Sunday, October 28, 2018
Chinese Statistical Fakers Punished
Chinese companies are being punished for falsifying statistics they report to government statistical bureaus. Since last year the National Bureau of Statistics has been checking local statistics for falsification and misreporting. The Bureau has caught 97 companies in five provinces who will be assessed penalties, have their names published on a black list, and be reported to the "Credit China" web site and a national credit information sharing system. A list of 45 companies in Liaoning, Anhui, Fujian, Shandong, Sichuan, and Guizhou guilty of severe statistical falsification was published with the article. Another 54 companies have a second chance before they will be sanctioned.
Low Protein Feed Standards Approved
China's Feed Industry Association has approved release of new swine and poultry feed standards calling for reduced protein content. The association described the standards as a "milestone" that will improve feed efficiency, relieve stress on the environment, and reduce China's longstanding reliance on imported protein materials for feed.
At the October 26 meeting announcing the release, the association said current high rates of inclusion of soybean meal and other protein in livestock feed reduce efficiency and stress animals' metabolism. Low absorption rates means large amounts of nutrients are excreted in waste, becoming a major rural environmental problem.
The association's new standards for feeder pigs, finishing hogs, layer hens and broiler chickens add upper limits on protein and phosphorus, reduce lower limits on protein inclusion, allow more synthetic amino acids, and reclassify animal growth stages in comparison with national standards published in 2008. The association claims that adding amino acids while reducing protein intake will not affect the animal's growth rate or time on feed.
According to the association, the new standard reduces the proportion of protein in pig feed by 1.5 percentage points and 1 percentage point for broiler feed, on average. The amount of protein needed to produce 1 kilogram of pork is reduced from .45 kg to .39 kg, a 13% reduction. The new standard could reduce soybean meal needs by 11 million metric tons annually, the association claimed--equal to a 14-mmt reduction in soybean needs.
These standards are recommendations issued by the association, a semi-governmental organization that was part of the Ministry of Agriculture until the 1990s. They will not necessarily be adopted immediately by all feed mills and producers, although there will likely be political pressure to do so as a measure to avoid importing U.S. soybeans over the next three months.
At the October 26 meeting announcing the release, the association said current high rates of inclusion of soybean meal and other protein in livestock feed reduce efficiency and stress animals' metabolism. Low absorption rates means large amounts of nutrients are excreted in waste, becoming a major rural environmental problem.
The association's new standards for feeder pigs, finishing hogs, layer hens and broiler chickens add upper limits on protein and phosphorus, reduce lower limits on protein inclusion, allow more synthetic amino acids, and reclassify animal growth stages in comparison with national standards published in 2008. The association claims that adding amino acids while reducing protein intake will not affect the animal's growth rate or time on feed.
According to the association, the new standard reduces the proportion of protein in pig feed by 1.5 percentage points and 1 percentage point for broiler feed, on average. The amount of protein needed to produce 1 kilogram of pork is reduced from .45 kg to .39 kg, a 13% reduction. The new standard could reduce soybean meal needs by 11 million metric tons annually, the association claimed--equal to a 14-mmt reduction in soybean needs.
These standards are recommendations issued by the association, a semi-governmental organization that was part of the Ministry of Agriculture until the 1990s. They will not necessarily be adopted immediately by all feed mills and producers, although there will likely be political pressure to do so as a measure to avoid importing U.S. soybeans over the next three months.
Wednesday, October 24, 2018
Brazil Overtakes U.S. as top Ag Import Supplier to China
Brazil has overtaken the United States as China's leading supplier of agricultural imports, as China's retaliatory tariffs begin to bite. Tabulations of imports in broad categories posted by China's customs administration indicate that imports of food and agricultural products from Brazil totaled $3.6 billion during September 2018, about 30% of the total. Imports from the United States were $625 million--a 5% share.
China's imports from the U.S. normally fall to a seasonal low during the summer months. The September data are the first to reveal impacts of China's tariff retaliation. China's imports of U.S. ag products during September 2018 were down $690 million from a year earlier--a much larger margin than in July (when most tariffs took effect) and August. China's imports from the U.S. normally jump during November and December as soybeans from the U.S. harvest become available. It's possible imports from the U.S. could be down year-on-year by as much as $2 billion during those months if China minimizes soybean imports from the U.S.
China's imports of ag products from Brazil were up more than $1 billion y-o-y in September. Imports from Brazil have been up from last year in 4 of the last 5 months.
Most of Brazil's dominance is in soybeans. In September, Brazil supplied 84% of China's imports in the category HS 12 (mainly soybeans, as well as other oilseeds and hay). The U.S. supplied 2.9% of imports in HS 12, while Canada supplied 4.9%, and Argentina supplied 1.8%. China's year-one-year decline in imports of U.S. soybeans was largest during January-March--before trade tensions got into full swing. The real impact of trade tensions will become evident during the next 3 months which are typically the peak season for China's purchases of U.S. soybeans.
Brazil is also China's top meat import supplier. In September Brazil supplied 28% of meat imports and the U.S. supplied just 2%. Other major suppliers were the European Union (19.7%), Australia (14.9%), Argentina and New Zealand (about 10% each). The decline in meat imports from the U.S. began in May, after the first tariff on U.S. pork was imposed.
Apart from soybeans, China's imports of U.S. grains, animal hides, fruit and nuts, dairy, meat, and cotton were down from a year ago. Imports of U.S. seafood rebounded in September.
China's imports of sorghum and corn fell to minimal volumes during September. Imports of barley have been relatively resilient. Much of the decline in grain imports reflects near elimination of imports of U.S. grain.
Brazil is also China's top meat import supplier. In September Brazil supplied 28% of meat imports and the U.S. supplied just 2%. Other major suppliers were the European Union (19.7%), Australia (14.9%), Argentina and New Zealand (about 10% each). The decline in meat imports from the U.S. began in May, after the first tariff on U.S. pork was imposed.
Monday, October 22, 2018
Crushers Confident, Nervous About Tight Supplies
Soybean crushers anticipated making it through the next few months without U.S. soybeans in an October 14 article published in the communist party's Futures Daily, but they also expressed trepidation about tight soybean supplies.
A futures analyst investigated the demand for soybean meal, the effect of trade tensions on soybean supplies and the impact of African swine fever on feed demand in the region by visiting 5 soybean crushing plants, three feed mills and a large integrated livestock company in Liaoning Province. This is a relatively small slice of China's soybean market compared to much larger crushers and feed mills in Shandong, Jiangsu and other coastal provinces further south.
The 25-percent tariff on U.S. soybeans appears to have morphed into a boycott. All of the companies interviewed presumed there would be no imports of U.S. soybeans in the fourth quarter of 2018. There was no consideration that they might buy if the price is right--even though U.S. soybeans with the 25% tariff are cheaper than Brazilian or Chinese soybeans at present. Even a foreign-owned crusher said their company would/could not import U.S. soybeans. Other Chinese news media include similar assumptions of zero imports of U.S. soybeans. Chinese media was quick to counter news from "foreign media" that two cargoes of U.S. soybeans were headed for China by trotting out buyers who insisted the shipments had been purchased in March and April--before trade tensions began in earnest--and they had not purchased any U.S. soybeans since then.
Crushers interviewed by the futures analyst said they have stocked up on Brazilian soybeans and they think they have enough to continue operations through December or January without importing U.S. soybeans. They appear confident they can make it through the next three months, but they anticipate soybean supplies will be "tight." In this article and others, everyone says they expect a soybean deficit of "10 million tons or so." The strategy of stocking up on extra Brazilian soybeans may be difficult to sustain in a drawn-out trade war of more than a year. Stocks will be scraping bottom by the time new soybeans are available from Brazil.
Most of their soybeans are stored in large warehouses at the Dalian and Yingkou ports in Liaoning Province. One crusher transports soybeans by rail from Dalian on a daily basis. Crushers store smaller amounts of soybean meal and oil which they sell mainly in the surrounding region of Liaoning and adjoining provinces.
Crushers sell directly to feed mills, both in bags and in bulk. According to one feed mill, over 90% of commercial feed in this region is produced for chickens and aquaculture and relatively little for hogs. However, a branch of one large integrated feed-livestock company said it produces 300,000 metric tons of feed for swine. Because corn is widely available in the northeastern region, one feed mill said most swine feed is concentrate (mainly soy meal, vitamins and trace elements) and premixes that are mixed with local corn. However, a large feed company says about two-thirds of its production is complete formulated feed for swine. Feed mills agreed that demand for poultry, aquaculture, beef cattle, and sheep is more vigorous than pork demand this year. One said pig feed sales are down this year.
Northeastern China is experiencing expansion of swine production and feed in response to the government's policy of "raising pigs in the north for the south" which has encouraged a shift of swine production from environmentally-stressed areas of the south to the Northeast region. The analysts were told that the expansion is ongoing and only a minor part of the planned new capacity has come online already. There has also been an expansion of crushing capacity--several crushing plants said they had built new production lines with capacity of 2,500-to-3000 metric tons per day. Companies said they expected expansion of soybean meal production to eventually saturate the market (not considering the effects of this year's trade tensions), and shipments of soybean meal from Shandong and other regions to the Northeast would shrink or vanish.
The poultry integrator said they vary the proportion of soybean meal in feed between 15% and 25%, depending on relatively prices of ingredients. The proportion is now at the bottom of the range. The large feed company branch said they use 15%-16% soybean meal in swine feed and may adjust it slightly as the meal price rises. One manager said mills had reduced soy meal use by 3%-to-4% in response to the government's call to cut back on soy meal. Another feed mill said there is some flexibility to adjust soymeal proportion in feed for laying hens but they are trying to keep the proportion stable in pig feed. The northeast region has access to relatively few substitutes for soybean meal. One mill buys some rapeseed from Inner Mongolia and another said they can use small amounts of peanut meal, but no palm kernel meal. Two feed mills said feed price increases are likely as raw material prices rise.
The companies seemed relatively unconcerned about impacts of African swine fever. They said the government's 1,200 yuan-per-head subsidy for culled pigs was enough to encourage farmers to comply with mandated culling in the 3-kilometer radius around outbreaks of the disease. They said the number of pigs culled is a tiny proportion of national production, but they agreed that African swine fever is inducing farmers to scale back plans to expand herds. One large company has put on hold plans to open a large pig breeding farm.
A futures analyst investigated the demand for soybean meal, the effect of trade tensions on soybean supplies and the impact of African swine fever on feed demand in the region by visiting 5 soybean crushing plants, three feed mills and a large integrated livestock company in Liaoning Province. This is a relatively small slice of China's soybean market compared to much larger crushers and feed mills in Shandong, Jiangsu and other coastal provinces further south.
The 25-percent tariff on U.S. soybeans appears to have morphed into a boycott. All of the companies interviewed presumed there would be no imports of U.S. soybeans in the fourth quarter of 2018. There was no consideration that they might buy if the price is right--even though U.S. soybeans with the 25% tariff are cheaper than Brazilian or Chinese soybeans at present. Even a foreign-owned crusher said their company would/could not import U.S. soybeans. Other Chinese news media include similar assumptions of zero imports of U.S. soybeans. Chinese media was quick to counter news from "foreign media" that two cargoes of U.S. soybeans were headed for China by trotting out buyers who insisted the shipments had been purchased in March and April--before trade tensions began in earnest--and they had not purchased any U.S. soybeans since then.
Crushers interviewed by the futures analyst said they have stocked up on Brazilian soybeans and they think they have enough to continue operations through December or January without importing U.S. soybeans. They appear confident they can make it through the next three months, but they anticipate soybean supplies will be "tight." In this article and others, everyone says they expect a soybean deficit of "10 million tons or so." The strategy of stocking up on extra Brazilian soybeans may be difficult to sustain in a drawn-out trade war of more than a year. Stocks will be scraping bottom by the time new soybeans are available from Brazil.
Most of their soybeans are stored in large warehouses at the Dalian and Yingkou ports in Liaoning Province. One crusher transports soybeans by rail from Dalian on a daily basis. Crushers store smaller amounts of soybean meal and oil which they sell mainly in the surrounding region of Liaoning and adjoining provinces.
Crushers sell directly to feed mills, both in bags and in bulk. According to one feed mill, over 90% of commercial feed in this region is produced for chickens and aquaculture and relatively little for hogs. However, a branch of one large integrated feed-livestock company said it produces 300,000 metric tons of feed for swine. Because corn is widely available in the northeastern region, one feed mill said most swine feed is concentrate (mainly soy meal, vitamins and trace elements) and premixes that are mixed with local corn. However, a large feed company says about two-thirds of its production is complete formulated feed for swine. Feed mills agreed that demand for poultry, aquaculture, beef cattle, and sheep is more vigorous than pork demand this year. One said pig feed sales are down this year.
Northeastern China is experiencing expansion of swine production and feed in response to the government's policy of "raising pigs in the north for the south" which has encouraged a shift of swine production from environmentally-stressed areas of the south to the Northeast region. The analysts were told that the expansion is ongoing and only a minor part of the planned new capacity has come online already. There has also been an expansion of crushing capacity--several crushing plants said they had built new production lines with capacity of 2,500-to-3000 metric tons per day. Companies said they expected expansion of soybean meal production to eventually saturate the market (not considering the effects of this year's trade tensions), and shipments of soybean meal from Shandong and other regions to the Northeast would shrink or vanish.
The poultry integrator said they vary the proportion of soybean meal in feed between 15% and 25%, depending on relatively prices of ingredients. The proportion is now at the bottom of the range. The large feed company branch said they use 15%-16% soybean meal in swine feed and may adjust it slightly as the meal price rises. One manager said mills had reduced soy meal use by 3%-to-4% in response to the government's call to cut back on soy meal. Another feed mill said there is some flexibility to adjust soymeal proportion in feed for laying hens but they are trying to keep the proportion stable in pig feed. The northeast region has access to relatively few substitutes for soybean meal. One mill buys some rapeseed from Inner Mongolia and another said they can use small amounts of peanut meal, but no palm kernel meal. Two feed mills said feed price increases are likely as raw material prices rise.
The companies seemed relatively unconcerned about impacts of African swine fever. They said the government's 1,200 yuan-per-head subsidy for culled pigs was enough to encourage farmers to comply with mandated culling in the 3-kilometer radius around outbreaks of the disease. They said the number of pigs culled is a tiny proportion of national production, but they agreed that African swine fever is inducing farmers to scale back plans to expand herds. One large company has put on hold plans to open a large pig breeding farm.
Wednesday, October 17, 2018
African swine fever case list
African swine fever continues to spread in China. Most new cases this month have been in Liaoning Province, and large farms with thousands of head have been infected. Today, the Ministry of Agriculture acknowledged the first case in Shanxi Province (although previous reports found infected meat in markets in Shanxi earlier this month). Below is a compilation of all the cases reported on the Ministry of Agriculture and Rural Affairs web site since August 1, 2018.
| African swine fever cases reported by China Ministry of Agriculture and Rural Affairs (NR=not reported) | |||||||
| Month | Day | Province | City | Location | Farm size (head) |
Sickened | Mortality |
| Oct | 17 | Shanxi | Datong | Farm | 15 | 7 | 4 |
| Oct | 16 | Liaoning | Panjin City | Farm | 161 | 43 | 43 |
| Oct | 15 | Liaoning | Tieling City | Farmer co-op | 6,640 | 50 | 14 |
| Oct | 15 | Liaoning | Tieling City | Farm | 4,323 | 1,030 | 1,030 |
| Oct | 15 | Liaoning | Tieling City | Farm | 3,223 | 31 | 20 |
| Oct | 14 | Liaoning | Jinzhou City | Farm | 19,938 | 221 | 221 |
| Oct | 14 | Liaoning | Jinzhou City | Farm | 1,571 | 109 | 109 |
| Oct | 14 | Liaoning | Jinzhou City | Farm | 270 | 129 | 129 |
| Oct | 14 | Liaoning | Anshan City | Farm | 180 | 14 | 14 |
| Oct | 12 | Tianjin | Yinzhou District | Farm | 639 | 292 | 189 |
| Oct | 12 | Liaoning | Anshan City | Farm | 120 | 88 | 72 |
| Oct | 11 | Liaoning | Dalian City | Farm | 1,353 | 20 | 11 |
| Oct | 8 | Liaoning | Anshan City | Farm | 460 | 160 | 160 |
| Oct | 7 | Liaoning | Yingkou City | Farm | 3,358 | 334 | 93 |
| Sept | 28 | Liaoning | Yingkou City | Five farms | 378 | NR | 102 |
| Sept | 28 | Jilin | Songyuan City | Farm | 44 | 8 | 3 |
| Sept | 22 | Inner Mongolia | Hohhot | Slaughterhouse | 388 | 4 | 2 |
| Sept | 17 | Jilin | Gongzhuling | Farm | 484 | 56 | 56 |
| Sept | 17 | Inner Mongolia | Xing'an League | Farm | 138 | 23 | 22 |
| Sept | 15 | Inner Mongolia | Xilin Gol League | Farm | 159 | 14 | 8 |
| Sept | 12 | Inner Mongolia | Abaqi Banner | Farm | NR | 16 | 16 |
| Sept | 12 | Henan | Jiaxian County | Farm | NR | 148 | 64 |
| Sept | 12 | Inner Mongolia | Xilin Gol League | Farm | NR | 16 | 16 |
| Sept | 12 | Henan | Xinxiang City | Farm | NR | 148 | 64 |
| Sept | 10 | Anhui | Tongling City | Farm | 219 | 63 | 23 |
| Sept | 6 | Heilongjiang | Jiamusi City | Farm | 203 | 26 | 10 |
| Sept | 6 | Anhui | Wuhu City | Farm | 30 | 13 | 4 |
| Sept | 6 | Anhui | Xuancheng City | Farm | 52 | 15 | 15 |
| Sept | 6 | Anhui | Quzhou City | Farm | 886 | 62 | 22 |
| Sept | 5 | Heilongjiang | Jiamusi City | Farm | 87 | 39 | 12 |
| Sept | 3 | Jiangsu | Wuxi City | Farm | 97 | 12 | 9 |
| Sept | 3 | Anhui | Xuancheng City | Farm | 308 | 152 | 83 |
| Sept | 2 | Anhui | Xuancheng City | Farm | 285 | NR | 40 |
| Sept | 2 | Anhui | Xuancheng City | Farm | 440 | NR | 94 |
| Aug | 29 | Anhui | Wuhu City | Farm | 459 | 185 | 80 |
| Aug | 17 | Zhejiang | Wenzhou City | 3 Farmers | NR | 430 | 340 |
| Aug | 15 | Jiangsu | Lianyungang | Farm | NR | 615 | 88 |
| Aug | 14 | Henan | Zhengzhou | Slaughterhouse | 260 | 30 | 30 |
| Aug | 1 | Liaoning | Shenyang City | farm | 383 | 47 | 47 |
China Wheat Sales Plunge; Reserves Auctioned
Chinese farmers' wheat sales were down 30 percent this year, but the State Administration of Grain and Commodity Reserves says not to worry because there are plenty of reserves. Authorities plan to offer 2 million metric tons of wheat reserves for sale weekly to ensure stable supplies, but results of the first auction were underwhelming.
Grain Administration statistics say a total of 50.15 mmt was procured from this year's wheat harvest as of September 30, 2018, the end of the main procurement season. That was 21.9 mmt less--about 30% less--than the volume of wheat procured during 2017. By comparison, the National Bureau of Statistics estimated that wheat production was 128.35 mmt, down 2.4% from last year. If these numbers are both true, farmers have sold less than 40% of the wheat they produced.
The Grain Reserve Administration explains that the sharp drop in wheat sales is due to a combination of policy reforms and weather factors. This year the minimum price procurement program was reformed to make policy-type procurement a supplement--not the primary marketing channel for wheat. The Reserve Administration says 90% of wheat sales this year were to "marketized" purchasers (not to government granaries), up 30 percentage points from last year. Consequently, farmers are holding their wheat longer and have retained a higher proportion of wheat beyond September 30 than usual.
The Administration also attributes the decline in sales to lower production and poor quality of this year's wheat harvest in Hubei, Anhui, and Henan Province. The Reserve administration says farmers in these regions have retained much of their wheat to use as animal feed or sold it to neighbors for that purpose. Statistics show that wheat sales were down nearly half in Henan, the biggest wheat-producing province, and in Anhui.
The Administration said that wheat prices are stable and a rational price premium of 10% or so has emerged for quality wheat. The Administration emphasizes that imports of wheat from Canada and Australia are used to mix with domestic wheat, imports are "small," and China has a high degree of self-sufficiency. Last year's imports of 4.4 mmt equaled 3% of consumption, the Administration said. Wheat imports for January-August 2018 totaled 2.23 mmt, down 1 mmt.
[This blog notes that the 2017 imports of 4.4 mmt would have equaled 6% of the volume of wheat that actually entered formal marketing channels.]
While the Administration insists that the poor quality wheat crop had minimal effect on supply and demand, it nevertheless announces that auctions of wheat from reserves have been resumed this week to ensure stable supplies and stable prices. Plans are to offer 2 mmt of reserve wheat for auction each week.
The first auction on October 10 sold 143,629 mt of the nearly 2 mmt offered, at an average price of 2,427 yuan/mt (about $353/mt). The wheat was from 2013, 2014, and 2015.
Grain Administration statistics say a total of 50.15 mmt was procured from this year's wheat harvest as of September 30, 2018, the end of the main procurement season. That was 21.9 mmt less--about 30% less--than the volume of wheat procured during 2017. By comparison, the National Bureau of Statistics estimated that wheat production was 128.35 mmt, down 2.4% from last year. If these numbers are both true, farmers have sold less than 40% of the wheat they produced.
| China 2018 wheat procurement | ||
| Province | 2018 volume | change from 2017 |
| Million metric tons | ||
| Henan | 12.065 | -10.97 |
| Jiangsu | 10.207 | -2.212 |
| Shandong | 9.274 | -1.574 |
| Anhui | 5.325 | -4.566 |
| Hebei | 4.698 | -1.094 |
| Hubei | 1.605 | -0.916 |
| Total | 50.152 | -21.907 |
The Grain Reserve Administration explains that the sharp drop in wheat sales is due to a combination of policy reforms and weather factors. This year the minimum price procurement program was reformed to make policy-type procurement a supplement--not the primary marketing channel for wheat. The Reserve Administration says 90% of wheat sales this year were to "marketized" purchasers (not to government granaries), up 30 percentage points from last year. Consequently, farmers are holding their wheat longer and have retained a higher proportion of wheat beyond September 30 than usual.
The Administration also attributes the decline in sales to lower production and poor quality of this year's wheat harvest in Hubei, Anhui, and Henan Province. The Reserve administration says farmers in these regions have retained much of their wheat to use as animal feed or sold it to neighbors for that purpose. Statistics show that wheat sales were down nearly half in Henan, the biggest wheat-producing province, and in Anhui.
The Administration said that wheat prices are stable and a rational price premium of 10% or so has emerged for quality wheat. The Administration emphasizes that imports of wheat from Canada and Australia are used to mix with domestic wheat, imports are "small," and China has a high degree of self-sufficiency. Last year's imports of 4.4 mmt equaled 3% of consumption, the Administration said. Wheat imports for January-August 2018 totaled 2.23 mmt, down 1 mmt.
[This blog notes that the 2017 imports of 4.4 mmt would have equaled 6% of the volume of wheat that actually entered formal marketing channels.]
While the Administration insists that the poor quality wheat crop had minimal effect on supply and demand, it nevertheless announces that auctions of wheat from reserves have been resumed this week to ensure stable supplies and stable prices. Plans are to offer 2 mmt of reserve wheat for auction each week.
The first auction on October 10 sold 143,629 mt of the nearly 2 mmt offered, at an average price of 2,427 yuan/mt (about $353/mt). The wheat was from 2013, 2014, and 2015.
Sunday, October 14, 2018
China Sept Soybean Imports 8mmt
China's September imports of soybeans and other agricultural products were relatively steady, and the market-year total was slightly ahead of last year's. But Brazil's supply of soybeans is entering its seasonal lull.
The value of September agricultural imports reported by China Customs was $11.8 billion, down from $12.7 billion in August, but 8.8% more than the $10.66 billion imported a year ago during September 2017. September soybean imports were valued at $3.43 billion, down from nearly $4 billion in August but slightly ahead of the $3.3 billion value from a year earlier.
The volume of soybean imports totaled 8 million metric tons during September, down from 9.15 mmt imported during August, but nearly identical to the volume imported a year earlier. According to customs statistics, the 12-month import total for October 2017-September 2018 was 94 million metric tons, up from 93.5 mmt during 2016/17.
The average value of soybean imports per metric ton actually fell slightly during September. The average $428 per metric ton was down from $433 in August, but about 5% higher than a year earlier.
Meanwhile, Brazilian customs data show that China got 55 mmt of the 69 mmt of soybeans Brazil exported during January-September 2018. In August (which would roughly correspond to China's September imports) Brazil exported 6.9 mmt of soybeans to China. Brazil's soybean exports to China fell to 4.2 mmt in September as Brazil's supplies started to run low.
Chinese market commentary has noted that Brazilian prices quoted to Chinese importers have started to rise in recent weeks. U.S. soybean prices have fallen low enough to be roughly comparable to Brazilian prices after assessing China's 25% retaliatory tariff on the U.S. beans. On October 12, the National Grain and Oils Information Center estimated that the CNF price of Brazilian soybeans for arrival in China was $465/mt, about 25% higher than the $348/mt CNF price for soybeans from the U.S. Gulf of Mexico. After adding tariffs, value added tax, and unloading fees, Brazilian beans would cost RMB 3708/mt and U.S. Gulf beans would cost RMB 3666/mt.
Chinese commentators agree that the November-January months will be the key period for determining how China's soybean and soybean meal markets are able to withstand the impacts of trade tensions with the United States. One commentator foresees a soybean supply deficit of "about 10 million metric tons."
Soybean meal stocks in China are reported to be at a comfortable level, but speculation about the prospects for supply and demand in coming months has driven cash prices up. According to quotes posted on ncpqh.com, soybean meal prices on October 12 were up 11% higher from a month earlier. The November-January months are typically peak production months as livestock producers gear up for the winter holidays. However, this year there is much uncertainty about how African Swine Fever will affect swine production.
The value of September agricultural imports reported by China Customs was $11.8 billion, down from $12.7 billion in August, but 8.8% more than the $10.66 billion imported a year ago during September 2017. September soybean imports were valued at $3.43 billion, down from nearly $4 billion in August but slightly ahead of the $3.3 billion value from a year earlier.
The volume of soybean imports totaled 8 million metric tons during September, down from 9.15 mmt imported during August, but nearly identical to the volume imported a year earlier. According to customs statistics, the 12-month import total for October 2017-September 2018 was 94 million metric tons, up from 93.5 mmt during 2016/17.
The average value of soybean imports per metric ton actually fell slightly during September. The average $428 per metric ton was down from $433 in August, but about 5% higher than a year earlier.
Chinese commentators agree that the November-January months will be the key period for determining how China's soybean and soybean meal markets are able to withstand the impacts of trade tensions with the United States. One commentator foresees a soybean supply deficit of "about 10 million metric tons."
Soybean meal stocks in China are reported to be at a comfortable level, but speculation about the prospects for supply and demand in coming months has driven cash prices up. According to quotes posted on ncpqh.com, soybean meal prices on October 12 were up 11% higher from a month earlier. The November-January months are typically peak production months as livestock producers gear up for the winter holidays. However, this year there is much uncertainty about how African Swine Fever will affect swine production.
Monday, October 8, 2018
African Swine Fever: Quarantines Lifted, New Cases, Bad Behavior
China's Ministry of Agriculture and Rural Affairs has lifted lockdowns on swine movements in three districts where African Swine Fever was discovered in early August, but new cases have appeared elsewhere. About a dozen local officials, traders and farm managers have been arrested or investigated for knowingly selling infected animals and falsifying health certificates. New incidents reveal that pigs are routinely shipped long distances, increasing the chances that the virus may be spreading far and wide.
On September 29 the Ministry lifted a ban on movement of pigs from Shenyang (Liaoning Province), having found no further presence of African Swine Fever after six weeks of surveillance. Bans were lifted on September 30 for Zhengzhou (Henan Province), and October 3 for Lianyungang (Jiangsu Province).
One September 28, new cases of ASF were confirmed on a small farm of 44 pigs in Jilin Province's Songyuan City, Changling County--8 pigs were sickened and 3 died. On the same day, an outbreak was confirmed on five farms holding 378 pigs (102 died) in Yingkou, a port city in Liaoning Province 2 hours south of Shenyang. A second outbreak in Yingkou was confirmed October 7 on a farm holding 3358 pigs (334 were sickened and 93 died).
On September 28, authorities in Shanxi Province's Pingyao County (about 1,250 km from Shenyang) said they discovered the ASF virus in pork from pigs transported from Liaoning Province. County officials said they found no evidence of the virus in local pigs. In Shanxi's Jiexiu City there were also rumors that pork infected with ASF was found in a food shop, but this does not appear to have been confirmed by testing. The Ministry has not announced the Shanxi cases.
On October 8, Jiexiu City issued a notice calling for culling pigs fed on waste from restaurants, hotels and cafeterias to prevent spread of disease.
Update: On October 9, MARA announced a new case of ASF confirmed on a 360-pig farm in Liaoning, Anshan City, Tai'an County, 160 were sickened and 160 died.
On September 29, the Ministry of Agriculture and Rural Affairs announced that farmers and traders had transported diseased hogs and some local officials had issued fraudulent health certificates and failed to adequately monitor the virus. The Ministry listed six cases under investigation and warned officials to properly carry out their duties.
On September 29 the Ministry lifted a ban on movement of pigs from Shenyang (Liaoning Province), having found no further presence of African Swine Fever after six weeks of surveillance. Bans were lifted on September 30 for Zhengzhou (Henan Province), and October 3 for Lianyungang (Jiangsu Province).
One September 28, new cases of ASF were confirmed on a small farm of 44 pigs in Jilin Province's Songyuan City, Changling County--8 pigs were sickened and 3 died. On the same day, an outbreak was confirmed on five farms holding 378 pigs (102 died) in Yingkou, a port city in Liaoning Province 2 hours south of Shenyang. A second outbreak in Yingkou was confirmed October 7 on a farm holding 3358 pigs (334 were sickened and 93 died).
On September 28, authorities in Shanxi Province's Pingyao County (about 1,250 km from Shenyang) said they discovered the ASF virus in pork from pigs transported from Liaoning Province. County officials said they found no evidence of the virus in local pigs. In Shanxi's Jiexiu City there were also rumors that pork infected with ASF was found in a food shop, but this does not appear to have been confirmed by testing. The Ministry has not announced the Shanxi cases.
On October 8, Jiexiu City issued a notice calling for culling pigs fed on waste from restaurants, hotels and cafeterias to prevent spread of disease.
Update: On October 9, MARA announced a new case of ASF confirmed on a 360-pig farm in Liaoning, Anshan City, Tai'an County, 160 were sickened and 160 died.
On September 29, the Ministry of Agriculture and Rural Affairs announced that farmers and traders had transported diseased hogs and some local officials had issued fraudulent health certificates and failed to adequately monitor the virus. The Ministry listed six cases under investigation and warned officials to properly carry out their duties.
- On August 11, the manager of a breeding farm and a hog trader in Heilongjiang Province's Jiamusi City transported a load of 253 hogs infected with the ASF virus to a Shuanghui processing plant in Henan Province's Zhengzhou. Veterinary officials provided false certificates and ear tags.
- On July 30, a load of 248 hogs were transported from Jilin province's Siping City to a slaughter facility in Zhucheng, Shandong Province. A veterinary official at a highway checkpoint in Lishu county of Jilin illegally issued a health certificate.
- In June, a farmer in Jun'nan District of Shenyang purchased 100 piglets from a trader in Jilin Province. After some died of disease, the farmer sold 45 pigs to another farmer in Shenyang New District. These pigs were the first ASF case reported on August 2.
- In Shenyang's Faku County, two officials issued animal health certificates outside their region of responsibility, making it difficult to trace the virus.
- In Anhui Province, Xuanzhou City, one veterinary official was criticized for failing to shut down an illegal slaughterhouse and a second official issued false health certificates.
- On September 20, a farmer in Tongliao, Inner Mongolia allegedly bribed a veterinary official to issue a health certificate for 96 pigs transported from Tieling in Liaoning Province to a slaughterhouse in Hohhot, Inner Mongolia. Four of the pigs had symptoms and two died.
Sunday, October 7, 2018
Rural Revitalization With Chinese Characteristics
China's practice of draping a brightly decorated capitalist blanket over a socialist skeleton is evident in the Rural Revitalization Plan (2018-22) released September 26.
The sprawling 36,000-character Plan is a little more than twice as long as the "Number 1 Document" that laid out the Rural Revitalization initiative earlier this year, yet this "Plan" includes a similar stream of general statements with few details and only a few minor new items. The Plan has great ambitions to overhaul the countryside--to make it richer, cleaner, more scenic, more ecologically balanced, and more closely integrated with cities.
In some ways the plan is similar to the 1958 "Peoples Communes" and the 1970s "Learn From Da Zhai" campaigns that also offered ambitious plans promising a modern, industrialized, idyllic and orderly countryside. This Plan digs up the bones from those earlier plans and will use them as the socialist skeleton for 21st-Century Rural Revitalization: village collectives, state farms, state-owned enterprises, supply and marketing cooperatives, rural credit cooperatives, model farms, and state-owned enterprises are all endorsed as core actors in this year's Revitalization. This time, a stream of pop-capitalist buzzwords learned from experts in Boston and Brussels are glued on the socialist skeleton: industrial parks, high-tech, "smart" farming, industry chains, alliances of companies and cooperatives, profit-sharing, innovation, multifunctionality, geographic indications, ecology, rural tourism, etc. All this is propped up by communist party arrangers and dealmakers and brought to life by a steady i.v.-drip of subsidies into the blood vessels.
The rural revitalization also includes a mash-up of Leninism and Chinese nationalism: there are exhortations to practice "socialist core values," strengthen "rural morality," revive rural culture, to respect the communist party and to respect parents.
The Plan is much broader than agriculture--it covers rural industry, tourism, sanitation, housing, ecological balance, rural governance, even rural culture, morality, integrity, and a "toilet revolution." But "food security" is declared as a "class one issue." The Plan aims to achieve a delicate balance of simultaneously opening the agricultural economy to the world while upgrading its domestic agricultural sector and forging links between farms, processors, input suppliers and service providers. The Plan's preamble says it presents great opportunities, but worries about prominent risks in international trade. Improving the competitiveness of China's agricultural products and strengthening risk management are identified as "urgent tasks."
The Plan calls for creating an open agricultural economy and improving international competitiveness of China's agricultural products. It includes an "action plan" to upgrade exports of specialty agricultural products. Specifically, it hopes to establish 300 or so specialized agricultural export regions and create a set of "China No. 1, World Famous" agricultural brands by 2020. The Plan aims to upgrade and expand the system of State Farms and turn them into globally competitive food conglomerates. Plans for an open economy include cooperation with "Belt and Road" countries and encouraging Chinese companies to invest in agriculture abroad. The Plan also hopes to boost China's R&D capacity in agricultural technology, set up S&T parks, technology-sharing platforms, and alliances to create world-leading agricultural technology companies.
"Risk management" items will tighten control over imported farm products. The Plan calls for improving biosecurity, strengthening border control, standardizing enforcement of animal and plant inspection and quarantine measures, and cracking down on smuggling of agricultural products.
At the core of the Plan is an exhortation to make massive investments in land that no one really owns. Opaque village collectives are to remain the main owners of rural land. Chronic problems of blurry property rights, disputed boundaries, absentee collective members, and de facto control by clans, business chieftains and criminal organizations will be cleared up. These organizations will be transformed into benevolent share-holding cooperatives that will lease out collective property to businesses infused with integrity and Confucian ethics, who will give villagers priority for jobs as hired hands, will generate a guaranteed fat stream of profits and distribute them to villager/shareholders.
Rural households are supposed to be the main participants in farming, but the plan calls for forming new-type agricultural businesses by carving out usage rights to farmland that can be consolidated and leased out to "family farms," farmer cooperatives, and agribusiness companies via rural land rights exchanges. Villagers' rights to land will be extended to give them more certainty about control of land. Banks will be cajoled into making loans to these new farming businesses on the basis of vague use rights to land they have sub-leased from the opaque collectives. Agribusinesses are expected to issue loan guarantees to banks on behalf of the farmers they purchase commodities from.
Business moguls are expected to invest in land that can only be used for the purpose prescribed by planners in the crazy quilt of zones laid out over the countryside. The plan calls for "scientifically delineating" space for urban, ecological, agricultural land use, and urban fringe development zones. There are "red lines" for protection of cultivated land, ecological protection, and coastal biological resources. No less than 103 million hectares of "permanent farmland" will be shielded from development by 2020. There will be 67 million hectares of "high-standard" fields by 2022.
An earlier 5-year plan's division of the country into seven major farm production regions and belts for specialization in 23 commodities is endorsed by the Revitalization Plan. The plan reiterates another plan to delineate zones where livestock and poultry are banned, limited, or encouraged that was introduced in the 2006 Livestock Law but ignored until 2013 when the communist party was embarrassed by 10,000 dead pigs floating into Shanghai's River. Land will be set aside for agricultural industry parks, science and technology parks, and innovation parks. Land will be designated for residential use, but villages will be consolidated. Small, marginal villages in areas with poor land and subject to "natural disasters" will be abandoned while important villages will be upgraded.
The plan regurgitates existing programs to use cropland more efficiently to achieve "a degree of self-sufficiency" by "stabilizing rice and wheat production," shifting land from corn to hay and minor grains in marginal regions, and coordinating development of livestock with fodder crops and pasture. The plan calls for firming up production in key cotton, oilseed, sugar, and rubber-producing regions. Exhortations to develop villages and towns specialized in particular commodities, developing brands, and improving quality and safety are not new. An industrialized aquaculture industry will gradually displace wild-catch fishing. For many initiatives the Plan relies on "model farms"--a mainstay of communism since the 1950s.
The plan envisions that China's farmers will need a steady intravenous drip of subsidies. The Plan promises to devise a mechanism to steadily increase government spending on agriculture. Fixed asset investment will be steered toward agriculture, including a set of major "foundational, long-term, influential" projects that will address weaknesses in agricultural infrastructure.
The Plan says subsidies will be better targeted, more precise, and "green." They will be steered toward the scaled-up "new-type" farmers. Subsidies will continue for shifting corn land to fodder crops, rotating corn with beans and minor grains, and setting up livestock farms to demonstrate the collection and utilization of waste. Machinery subsidies will be given for ecological equipment, large tractors, and other new priorities. One of the few new ideas is a promise of government policy support to help agribusinesses form profit-sharing links with farmers and possible government injections of funds into cooperatives and other organizations secured by cropland or forest property rights.
The corn reserve procurement system will be "improved" and subsidies for "marketized" purchasers of corn will be improved. The Plan also makes vague promises to "improve" or "rationalize" minimum prices for rice and wheat, subsidies for soybean, cotton, oilseeds, and sugar. It promises to reform state-owned grain enterprises, build up "backbone" enterprises, and attract new enterprises to the grain market. New initiatives include pilots for cost and income insurance for rice, wheat, and corn growers, and pilots for weather index, price index, and loan guarantee insurance.
Chinese leaders know they have taken on a tough task. They are attacking deep-seated problems that have led to atrophy of the countryside. In contrast to the frenzied campaigns of the 1950s and '70s, this plan's concluding text acknowledges that rural revitalization is long-term, difficult, and requires patience. The plan's authors anticipate that agricultural and rural modernization can be achieved by 2022 in developed coastal regions, the outskirts of big cities, and in villages with a strong collective economy. It might take until 2035 on the "main battlefield" on the outskirts of medium and small cities and small towns, villages on plains and hills. Efforts need to be focused precisely on the more difficult regions where modernization may not be achieved until 2050: old liberated areas, minority areas, border regions, and villages where it is difficult to consolidate fields.
 |
| China's Rural Revitalization Plan aims to designate land for agricultural, residential, forest and ecological uses, upgrade infrastructure, housing, and farming, clean up pollution, protect the environment and create a scenic countryside. |
In some ways the plan is similar to the 1958 "Peoples Communes" and the 1970s "Learn From Da Zhai" campaigns that also offered ambitious plans promising a modern, industrialized, idyllic and orderly countryside. This Plan digs up the bones from those earlier plans and will use them as the socialist skeleton for 21st-Century Rural Revitalization: village collectives, state farms, state-owned enterprises, supply and marketing cooperatives, rural credit cooperatives, model farms, and state-owned enterprises are all endorsed as core actors in this year's Revitalization. This time, a stream of pop-capitalist buzzwords learned from experts in Boston and Brussels are glued on the socialist skeleton: industrial parks, high-tech, "smart" farming, industry chains, alliances of companies and cooperatives, profit-sharing, innovation, multifunctionality, geographic indications, ecology, rural tourism, etc. All this is propped up by communist party arrangers and dealmakers and brought to life by a steady i.v.-drip of subsidies into the blood vessels.
The rural revitalization also includes a mash-up of Leninism and Chinese nationalism: there are exhortations to practice "socialist core values," strengthen "rural morality," revive rural culture, to respect the communist party and to respect parents.
 |
| Sixty years ago, the "Peoples Commune" movement offered a vision of an idyllic, carefully-ordered, self-sufficient rural community that included farming, grain storage, a militia, industry--many of the same principles in this year's "rural revitalization" plan. |
The Plan is much broader than agriculture--it covers rural industry, tourism, sanitation, housing, ecological balance, rural governance, even rural culture, morality, integrity, and a "toilet revolution." But "food security" is declared as a "class one issue." The Plan aims to achieve a delicate balance of simultaneously opening the agricultural economy to the world while upgrading its domestic agricultural sector and forging links between farms, processors, input suppliers and service providers. The Plan's preamble says it presents great opportunities, but worries about prominent risks in international trade. Improving the competitiveness of China's agricultural products and strengthening risk management are identified as "urgent tasks."
The Plan calls for creating an open agricultural economy and improving international competitiveness of China's agricultural products. It includes an "action plan" to upgrade exports of specialty agricultural products. Specifically, it hopes to establish 300 or so specialized agricultural export regions and create a set of "China No. 1, World Famous" agricultural brands by 2020. The Plan aims to upgrade and expand the system of State Farms and turn them into globally competitive food conglomerates. Plans for an open economy include cooperation with "Belt and Road" countries and encouraging Chinese companies to invest in agriculture abroad. The Plan also hopes to boost China's R&D capacity in agricultural technology, set up S&T parks, technology-sharing platforms, and alliances to create world-leading agricultural technology companies.
 |
| The Dazhai Commune was the model for a campaign during the 1970s. It also envisioned an idealized vision of farms, housing, mechanization, water projects, and rural abundance. |
"Risk management" items will tighten control over imported farm products. The Plan calls for improving biosecurity, strengthening border control, standardizing enforcement of animal and plant inspection and quarantine measures, and cracking down on smuggling of agricultural products.
At the core of the Plan is an exhortation to make massive investments in land that no one really owns. Opaque village collectives are to remain the main owners of rural land. Chronic problems of blurry property rights, disputed boundaries, absentee collective members, and de facto control by clans, business chieftains and criminal organizations will be cleared up. These organizations will be transformed into benevolent share-holding cooperatives that will lease out collective property to businesses infused with integrity and Confucian ethics, who will give villagers priority for jobs as hired hands, will generate a guaranteed fat stream of profits and distribute them to villager/shareholders.
Rural households are supposed to be the main participants in farming, but the plan calls for forming new-type agricultural businesses by carving out usage rights to farmland that can be consolidated and leased out to "family farms," farmer cooperatives, and agribusiness companies via rural land rights exchanges. Villagers' rights to land will be extended to give them more certainty about control of land. Banks will be cajoled into making loans to these new farming businesses on the basis of vague use rights to land they have sub-leased from the opaque collectives. Agribusinesses are expected to issue loan guarantees to banks on behalf of the farmers they purchase commodities from.
Business moguls are expected to invest in land that can only be used for the purpose prescribed by planners in the crazy quilt of zones laid out over the countryside. The plan calls for "scientifically delineating" space for urban, ecological, agricultural land use, and urban fringe development zones. There are "red lines" for protection of cultivated land, ecological protection, and coastal biological resources. No less than 103 million hectares of "permanent farmland" will be shielded from development by 2020. There will be 67 million hectares of "high-standard" fields by 2022.
An earlier 5-year plan's division of the country into seven major farm production regions and belts for specialization in 23 commodities is endorsed by the Revitalization Plan. The plan reiterates another plan to delineate zones where livestock and poultry are banned, limited, or encouraged that was introduced in the 2006 Livestock Law but ignored until 2013 when the communist party was embarrassed by 10,000 dead pigs floating into Shanghai's River. Land will be set aside for agricultural industry parks, science and technology parks, and innovation parks. Land will be designated for residential use, but villages will be consolidated. Small, marginal villages in areas with poor land and subject to "natural disasters" will be abandoned while important villages will be upgraded.
The plan regurgitates existing programs to use cropland more efficiently to achieve "a degree of self-sufficiency" by "stabilizing rice and wheat production," shifting land from corn to hay and minor grains in marginal regions, and coordinating development of livestock with fodder crops and pasture. The plan calls for firming up production in key cotton, oilseed, sugar, and rubber-producing regions. Exhortations to develop villages and towns specialized in particular commodities, developing brands, and improving quality and safety are not new. An industrialized aquaculture industry will gradually displace wild-catch fishing. For many initiatives the Plan relies on "model farms"--a mainstay of communism since the 1950s.
The plan envisions that China's farmers will need a steady intravenous drip of subsidies. The Plan promises to devise a mechanism to steadily increase government spending on agriculture. Fixed asset investment will be steered toward agriculture, including a set of major "foundational, long-term, influential" projects that will address weaknesses in agricultural infrastructure.
The Plan says subsidies will be better targeted, more precise, and "green." They will be steered toward the scaled-up "new-type" farmers. Subsidies will continue for shifting corn land to fodder crops, rotating corn with beans and minor grains, and setting up livestock farms to demonstrate the collection and utilization of waste. Machinery subsidies will be given for ecological equipment, large tractors, and other new priorities. One of the few new ideas is a promise of government policy support to help agribusinesses form profit-sharing links with farmers and possible government injections of funds into cooperatives and other organizations secured by cropland or forest property rights.
The corn reserve procurement system will be "improved" and subsidies for "marketized" purchasers of corn will be improved. The Plan also makes vague promises to "improve" or "rationalize" minimum prices for rice and wheat, subsidies for soybean, cotton, oilseeds, and sugar. It promises to reform state-owned grain enterprises, build up "backbone" enterprises, and attract new enterprises to the grain market. New initiatives include pilots for cost and income insurance for rice, wheat, and corn growers, and pilots for weather index, price index, and loan guarantee insurance.
Chinese leaders know they have taken on a tough task. They are attacking deep-seated problems that have led to atrophy of the countryside. In contrast to the frenzied campaigns of the 1950s and '70s, this plan's concluding text acknowledges that rural revitalization is long-term, difficult, and requires patience. The plan's authors anticipate that agricultural and rural modernization can be achieved by 2022 in developed coastal regions, the outskirts of big cities, and in villages with a strong collective economy. It might take until 2035 on the "main battlefield" on the outskirts of medium and small cities and small towns, villages on plains and hills. Efforts need to be focused precisely on the more difficult regions where modernization may not be achieved until 2050: old liberated areas, minority areas, border regions, and villages where it is difficult to consolidate fields.