China's vision for solving global problems through international collaboration in agricultural science under the "one belt-one road" initiative was laid out in an article in State media this week.
The head of China's Academy of Agricultural Sciences, Wu Kongming, sees great potential for food production in the abundant water and soil resources and high quality ecological environment of belt-road countries. He said “one belt-one road” agricultural cooperation can promote orderly regional flows of agricultural factors of production and deepen agricultural market integration. Exchange of experience in agricultural development and bringing into play the comparative advantages of each country can maximize the potential for agricultural development, advancing mutually beneficial opportunities for each country, Wu said.
According to the article, China's Ministry of Agriculture drew up a vision for banding together various government departments, research institutes, and agricultural enterprises to carry out global agricultural cooperation in 2014.
Chinese Academy of Agricultural Sciences (CAAS) International Cooperation Bureau Director Gong Xifeng explained that CAAS now has over 60 foreign agricultural technology projects. China’s seeds, veterinary drugs, machinery, and plant protection technology help “one belt-one road” countries raise production, increase income of farmers, and raise the competitiveness of agricultural products, he said. China’s plan for sharing ag technology features rice, specifically “green super rice” for which they say got aid from Gates Foundation.
The Chinese strategy includes setting up joint laboratories in various countries to take advantage of genetic resources through gene sequencing, developing new varieties, etc. Examples are a joint cotton lab in Uzbekistan and a survey of cotton resources in East Africa.
The Chinese Academy of Ag Sciences sends scholars abroad and are hosting hundreds of grad students and researchers to build goodwill abroad. Mr. Gong said CAAS now has 395 foreign students, of whom 70% are from belt-road countries.
Most Chinese projects abroad are conducted by commercial entities, and CAAS is developing offices and platforms to support companies by supplying them with info about the countries. China also has a plan to nurture a new generation of domestic personnel who can speak foreign languages and understand agricultural technology (a big bottleneck to efforts to go abroad to date) to work in Chinese companies and embassies abroad.
Tuesday, May 29, 2018
Minimum Price Program Tweaked
China announced a modest reform of its minimum price purchase program for wheat and rice that Farmers Daily described as a signal of marketized reform.
This year's implementation plan for the program sets stricter conditions for activating minimum price procurement of wheat and rice. Minimum price procurement can begin only when the market price has fallen below the minimum price announced by the government for 3 days in a row. When this happens, the province's branch of Sinograin applies to its headquarters, which in turn seeks approval from the State Administration of Grain and Commodity Reserves to begin minimum price procurement. Minimum price procurement must be suspended when the market price rises above the minimum for 3 days.
The document allows only grain of national grade 3 or higher to be purchased at minimum prices. When there are large volumes of grain below grade 3 due to a disaster or other reason, provincial authorities are urged to begin their own "temporary reserve" purchases of grain.
The minimum price procurement for wheat can start June 1 (about a week later than in previous years) and ends by September 30. Early indica rice minimum price procurement season is August 1 to September 30. Middle and late indica rice procurement can begin October 10 and finishes by January 31. Japonica rice procurement can begin November 1 and finishes by the end of February. The national program covers the same provinces as in past years: 6 wheat provinces, 5 early rice provinces, 8 middle and late indica rice provinces, and 4 northeastern japonica rice provinces. Other provinces can launch their own procurement at minimum prices at their discretion.
This year's program is more specific about the roles of various actors. Sinograin is commissioned as the main actor in procuring rice and wheat at minimum prices. This year's document specifically identifies four state-owned companies that can purchase grain on Sinograin's behalf: COFCO, Supply and Marketing Group, Sinochem, and China State Farm Group. Sinograin can appoint other entities to purchase grain if they meet requirements for capital, assets, credit, etc.
This year the Peoples Bank of China and the Banking and Insurance Regulatory Commission are added as issuers of the document. The Agricultural Development Bank is identified as supplier of credit for the program.
The document's preamble identifies its main purpose as protecting the profits of farmers. Other language suggests that the reforms are aimed at stopping abuses of the program by local depot operators. The document calls for ensuring that quantities purchased are "truthful." Orders issued at summer grain procurement meetings warn officials not to "round trip" grain by buying and selling the same grain multiple times and they were sternly ordered not to use reserve grain as a guarantee for any other loans. There were also admonitions to prevent poor quality grain from mixing with food grains to prevent food safety threats.
Officials at the national summer grain meeting convened on May 17 anticipated that the volume of grain purchased at minimum prices will be smaller this year and prices will better reflect quality premiums.
However, a report on progress of the wheat harvest says there are serious quality problems with this year's winter wheat crop. Heavy rains during the recent harvest has caused lodging, sprouting, and mold problems in many areas. Prices are said to be lower than at this time last year.
At meetings to organize summer grain procurement officials were admonished to give proper attention to grain procurement to protect the interests of farmers and to maintain social stability. Local meetings reported training dozens of officials; counted up scales, grain driers, and other equipment on-hand; and ensured adequate credit is available from Agricultural Development Banks to buy grain.
This year's implementation plan for the program sets stricter conditions for activating minimum price procurement of wheat and rice. Minimum price procurement can begin only when the market price has fallen below the minimum price announced by the government for 3 days in a row. When this happens, the province's branch of Sinograin applies to its headquarters, which in turn seeks approval from the State Administration of Grain and Commodity Reserves to begin minimum price procurement. Minimum price procurement must be suspended when the market price rises above the minimum for 3 days.
The document allows only grain of national grade 3 or higher to be purchased at minimum prices. When there are large volumes of grain below grade 3 due to a disaster or other reason, provincial authorities are urged to begin their own "temporary reserve" purchases of grain.
The minimum price procurement for wheat can start June 1 (about a week later than in previous years) and ends by September 30. Early indica rice minimum price procurement season is August 1 to September 30. Middle and late indica rice procurement can begin October 10 and finishes by January 31. Japonica rice procurement can begin November 1 and finishes by the end of February. The national program covers the same provinces as in past years: 6 wheat provinces, 5 early rice provinces, 8 middle and late indica rice provinces, and 4 northeastern japonica rice provinces. Other provinces can launch their own procurement at minimum prices at their discretion.
This year's program is more specific about the roles of various actors. Sinograin is commissioned as the main actor in procuring rice and wheat at minimum prices. This year's document specifically identifies four state-owned companies that can purchase grain on Sinograin's behalf: COFCO, Supply and Marketing Group, Sinochem, and China State Farm Group. Sinograin can appoint other entities to purchase grain if they meet requirements for capital, assets, credit, etc.
This year the Peoples Bank of China and the Banking and Insurance Regulatory Commission are added as issuers of the document. The Agricultural Development Bank is identified as supplier of credit for the program.
The document's preamble identifies its main purpose as protecting the profits of farmers. Other language suggests that the reforms are aimed at stopping abuses of the program by local depot operators. The document calls for ensuring that quantities purchased are "truthful." Orders issued at summer grain procurement meetings warn officials not to "round trip" grain by buying and selling the same grain multiple times and they were sternly ordered not to use reserve grain as a guarantee for any other loans. There were also admonitions to prevent poor quality grain from mixing with food grains to prevent food safety threats.
Officials at the national summer grain meeting convened on May 17 anticipated that the volume of grain purchased at minimum prices will be smaller this year and prices will better reflect quality premiums.
However, a report on progress of the wheat harvest says there are serious quality problems with this year's winter wheat crop. Heavy rains during the recent harvest has caused lodging, sprouting, and mold problems in many areas. Prices are said to be lower than at this time last year.
At meetings to organize summer grain procurement officials were admonished to give proper attention to grain procurement to protect the interests of farmers and to maintain social stability. Local meetings reported training dozens of officials; counted up scales, grain driers, and other equipment on-hand; and ensured adequate credit is available from Agricultural Development Banks to buy grain.
Friday, May 18, 2018
China Quits Sorghum Anti-Dumping Investigation
China's Ministry of Commerce announced today that its antidumping and anti-subsidy investigation of sorghum imported from the United States would be terminated because duties would not be in the public interest. Provisional duties of 179% imposed last month will be terminated and deposits collected will be returned.
The Ministry's "Announcement on termination of anti-dumping and anti-subsidy investigation of sorghum imported from United States" [关于终止对原产于美国的进口高粱反倾销反补贴调查的公告] released May 18, 2018 said the investigation found that duties would raise costs for consumers and impose even more pain on the beleaguered swine industry which is suffering severe losses due to a 30-percent decline in hog prices since the beginning of the year:
The Ministry's "Announcement on termination of anti-dumping and anti-subsidy investigation of sorghum imported from United States" [关于终止对原产于美国的进口高粱反倾销反补贴调查的公告] released May 18, 2018 said the investigation found that duties would raise costs for consumers and impose even more pain on the beleaguered swine industry which is suffering severe losses due to a 30-percent decline in hog prices since the beginning of the year:
"In the process of the investigation, the investigating organizations received many reactions from downstream users who told the investigation that downstream livestock farming industry would experience higher costs. The anti-dumping and anti-subsidy measures would result in higher costs of living for the broad population of consumers and would not be in the public interest. The investigating organizations found that pork prices had recently been on a sustained declining trend, and many farmers are facing difficulties. In this situation, the anti-dumping and anti-subsidy measures are not in the public interest." [unofficial translation by dim sums blog]
Thursday, May 17, 2018
Corn Auctions Cost Billions
China is disgorging massive quantities of surplus corn from its reserves, but sales are costing the Chinese treasury billions of dollars.
Today China sold 1.4 million metric tons of corn from its "temporary reserve" at an average price of 1,401 yuan ($220.79) per metric ton. Most of that corn had been purchased during 2014 at support prices of 2220 yuan in Heilongjiang Province and 2260 yuan in Inner Mongolia and Liaoning Province. Thus, the sale recovered only about 62 percent of the price paid for the corn when in was purchased about 3 1/2 years ago. Additionally, authorities paid about 5% interest on loans used to buy the corn and about 86 yuan ($13.50) per ton per year to store the corn.
The total cost of corn auctioned can be estimated by applying these accounting calculations to auction results reported on www.grainmarket.com.cn.
The April-May auctions of corn have generated $5.9 billion (using an exchange rate of 6.35 yuan/dollar), but the original purchase cost of the corn was $8.9 billion. So auction sales, on average, recovered 64 percent of the original cost of the corn--not nearly enough to pay back the loans used to purchase the corn. Interest and storage cost for the corn added $3.4 billion, presumably paid for by subsidies from the Ministry of Finance. Thus, the corn cost $12.3 billion, but only $5.9 billion was generated from auction sales. The net cost to the Chinese government and/or banks of the corn sold is therefore $6.4 billion, or $249 per metric ton.
The 48.8 mmt auctioned during May-September 2017 (for which we could find auction results) generated $10.4 billion and cost $21.9 billion, a net cost of $11.5 billion for 48.8 mmt, or $236 per metric ton.
These costs do not include costs for unsold corn still held in inventories.
Officials are eager to sell corn since interest and storage costs go up and grain deteriorates the longer the grain is held.
Today China sold 1.4 million metric tons of corn from its "temporary reserve" at an average price of 1,401 yuan ($220.79) per metric ton. Most of that corn had been purchased during 2014 at support prices of 2220 yuan in Heilongjiang Province and 2260 yuan in Inner Mongolia and Liaoning Province. Thus, the sale recovered only about 62 percent of the price paid for the corn when in was purchased about 3 1/2 years ago. Additionally, authorities paid about 5% interest on loans used to buy the corn and about 86 yuan ($13.50) per ton per year to store the corn.
The total cost of corn auctioned can be estimated by applying these accounting calculations to auction results reported on www.grainmarket.com.cn.
| Estimated financial losses from China's auctions of corn from "temporary reserve", 2017-18 | ||
| Item | May-Sept 2017 | April-May 2018 |
| Million metric tons | ||
| Grain sold at auction | 48.8 | 25.7 |
| Billion dollars | ||
| Revenue from auction sales | 10.4 | 5.9 |
| − Purchase cost | -17.2 | -8.9 |
| − Cost of interest and storage | -4.7 | -3.4 |
| Total cost of grain | -21.9 | -12.3 |
| Assumes exchange rate of 6.35 RMB/US$; interest rate 5%; storage cost of 86 yuan/ton/year. Purchase cost based on temporary reserve prices. | ||
The April-May auctions of corn have generated $5.9 billion (using an exchange rate of 6.35 yuan/dollar), but the original purchase cost of the corn was $8.9 billion. So auction sales, on average, recovered 64 percent of the original cost of the corn--not nearly enough to pay back the loans used to purchase the corn. Interest and storage cost for the corn added $3.4 billion, presumably paid for by subsidies from the Ministry of Finance. Thus, the corn cost $12.3 billion, but only $5.9 billion was generated from auction sales. The net cost to the Chinese government and/or banks of the corn sold is therefore $6.4 billion, or $249 per metric ton.
The 48.8 mmt auctioned during May-September 2017 (for which we could find auction results) generated $10.4 billion and cost $21.9 billion, a net cost of $11.5 billion for 48.8 mmt, or $236 per metric ton.
These costs do not include costs for unsold corn still held in inventories.
Officials are eager to sell corn since interest and storage costs go up and grain deteriorates the longer the grain is held.
Sunday, May 13, 2018
China Adjusts "Go Global" Agriculture Program
China's foreign investment and cooperation in agriculture must recognize the "deep changes in the domestic and foreign environment," "seize opportunities" and "take the initiative" according to exhortations issued at a Ministry of Agriculture and Rural Affairs meeting of officials responsible for international cooperation held last week.
Officials were instructed to guide industries to shift investment to "belt and road" countries and the Indochina region of Southeast Asia. Other edicts were to:
There is nothing really new in last week's meeting. All the components have been included in China's recent under-the-radar program to make the country's overseas agricultural investments more effective.
A November 2016 Ministry of Agriculture circular "Program for Construction of 'Two Zones' for External Agricultural Cooperation" laid out an experimental program for trying out various support and development strategies for foreign investors in agriculture to carry out instructions in the State Council's "No. 1 Documents" to improve international cooperation in agriculture with "one belt, one road" countries and foster big grain traders and agribusiness conglomerates. Participating companies can be both state-owned and private, and non-agricultural companies are also encouraged.
In a two-year pilot program the strategy will throw different ideas at the wall and see which one sticks. "Two zones" refers to foreign "demonstration zones" and "experimental zones." Demonstration zones include various types of technology and industry parks and free trade zones with an emphasis on multiple Chinese businesses working together to form industry clusters and/or chains of industry: seeds, machinery, farming, marketing, processing and sales. "Experimental zones" are zones in China that will experiment with various policies to provide support to overseas investors in agriculture, including information databases, subsidized loans, insurance, training of companies and personnel. Companies could get help raising funds in capital markets, loan guarantees, priority in attaining national-level "dragon head enterprise" status, help with inspection and quarantine procedures. The document called for state-trading enterprises to use their tariff rate quotas to import products of Chinese companies investing in agriculture abroad.
Last July, the first ten demonstration and experimental zones were announced, and the top 100 overseas agricultural investment companies were announced in February 2018. Lists are shown below.
The first 10 demonstration zones included five in Africa, two in central Asia, two in southeast Asia, and a fishing industry zone in Fiji. The Tanzanian zone happens to be in a gold-mining region. Each zone is to be managed by a relatively anonymous provincial company:
Experimental zones include a mix of port cities, fishing industry centers, inland border crossings, a China-Singapore food trade zone, and a tropical agriculture institute, most managed by city or county governments.
A partial list of the top 100 companies designated for foreign investment in agriculture includes the top state-owned grain-trader COFCO, the top agribusiness conglomerate Guangming, many companies from the system of state farms, state-owned chemical companies, feed, seed, agricultural machinery, rubber, and fishery companies.
Officials were instructed to guide industries to shift investment to "belt and road" countries and the Indochina region of Southeast Asia. Other edicts were to:
- establish a complete agricultural trade policy system,
- actively participate in negotiations on international rules for trade and investment.
- Speed up nurture of a set of major international grain traders and agricultural enterprise conglomerates,
- encourage enterprises to optimize their industry and market layout worldwide.
There is nothing really new in last week's meeting. All the components have been included in China's recent under-the-radar program to make the country's overseas agricultural investments more effective.
A November 2016 Ministry of Agriculture circular "Program for Construction of 'Two Zones' for External Agricultural Cooperation" laid out an experimental program for trying out various support and development strategies for foreign investors in agriculture to carry out instructions in the State Council's "No. 1 Documents" to improve international cooperation in agriculture with "one belt, one road" countries and foster big grain traders and agribusiness conglomerates. Participating companies can be both state-owned and private, and non-agricultural companies are also encouraged.
In a two-year pilot program the strategy will throw different ideas at the wall and see which one sticks. "Two zones" refers to foreign "demonstration zones" and "experimental zones." Demonstration zones include various types of technology and industry parks and free trade zones with an emphasis on multiple Chinese businesses working together to form industry clusters and/or chains of industry: seeds, machinery, farming, marketing, processing and sales. "Experimental zones" are zones in China that will experiment with various policies to provide support to overseas investors in agriculture, including information databases, subsidized loans, insurance, training of companies and personnel. Companies could get help raising funds in capital markets, loan guarantees, priority in attaining national-level "dragon head enterprise" status, help with inspection and quarantine procedures. The document called for state-trading enterprises to use their tariff rate quotas to import products of Chinese companies investing in agriculture abroad.
Last July, the first ten demonstration and experimental zones were announced, and the top 100 overseas agricultural investment companies were announced in February 2018. Lists are shown below.
The first 10 demonstration zones included five in Africa, two in central Asia, two in southeast Asia, and a fishing industry zone in Fiji. The Tanzanian zone happens to be in a gold-mining region. Each zone is to be managed by a relatively anonymous provincial company:
| First set of Chinese foreign agriculture development zones, announced July 31, 2017 | |
| Zone name | Company responsible |
| Tajikstan-China Agricultural Cooperation Demonstration Park | Xinjiang Lihua Cotton Co. |
| Mozambique-China Agricultural Technology Demonstration Center | Hubei Province Lianfeng Overseas Agriculture Development Ltd Co |
| Jiangsu-Shinyanga Agricultural and Industrial Modern Industrial Park (Tanzania) | Jiangsu Haiqi Technology Engineering Ltd Co |
| Uganda-China Agricultural Cooperation Industry Park | Sichuan Youhao Hengyuan Agriculture Development Ltd Co |
| Star of Asia Agricultural Industry Cooperation Zone (Kyrgyzstan) | Henan Guiyou Shiye Group Ltd Co |
| Sudan-China Agricultural Cooperation Open Zone | Shandong International Economic Technology Cooperation Co |
| Laos-China Modern Agricultural Technology Demonstration Park | Shenzhen Huada Genetic Sci-tech Ltd Co |
| Cambodia-China Tropical Ecological Agricultural Cooperation Demonstraton Zone | Hainan Dingyi Luzhou Ecological Agriculture Ltd Co |
| Fiji-China Fishery Industry Comprehensive Industry Park | Shandong Lidao Ocean Technology Ltd Co |
| Zambia Agricultural Product Processing Cooperation Zone | Qingdao Ruichang Sci-Tech Industry Ltd Co |
Experimental zones include a mix of port cities, fishing industry centers, inland border crossings, a China-Singapore food trade zone, and a tropical agriculture institute, most managed by city or county governments.
| China Open Agriculture Experimental Zones, announced July 31, 2017 | |
| Zone name | Organizing Unit |
| Qionghai Open Agriculture Cooperation Experimental Zone | Hainan Qionghai City Government |
| Tropical Agriculture Open Cooperation Experimental Zone | China Institute for Tropical Agriculture |
| Lianyungang Open Agriculture Cooperation Experimental Zone | Jiangsu Lianyungang City Government |
| Jilin Zhongxin Food Zone Open Agriculture Cooperation Experimental Zone | Jilin (China-Singapore) Food Zone Management Commission |
| Jeminay Open Agriculture Cooperation Experimental Zone | Xinjiang AR, Jeminay County Government |
| Raoping Open Agriculture Cooperation Experimental Zone | Guangdong Province, Raoping County Government |
| Weifang Open Agriculture Cooperation Experimental Zone | Shandong Weifang City Government |
| Dongning Open Agriculture Cooperation Experimental Zone | Heilongjiang Dongning City Government |
| Rongcheng Open Agriculture Cooperation Experimental Zone | Shandong Rongcheng City Government |
| Binhai New District Open Agriculture Cooperation Experimental Zone | Tianjin Binhai District Government |
A partial list of the top 100 companies designated for foreign investment in agriculture includes the top state-owned grain-trader COFCO, the top agribusiness conglomerate Guangming, many companies from the system of state farms, state-owned chemical companies, feed, seed, agricultural machinery, rubber, and fishery companies.
| Sample list of 31 of the top 100 Chinese companies for foreign investment in agriculture, February 2018 |
| COFCO Group |
| Guangming Foods |
| Hainan Natural Rubber Industry Group |
| New Hope Liuhe Corporation |
| Shandong Ruyi Sci-Tech Group |
| Sinochem International |
| Lovol Corp |
| ChemChina Agricultural Chemicals |
| China National Fisheries Corp |
| Dakang International Food and Agriculture |
| Guangdong Guangken Rubber Group |
| Inner Mongolia Yili Group |
| Guangdong Haid Group |
| Tongwei Corp |
| Shanghai Fisheries Group |
| Yunnan State Farms Rubber Investment |
| Rugao Shuang Ma Chemical |
| Shandong Meijia Group |
| YTO Group |
| China State Farms Group |
| Xinjiang Production and Construction Corps Engineering |
| Tianjin Food Group |
| Shandong Sinotex |
| Beijing Nutrichem |
| Yuan Longping Agri-Tech |
| Jilin Province Jinda Foreign Agriculture Investment |
| China-Africa Agriculture Investment Co |
| Jiangsu Red Flag Seed Co |
| Beidahuang Rice Group International Rice (Beijing) |
| Chongqing Grain Group Haining Fudi Investment |
| Pu'er City Conghe Rubber |
Saturday, May 5, 2018
China Soybean Planting "Emergency" Declared
Two Chinese provinces issued orders to increase soybean planting this spring with promises of a big subsidy. It is unclear whether the "emergency" is a potential shrinkage of soybean imports from the United States or low soybean prices that threaten to derail China's multi-year effort to shift land from corn to soybeans.
Jilin Province issued a "circular on 2018 soybean planting task"《关于下达2018年全省大豆种植面积任务的通知》to township governments ordering local officials to expand soybean planting, and warning them that they must raise their "awareness and political standing" to decisively complete the task. Local officials were told to email their soybean plan to provincial officials by May 2. On April 28, Changchun municipality issued an "emergency notice on implementing the 2018 soybean planting task《关于迅速落实2018年大豆种植面积任务的紧急通知》which emphasized that "expanding soybean area is an important political task in agricultural production." Heilongjiang Province also issued an "emergency" circular to expand soybean planting this year.
The Jilin circular issued to Shuangliao District officials (see below) promises subsidies of 350 yuan per mu ($813 per hectare or nearly $344 per acre). A meeting convened by the vice mayor of Heihe City in Heilongjiang promised a 200-yuan/mu soybean producer subsidy and a 150-yuan subsidy for switching from corn to soybeans--the same as the 350-yuan subsidy /mu in Jilin. (Heihe's corn subsidy is 100 yuan/mu.)
Market prices for soybeans in Heilongjiang now range from 3.3 to 3.6 yuan/kg. With a yield of 140 kg/mu, the 350-yuan subsidy would add 70-to-75 percent to the 462-to-504 yuan/mu gross income per mu from growing soybeans. The subsidy is also roughly equal to the average rent for land in northeastern China.
Academy of Social Sciences Agricultural Economist Li Guoxiang told NBD News that the provincial soybean-planting campaigns are a continuation of the 5-year "supply side structural adjustment" program to shift land from corn to alternative crops as well as an effort to reduce reliance on soybean imports.
The big subsidies could have been prompted by the late realization that market conditions have severely eroded the profitability of soybeans for Chinese farmers: domestic soybean prices are down and corn prices are up. The monthly Ministry of Agriculture commodity market report released April 18 revealed that soybean prices in Heilongjiang Province are down 9.2 percent from a year ago, while corn prices in the province are up 12-to-18 percent from a year ago. National Bureau of Statistics farm producer price indexes show a similar pattern of rising corn prices and falling soybean prices from 2017 to 2018. These price movements seem likely to prompt farmers to switch from soybeans to corn, thus bringing the "supply side structural adjustment" program to a screeching halt in its third year.
Jilin Province issued a "circular on 2018 soybean planting task"《关于下达2018年全省大豆种植面积任务的通知》to township governments ordering local officials to expand soybean planting, and warning them that they must raise their "awareness and political standing" to decisively complete the task. Local officials were told to email their soybean plan to provincial officials by May 2. On April 28, Changchun municipality issued an "emergency notice on implementing the 2018 soybean planting task《关于迅速落实2018年大豆种植面积任务的紧急通知》which emphasized that "expanding soybean area is an important political task in agricultural production." Heilongjiang Province also issued an "emergency" circular to expand soybean planting this year.
The Jilin circular issued to Shuangliao District officials (see below) promises subsidies of 350 yuan per mu ($813 per hectare or nearly $344 per acre). A meeting convened by the vice mayor of Heihe City in Heilongjiang promised a 200-yuan/mu soybean producer subsidy and a 150-yuan subsidy for switching from corn to soybeans--the same as the 350-yuan subsidy /mu in Jilin. (Heihe's corn subsidy is 100 yuan/mu.)
Market prices for soybeans in Heilongjiang now range from 3.3 to 3.6 yuan/kg. With a yield of 140 kg/mu, the 350-yuan subsidy would add 70-to-75 percent to the 462-to-504 yuan/mu gross income per mu from growing soybeans. The subsidy is also roughly equal to the average rent for land in northeastern China.
 |
| "circular on 2018 soybean planting task" issued to local governments in Jilin Province's Shuangliao municipality. |
The big subsidies could have been prompted by the late realization that market conditions have severely eroded the profitability of soybeans for Chinese farmers: domestic soybean prices are down and corn prices are up. The monthly Ministry of Agriculture commodity market report released April 18 revealed that soybean prices in Heilongjiang Province are down 9.2 percent from a year ago, while corn prices in the province are up 12-to-18 percent from a year ago. National Bureau of Statistics farm producer price indexes show a similar pattern of rising corn prices and falling soybean prices from 2017 to 2018. These price movements seem likely to prompt farmers to switch from soybeans to corn, thus bringing the "supply side structural adjustment" program to a screeching halt in its third year.
 |
| Changchun emergency notice says expanding soybean planting is an important political task. |
 |
| Meeting in Heihe City promised subsidies of 200 yuan and 150 yuan for growing soybeans. |
Wednesday, May 2, 2018
Xinjiang Leads China Wheat Policy Reform
China's Xinjiang Autonomous Region says it will replace a support price for wheat with market-determined prices supplemented by a bigger direct payment to farmers, according to Grain and Oils News. A grain official said the policy adjustment is intended to address the province's surplus of low-quality wheat which has overwhelmed storage facilities.
Since 2004, Xinjiang has set a support price for wheat and given farmers subsidy of 0.3 yuan for each kilogram of wheat they sold to state-owned enterprises. Since 2009, the region has set an annual plan to purchase 1.5 mmt of wheat for a "temporary reserve." An official said that paying farmers based purely on the weight of grain sold encouraged them to produce maximum quantities without regard to quality. The policy was set to ensure that the region -- in China's northwest far removed from the main wheat-producing regions -- could meet its food needs with a small surplus. Instead, an official told Grain and Oils News, farmers produced a bloated surplus and there is no room in storage facilities. Farmers became overly reliant on selling to the government, and undermined the marketing system, officials explained.
This year Xinjiang will begin "supply side structural reform" for wheat. Officials say the wheat price for farmers will be set by the market, with prices rewarding farmers for high quality wheat demanded by the market. "Diverse players" will enter the market, and Xinjiang will no longer carry out the 1.5-mmt "temporary reserve" purchase plan.
The government will still have a significant role, however. An annual wheat production plan will be drawn up for each county. Pilot programs will promote selenium-enriched wheat, organic wheat, and strong gluten wheat and brands in various regions. Minimum and maximum inventory guidelines will be issued to warehouses and mills. Banks will be instructed to set aside funds to finance grain purchases by marketing enterprises, and interest rates will be subsidized.
Farmers will get more generous subsidies. The "cultivated land fertility protection" subsidy will be increased by 30 yuan per mu for winter wheat and 15 yuan for spring wheat to ensure that grain is profitable enough to attract farmers, Grain and Oils News said. Information about this subsidy is elusive. Funds are issued to counties which set the amount of the subsidy.
News items say farmers who grow wheat, corn for silage, alfalfa, field corn and unspecified specialty crops are eligible for the land fertility protection subsidy. (Cotton, sugar beet producers are not eligible--they have their own subsidies.) In one region, a calculation indicates the land fertility subsidy was 56 yuan/mu in 2017 and would therefore be 86 yuan/mu this year. In Wusu prefecture, a document specifies a subsidy of 100 yuan/mu for producers of wheat, corn for silage, alfalfa, and 18 yuan/mu for field corn, tomatoes for processing, sunflowers, and melons. The same subsidies were announced for Bayingol Meng Prefecture in January and for Yili Kazakh Prefecture in 2016.
In principle, the land fertility subsidy is intended to pay for measures to restore soil fertility, but no conditions for receiving the subsidies are specified.
A reform of wheat policy announced in Xinjiang may indicate China's new direction for food grain policy. The minimum procurement price policy for the core wheat regions of Hebei, Henan, Shandong, Jiangsu, Anhui, and Hubei has always been distinct from Xinjiang's wheat policy. A Ministry of Agriculture report on supply side structural reform for wheat issued in 2017 also blamed the price support program for prompting farmers to produce excess supplies of moderate-gluten wheat because it rewards them for test weight and low proportion of imperfect kernels but not for gluten or protein content. A Chinese Academy of Agricultural Sciences study of wheat samples from 2006 to 2015 found that the proportion of wheat meeting standards for strong gluten declined by half over the period and the proportion meeting weak-gluten standards remained minimal over the study period.
A similar strategy of direct payments in exchange for reducing support prices has been promised for rice this year, but no concrete measures have been announced.
Since 2004, Xinjiang has set a support price for wheat and given farmers subsidy of 0.3 yuan for each kilogram of wheat they sold to state-owned enterprises. Since 2009, the region has set an annual plan to purchase 1.5 mmt of wheat for a "temporary reserve." An official said that paying farmers based purely on the weight of grain sold encouraged them to produce maximum quantities without regard to quality. The policy was set to ensure that the region -- in China's northwest far removed from the main wheat-producing regions -- could meet its food needs with a small surplus. Instead, an official told Grain and Oils News, farmers produced a bloated surplus and there is no room in storage facilities. Farmers became overly reliant on selling to the government, and undermined the marketing system, officials explained.
This year Xinjiang will begin "supply side structural reform" for wheat. Officials say the wheat price for farmers will be set by the market, with prices rewarding farmers for high quality wheat demanded by the market. "Diverse players" will enter the market, and Xinjiang will no longer carry out the 1.5-mmt "temporary reserve" purchase plan.
The government will still have a significant role, however. An annual wheat production plan will be drawn up for each county. Pilot programs will promote selenium-enriched wheat, organic wheat, and strong gluten wheat and brands in various regions. Minimum and maximum inventory guidelines will be issued to warehouses and mills. Banks will be instructed to set aside funds to finance grain purchases by marketing enterprises, and interest rates will be subsidized.
Farmers will get more generous subsidies. The "cultivated land fertility protection" subsidy will be increased by 30 yuan per mu for winter wheat and 15 yuan for spring wheat to ensure that grain is profitable enough to attract farmers, Grain and Oils News said. Information about this subsidy is elusive. Funds are issued to counties which set the amount of the subsidy.
News items say farmers who grow wheat, corn for silage, alfalfa, field corn and unspecified specialty crops are eligible for the land fertility protection subsidy. (Cotton, sugar beet producers are not eligible--they have their own subsidies.) In one region, a calculation indicates the land fertility subsidy was 56 yuan/mu in 2017 and would therefore be 86 yuan/mu this year. In Wusu prefecture, a document specifies a subsidy of 100 yuan/mu for producers of wheat, corn for silage, alfalfa, and 18 yuan/mu for field corn, tomatoes for processing, sunflowers, and melons. The same subsidies were announced for Bayingol Meng Prefecture in January and for Yili Kazakh Prefecture in 2016.
In principle, the land fertility subsidy is intended to pay for measures to restore soil fertility, but no conditions for receiving the subsidies are specified.
A reform of wheat policy announced in Xinjiang may indicate China's new direction for food grain policy. The minimum procurement price policy for the core wheat regions of Hebei, Henan, Shandong, Jiangsu, Anhui, and Hubei has always been distinct from Xinjiang's wheat policy. A Ministry of Agriculture report on supply side structural reform for wheat issued in 2017 also blamed the price support program for prompting farmers to produce excess supplies of moderate-gluten wheat because it rewards them for test weight and low proportion of imperfect kernels but not for gluten or protein content. A Chinese Academy of Agricultural Sciences study of wheat samples from 2006 to 2015 found that the proportion of wheat meeting standards for strong gluten declined by half over the period and the proportion meeting weak-gluten standards remained minimal over the study period.
A similar strategy of direct payments in exchange for reducing support prices has been promised for rice this year, but no concrete measures have been announced.