corn stalks. In 2012, an unusually large infestation attacked large areas of China's corn crop. The 2013 emergency notice warned that many areas of northeast and north China and the Huang-Huai region have a high risk of infestation by second- and third-generation army worms. The notice warned that army worms tend to migrate as a group and an infestation can develop rapidly. Local officials were told to watch migratory patterns and to be on the lookout for hidden or unexpected army worm risks. Officials were urged to do a good job on weekly reporting of pest problems and organizing prevention and control teams.
The battle against bugs like army worms in China usually includes swarms of farmers sent out to drench fields with pesticides. The collateral damage that results is implied by the emergency notice which exhorted local officials to "scientifically" use effective, low-toxicity pesticides and to use a "green" mentality in pest control. Apparently, many farmers were poisoned pesticides during the previous year's army worm control campaign. The 2013 emergency notice warns readers to "learn a lesson from last year's farmer poisonings and heat stroke in many areas."
A Jilin Province corn field in September 2012 where army worms
stripped lower leaves off the stalks. The corn cobs are left intact.
The battle against bugs like army worms in China usually includes swarms of farmers sent out to drench fields with pesticides. The collateral damage that results is implied by the emergency notice which exhorted local officials to "scientifically" use effective, low-toxicity pesticides and to use a "green" mentality in pest control. Apparently, many farmers were poisoned pesticides during the previous year's army worm control campaign. The 2013 emergency notice warns readers to "learn a lesson from last year's farmer poisonings and heat stroke in many areas."
Friday, July 5, 2013
Cadmium Rice Needs Costly Clean-up
Liu Xiangji, a rice mill operator in Hunan Province's You County, claims he hasn't been able to sleep at night since cadmium was detected in his mill's rice. "What is cadmium? I really don't know." Liu is perplexed because his mill removes husks, polishes the rice and bags it; nothing is added to the rice in the process. So he doesn't understand how rice could have become contaminated.
In contrast to many of China's other food safety incidents, there is no "black-hearted" behavior or clear culprits intentionally adding poisons in the "cadmium rice" incident. Instead, it stems from widespread pollution of the rice-growing environment due to both unchecked industrialization and abuse of agricultural chemicals by farmers.
The cadmium contamination is blamed largely on waste from mining and metal-smelting industries that is carried to fields by irrigation water, deposited in the soil and then absorbed by crops. Polluting industries are often shielded by the "umbrella" of local government. One scholar blamed "GDP supremacy" for the contamination.
In October 2011, a scholar of China's Academy of Engineering warned that one-sixth of his country's cultivated land was contaminated with cadmium. No one paid much attention until 17 months later in May of this year when news media reported that a number of rice samples in Guangdong Province exceeded legal tolerances for cadmium, a lustrous white heavy metal that can cause kidney and skeletal disorders.
Caixin reports that cadmium contamination has been found in several different scientific studies and may have been known by grain management officials since 2002. The problems seem to be concentrated in Hunan Province, especially in central and eastern parts of the province--also China's most productive rice-growing region. Many consumers and traders are now shunning Hunan rice. Rice from neighboring Jiangxi and parts of Guangdong have tested positive as well.
Agriculture itself may bear a significant part of the blame. Abuse of chemical fertilizer and pesticides also has contributed to the cadmium problem. Phosphate fertilizer is a source of cadmium that is limited in Europe and North America. A Hunan Province agricultural expert said that Hunan's soil is highly acidic, a condition that makes rice plants more readily absorb cadmium. He blames the high acidity on excessive use of agricultural chemicals.
Reversing contamination of the soil is difficult--more difficult to deal with than air and water pollution. A Chinese Academy of Sciences Institute of Geographic Sciences expert estimated that it would take 3 to 5 years and 20,000 yuan per mu to clean up lightly-polluted soils. The total bill for cleaning up the soil was estimated at 6 trillion yuan (about $1 trillion).
Wen Tiejun, a well-known rural affairs scholar from Renmin University, is critical of the chemical-intensive methods used in Chinese agriculture. He has been promoting chemical-free production methods at a demonstration site in Hebei Province. Professor Wen says that crops need to be grown chemical-free for 3 to 5 years to detoxify the soil. This is needed to break what he calls the "vicious cycle" of chemical fertilizer use which degrades the natural fertility of soil, prompting even higher chemical applications. However, following Prof. Wen's prescription nationwide would require several years of low output, a non-starter for a country struggling to feed its population.
Some consumers are seeking out rice from northeastern China which has a reputation for being a relatively unspoiled environment. However, the northeast has been losing its rich black topsoil at an alarming rate. Moreover, Old Zhang, a Jilin Province farmer. worries that the increased dependence on chemical fertilizer is degrading the "vigor" of his soil. He observes that ten years ago he used to apply only 30 kg of fertilizer per mu but now applies 60 kg. And if fertilizer is not used, production will fall by half.
The vice director of the Chinese Academy of Agricultural Sciences soil institute worries that the land tenure system discourages soil conservation. "In a few years, you may not have this land any more, so why would you want to invest in conservation?" asks the scientist.
In contrast to many of China's other food safety incidents, there is no "black-hearted" behavior or clear culprits intentionally adding poisons in the "cadmium rice" incident. Instead, it stems from widespread pollution of the rice-growing environment due to both unchecked industrialization and abuse of agricultural chemicals by farmers.
The cadmium contamination is blamed largely on waste from mining and metal-smelting industries that is carried to fields by irrigation water, deposited in the soil and then absorbed by crops. Polluting industries are often shielded by the "umbrella" of local government. One scholar blamed "GDP supremacy" for the contamination.
In October 2011, a scholar of China's Academy of Engineering warned that one-sixth of his country's cultivated land was contaminated with cadmium. No one paid much attention until 17 months later in May of this year when news media reported that a number of rice samples in Guangdong Province exceeded legal tolerances for cadmium, a lustrous white heavy metal that can cause kidney and skeletal disorders.
Caixin reports that cadmium contamination has been found in several different scientific studies and may have been known by grain management officials since 2002. The problems seem to be concentrated in Hunan Province, especially in central and eastern parts of the province--also China's most productive rice-growing region. Many consumers and traders are now shunning Hunan rice. Rice from neighboring Jiangxi and parts of Guangdong have tested positive as well.
Agriculture itself may bear a significant part of the blame. Abuse of chemical fertilizer and pesticides also has contributed to the cadmium problem. Phosphate fertilizer is a source of cadmium that is limited in Europe and North America. A Hunan Province agricultural expert said that Hunan's soil is highly acidic, a condition that makes rice plants more readily absorb cadmium. He blames the high acidity on excessive use of agricultural chemicals.
Reversing contamination of the soil is difficult--more difficult to deal with than air and water pollution. A Chinese Academy of Sciences Institute of Geographic Sciences expert estimated that it would take 3 to 5 years and 20,000 yuan per mu to clean up lightly-polluted soils. The total bill for cleaning up the soil was estimated at 6 trillion yuan (about $1 trillion).
Wen Tiejun, a well-known rural affairs scholar from Renmin University, is critical of the chemical-intensive methods used in Chinese agriculture. He has been promoting chemical-free production methods at a demonstration site in Hebei Province. Professor Wen says that crops need to be grown chemical-free for 3 to 5 years to detoxify the soil. This is needed to break what he calls the "vicious cycle" of chemical fertilizer use which degrades the natural fertility of soil, prompting even higher chemical applications. However, following Prof. Wen's prescription nationwide would require several years of low output, a non-starter for a country struggling to feed its population.
Some consumers are seeking out rice from northeastern China which has a reputation for being a relatively unspoiled environment. However, the northeast has been losing its rich black topsoil at an alarming rate. Moreover, Old Zhang, a Jilin Province farmer. worries that the increased dependence on chemical fertilizer is degrading the "vigor" of his soil. He observes that ten years ago he used to apply only 30 kg of fertilizer per mu but now applies 60 kg. And if fertilizer is not used, production will fall by half.
The vice director of the Chinese Academy of Agricultural Sciences soil institute worries that the land tenure system discourages soil conservation. "In a few years, you may not have this land any more, so why would you want to invest in conservation?" asks the scientist.