China's Grain Procurement Doubles in One Year

China reported that 308.8 million metric tons (mmt) of last fall's grain crop had been procured as of the end of February 2025. This is more than twice the amount procured a year earlier. The announcement in State media did not mention the huge increase nor explain how such an unprecedented increase in grain procurement was achieved. 

Economic Daily reported that procurement by all types of enterprises included 105 mmt of rice, 190 mmt of corn, and 10 mmt of soybeans. 

The State Administration of Food and Commodity Reserves reported only the total procurement of 308.79 mmt of fall grain with no data for individual grains except mentioning that 7.11 mmt of middle and late rice was procured through the minimum price program. 

In past years the Administration regularly reported procurement progress statistics for each type of fall grain from October through April 30 on a monthly or 10-day interval. But this year only 3 monthly reports have been posted at the end of December, January and February with no detail on procurement of each grain. 

Comparison with Fall grain procurement reports from the previous 3 Februarys shows that this year's procurement volume as of February is twice as large as in previous years. This year's procurement through February exceeds fall grain procurement for the entire season last year (200 mmt).

Source: data compiled from China's State Administration of Food and Commodity Reserves web site.

China's National Bureau of Statistics reported an 11-mmt increase in the fall grain harvest in 2024 over the previous year, but this increase does not account for the huge 150-mmt increase in procurement.

Summer grain procurement reports are issued from June through September 30. Last September the Food Reserve Administration reported that 75 mmt of summer grain had been procured from the 2024 crop. This was up 6.4 mmt from the previous year's 68.6 mmt, a more plausible increase. 

The Economic Daily announcement seems aimed at encouraging farmers to continue planting grain for next fall's crop as they face weak prices with spring planting approaching. Economic Daily commented that procurement is proceeding smoothly, in an orderly manner, and prices are rising steadily. The article highlighted the government's purchases of 7% of the fall rice harvest at the minimum price set by the government in order to stabilize prices and recent increases in corn prices.

The procurement volumes reported in past years appeared to be inconsistent with China's production data. For example, the 200 mmt procured during last year's procurement season was only 38% of the fall grain harvest. It is unlikely that more than 60 percent of grain remains on farms. The purchases are by all kinds of grain enterprises (各类粮食企业). Perhaps the statistical system found a way to account for purchases by itinerant traders who cruise villages purchasing grain by the truckload who had failed to report in previous years. 

Expanded list of U.S. goods hit with 10% tariffs

China's official list of U.S. agricultural products subject to 10-percent additional tariffs announced March 4, 2025 is much broader than reported in yesterday's post on this blog. The list of products targeted for 15-percent tariffs is unchanged. Tariffs will go into effect March 10, 2025, according to the announcement.

The 10-percent tariff product list includes 711 tariff lines that cover most major U.S. agricultural exports to China. In addition to the soybeans, sorghum, beef, pork, and offal reported yesterday, additional 10-percent tariffs will be applied to fish and seafood (fresh, frozen, and processed products), most dairy products, vegetables, fruit, nuts, potato flour, fish oil, and processed nuts, fruits and vegetables.

The 10-percent tariff list does not include whey, alfalfa, peanuts, vegetable oils, grass seed, vegetable seeds, live plants and flowers, live animals, turkey, guinea hens, lamb, ginseng, honey, pet food, distillers grains, fish meal, or leaf tobacco. Also excluded are food ingredients, lactose and other sweeteners, confections, chocolate, coffee, tea, spices, malt extract, infant food, wine, beer, and whiskey.

Goods shipped from the place of departure before March 10, 2025, and imported between March 10, 2025 and April 12, 2025, will not be subject to the additional tariffs. 

China's General Administration of Customs also announced March 4 it is suspending imports of soybeans by 3 trading companies (CHS, Inc., Louis Dreyfuss, EGT LLC) due to detection of ergot fungus and seed coatings on soybeans imported from the United States during recent inspections. The suspension takes effect immediately.

China's Customs authority is also suspending imports of U.S. logs due to detection of forest pests such as bark beetles and longhorn beetles in logs imported from the United States.

China Sends Ag Minister to Uruguay Inauguration

China sent its agriculture minister to the inauguration of Uruguay's President Yamandú Orsi in Montevideo. Why would China send its agriculture minister--in office for less than a year--to the inauguration of an important Latin American ally?

According to State media, Minister of Agriculture and Rural Affairs Han Jun was appointed as Xi Jinping's special envoy to the March 1 inauguration. Minister Han met with President Orsi at the presidential palace to convey greetings and best wishes from China's leader.

(The Uruguay trip explains why Minister Han was absent from a prominent meeting to discuss China's seed industry held the same day as the inauguration.)

President Trump chose Alabama Senator Katie Britt to attend the inauguration. Several South American countries sent their presidents, as did Armenia. Germany sent its low-profile president Frank-Walter Steinmeier.

Minister Han Jun

Senator Katie Britt

Orsi has promised a leftward shift from previous President Luis Lacalle Pouin, a shift that seems favorable to China's Latin American ambitions. Uruguay's political shift is similar President Lula Da Silva's return to power in neighboring Brazil which warmed relations with the Middle Kingdom.

China has been pushing for a trade deal with Uruguay since 2021 and made a concerted effort to draw Uruguay into its "Belt and Road" sphere in 2023. Lula apparently did not attend the inauguration, but Da Silva just invited Uruguay's new president to attend the China-dominated BRICS summit in Rio de Janeiro coming up in July.

Maybe Minister Han was the only official available for the trip, or maybe he was the only one Xi thought he could trust. But the importance of agriculture in Uruguay seems to be a logical explanation for choosing Minister Han to represent China at the inauguration. 

Uruguay has become a significant exporter of food to China. In 2024 China's imported $2 billion worth of farm products from Uruguay, but nearly all of it was composed of beef and soybeans. China's $892 million of meat imports was composed mainly of beef, plus $14 million of lamb. Imports of soybeans were over $1 billion. Uruguay is the 4th-ranked supplier of China's beef and soybean imports and supplies roughly 9%-14% of China's imported beef and just 2% of China's imported soybeans.

Harmonized system codes 02-24.
From China Customs Administration web site.

However, China's agricultural imports from Uruguay are not exactly booming. China's imports of Uruguayan beef were on a steep growth path until 2022 when their value peaked at $1.9 billion. China's beef purchases from Uruguay plummeted to $870 million in 2024. A Uruguayan exporter was one of 7 beef companies suspended by China Customs yesterday.

China Customs Administration data.

China's imports of soybeans from Uruguay have bounced between $500,000 and $1 billion in most years since 2015, peaking at $1.27 billion in 2022. China reported no soybean imports from Uruguay in 2023, apparently due to drought in the South American country. There is a history of quality issues including excessive moisture and high temperature in soybean shipments from Uruguay to China, addressed by a 2017 bilateral agreement. But last fall there were reports that private terminals were preventing external inspectors from checking vessels.

In relations with "Belt and Road" countries China's agriculture ministry is mainly involved in offering technical assistance and coordinating outbound Chinese agribusiness investment. It would appear China has little to offer Uruguay in assistance to beef or soybean growers in Uruguay since China does poorly in growing both of these commodities and is highly dependent on imports of both beef and soybeans. 

During a July 2024 China visit by Uruguay's Minister of Livestock, Agriculture, and Fisheries of Uruguay the two sides pledged to work on beef production, hold a meeting of the China–Uruguay Joint Committee on Agriculture in China, and set up Chinese demonstration farms focused on green, digital and intelligent agriculture in Uruguay.

The banned Uruguayan beef exporter was dinged for having excessive levels of a compound used to control ticks in cattle. Technical problems with imports are chiefly handled by China's customs authority. A study by Chinese scientists found that soybeans with Uruguayan genetics had lower protein content than Chinese soybeans, but the study may have little relevance since the experiment grew both types of soybeans in Chinese fields and did not use commercial seed. Nor did the study take into account that Chinese soybeans are actually not in high demand.

Maybe China will offer to build a rice demonstration farm since rice is a relatively minor crop in Uruguay. Another possibility is that Han will negotiate deals for Chinese beef companies to invest in Uruguay to ship beef to China or Chinese grain-trading companies to buy a shipping terminal in Uruguay to facilitate shipping and inspection of soybeans to China. 

China announces extra tariffs on $19.5 billion of U.S. farm products

(see update of 10-percent tariff list)

China announced retaliatory tariffs on U.S. agricultural products today that will be added to imports of products that accounted for about $19.5 billion of Chinese imports of farm goods from the United States last year. Based on calendar-year 2024 import data from China's Customs Administration web site, 15-percemt tariffs will be added to $3.43 billion worth of U.S. agricultural imports and 10-percent tariffs will be added to $16.06 billion of U.S. agricultural imports.

Among the $3.4 billion in U.S. products targeted for 15-percent tariffs, cotton, corn, wheat and chicken accounted for most of the imports from the United States last year. According to China's Customs Administration, calendar year imports from the United States were as follows:

• Cotton imports from the United States totaled $1.85 billion, comprising 35% of China's cotton imports last year. 
• Wheat imports from the U.S. totaled $600 million, 17% of the total.
• Corn imports from the U.S. totaled $560 million, 15% of China's corn imports last year.
• Chicken imports from the U.S. totaled $419 million, 14% of all chicken imports. Chicken feet and paws made up more than half of chicken imports ($228 million, 14% of all imports) 

Among the $16.1 billion of U.S. products that will be assessed 10-percent tariffs, soybeans were by far the largest component, followed by sorghum, beef, and swine offal.

• Soybean imports from the U.S. totaled $12 billion in 2024, 23 percent of China's soybean imports according to China's customs data. The volume was 22.12 million metric tons. (In addition to these totals China has a separate tariff line for non-GMO soybeans which China did not import from the U.S. last year.)
• Sorghum imports from the U.S. totaled $1.7 billion, 66.8% of China's sorghum imports in 2024. The volume was 5.68 million metric tons. 
• Beef imports from the U.S. totaled $1.430 billion, 14 percent of the total.
• Swine offal imports from the U.S. totaled $695 million, 28% of imports. 
• Imports of U.S. pork totaled $164 million, 4 percent of all imports.

The importance of China as a market for U.S. products targeted for tariffs is indicated by USDA export data for calendar year 2024: 

• China accounted for 51 percent of U.S. soybean exports   
• China accounted for 90 percent of U.S. sorghum exports
• China accounted for 28 percent of U.S. cotton exports
• China accounted for 2 percent of U.S. corn exports 
• China accounted for 9 percent of U.S. wheat exports
• China accounted for 64 percent of U.S. swine offal exports and 5 percent of swine meat exports
• China accounted for 15 percent of U.S. exports of beef and products

China Plans a "Silicon Valley" for Seeds

Worried that its fragmented seed industry is falling behind multinational companies, China is finishing up a 10-year plan to create national champion seed companies. A 2-year-old plan hatched by Xi Jinping to create a "Silicon Valley" for seeds--the so-called "silicon chips of agriculture"--has big ambitions, but it depends on funding from overextended State banks and the basic matter of acquiring farmland to grow the seeds.

On March 1, the Ministry of Agriculture and Rural Affairs (MARA) held a meeting to boost implementation of a 2023-2030 "South China Seed Silicon Valley Construction Plan." According to the Ministry, the project will build a sprawling complex of labs and testing/propagation farms in Hainan Province, a region where seed breeders have long focused their work due to the ability to grow crops year-round in the sub-tropical climate. The South China zone is planned to be a center for seed breeding innovation in China, a platform for international cooperation, and an experimental zone for reforming the country's seed industry.

The "Silicon Valley" scheme is described as an upgrade from the 2015-2025 "National South China Seed Research and Breeding Base (Hainan) Construction Plan" that called for setting up a 44,150-acre protected zone for crop breeding around the Yazhou Bay "Science City." In a 2018 inspection, Xi Jinping praised the South China Seed Base as a national treasure and ordered construction of a "Southern Silicon Valley" that would concentrate R&D, production, sales, scientific exchange, and dissemination of seeds to serve the entire country.

The 2025 Central Document No. 1 on rural policy--released to the public just a few days before the meeting--included the "South Silicon Valley" project in its instructions to revitalize the seed industry. 

A symposium on revitalization of the seed industry held by MARA December 19, 2024 made it clear that the effort is aimed at making China great again. MARA described seed industry revitalization as having a prominent position in building China into an agricultural power by achieving self-reliance and self-improvement in seed technology and independent control of seed sources and ensuring the security of the agricultural industry. 

Chinese leaders seem worried that their industry is falling behind multinational seed companies. At the seed industry symposium, Agriculture Minister Han Jun warned that China's seed industry still has many shortcomings and weaknesses, "international giants are seizing the commanding heights of seed technology," and "the domestic seed industry is in urgent need of innovation, breakthroughs, and upgrades." 

China's seed industry plan reflects chronic problems of fragmentation between R&D (conducted mainly by research institutes) and marketing of seeds done by thousands of companies that traditionally conducted little or no R&D. Incentives for academic scientists to create seeds that meet market demand were muted when scholars stood no chance of profiting from their research. Profits from successful seeds were shrunk by widespread copying and fraudulent imitations.

The December seed industry symposium called for 

• creating a commercial breeding system with companies as the main body
• nurturing and strengthening a group of high-level seed companies
• deep integration of production, education, and research

Ag Minister Han Jun said support policies should be targeted at seed companies to help them breed a new batch of varieties that improve yield, performance, and quality. These include financing and insurance for companies. Han also emphasized protection of intellectual property and a crackdown on "infringement and illegal crimes" to "purify" the seed market.

The rationale for the South Silicon Valley Seed project is made clear by Minister Han's comments at the December seed industry revitalization meeting. Han called for innovative mechanisms to share and utilize resources and facilities to promote cooperation between S&T companies. This includes linking up seed companies with scientific institutes and financial institutions via seed bases. Han called for new ways to utilize scientific and technical expertise, application of artificial intelligence in breeding, construction of digital facilities and equipment to keep up with the world's cutting-edge pace in breeding. 

Source: The Paper.

According to state-owned news magazine Liaowang, the Hainan Provincial seed lab, China Seed Group's Syngenta, and Huada Genetics have been working together on projects since 2021. Liaowang reported that Hainan has gathered more than 2,800 seed industry companies, and the output value of the South China Seed Industry exceeded 12 billion yuan in 2023, a year-on-year increase of 50%.

The December 2024 meeting was attended by heads of China's elite seed companies, such as Syngenta China, Longping High-Tech, Beijing DBN, Beidahuang Kenfeng Seeds, Hefei Fengle, Shandong Denghai, and Gansu Dunhuang, as well as companies engaged in poultry, swine, aquaculture, and feed manufacturing, academic institutions such as the Chinese Academy of Agricultural Sciences, two agricultural universities, and state-owned banks Agricultural Development Bank of China and Agricultural Bank of China.

None of these articles mention problems acquiring land for the giant seed project. A Hainan Province regulation to facilitate acquisition of land for the South China Seed Breeding Base published last week reveals that progress in acquiring fields for the 44,150-acre protected zone designated 10 years ago has been slow because many Hainan farmers have been unwilling to turn over their land, there are a bewildering array of intermediaries to deal with in acquiring land, procedures are not standardized, and length of land contracts varies.

One step China took to compete with multinational seed companies was to buy one of them. In 2017 ChemChina paid $43 billion to acquire Swiss agrichemical and seed breeder Syngenta, China's largest overseas acquisition. Syngenta is still headquartered in Switzerland. Plans for a public listing of Syngenta in China--anticipated to raise $9 billion--have been scrapped due to the poor state of China's stock market. 

In their U.S. business Syngenta and its American CEO are now caught up in the frenzy over Chinese ownership of U.S. farmland. Syngenta owns multiple farms in the United States used for crop trials, and Arkansas has already ordered Syngenta to sell its 160 acres in that state. This raises the question of how the company will develop and test chemicals for the large U.S. market for seeds and farm chemicals if it cannot own any land there.

Syngenta announced last week that the company has made a deal with the Shanghai government to build its 3rd global crop protection innovation hub at a site in Shanghai (the other two are in Switzerland and the UK). This giant facility will focus on crop protection chemicals, biologicals, soil health, sustainable chemistry, and integrated pest management.

Insecurity Pervades Technocratic No. 1 Document

China's 2025 Central Document No. 1 appears on the surface to be a bold technocratic plan to reshape and modernize the countryside and forge links with the urban economy. A closer inspection indicates insecurity about depressed prices, peasants falling back into poverty, and farming sectors in need of protection and aid. 

The document--a blueprint for this year's rural policies--rehashes ideas that have been put forth in these documents for years. For example, this year's call for a severe crackdown on smuggling of agricultural products has appeared in 12 of 16 "No. 1" documents issued since 2010. 

Likewise, nearly every document orders officials to prevent loss of arable land to nonfarm uses, but this year's document adds instructions to stop specific activities--hiding rural vacation homes in faux greenhouses, digging lakes and building houses on farmland--suggesting that these activities have become rampant. It bans urban people and retired cadres from buying rural houses. This year's document instructs officials to stop farming land on river banks that affect flood safety--perhaps a problem noticed during last summer's severe flooding. One new item is the document's order to protect traditional terraces built to grow rice on mountainsides.

Another outcome of last year's flooding is concern about vegetable supplies. The document orders strengthening of vegetable emergency supply bases around medium and large cities. 

Orders to prevent erosion in northeastern black soil region appear in the document in most years, but this year's document adds a new problem of "erosion gullies" to be addressed. Other soil problems are reflected by instructions to conduct pilot projects to utilize saline/alkaline farmland and stronger management of acidified and degraded land in southern regions.

Remarks by deputy chairman of the Central Financial Leading Group explained the document's pledge to create a complete agricultural supports system and to coordinate foreign trade with farm production reflects insecurity regarding low farm prices. The official reveals a series of specific price stabilization measures: the minimum price program for rice will be activated by purchasing rice in four provinces, the government will stockpile wheat and corn, and unspecified measures will increase soybean sales and promote processing. He also promised unspecified adjustment of the subsidy for cultivated land fertility, improved subsidies for corn, soybean, and rice producers, and a pilot program to subsidize credit for grain and oilseed producers. 

The No. 1 Document promises to sharpen incentives for local officials to boost grain output and rehashes an old idea to make rich eastern provinces pay "real money" to grain-producing provinces. 

An instruction to strengthen the biosafety inspection system at ports (which appeared in last year's document and many others) shows up in a paragraph that calls for improving the coordination mechanism between agricultural product trade and production. This suggests that inspections at ports can be made stricter when authorities want to slow down imports to ease downward pressure on domestic prices. 

The document includes a promise of a bailout for beef and dairy cattle industries. Another copy-paste policy is the instruction to boost production of fodder for ruminants and upgrade hay and fodder industries. Bad behavior in the hog industry apparently continues: the document calls for strict supervision of hog slaughter and quarantine, and it urges stronger prevention and control of major animal diseases and zoonotic diseases.

The Ministry of Agriculture and Rural Affairs held a meeting last week to address problems in the hog industry. The meeting's main theme was that there are too many sows and the number of piglets to be produced in coming months threatens to drive down prices. The directives hinted that local officials should raise entry barriers by implementing stricter environmental regulations and land approvals for farm construction. The Ministry described the disease epidemic situation as complicated and warned of continuing risks of foreign disease epidemics spreading to China. Officials were instructed to strengthen prevention and control of African swine fever, and promote immunizations against swine fever, foot-and-mouth disease, blue-ear disease, and pseudorabies. Officials were ordered to quickly deal with epidemics and hidden dangers. The document also ordered crackdowns on other old nagging problems--use of illegal feed additives like clenbuterol and illegal slaughter.

Preventing rural areas from slipping back into poverty is a second theme of this year's No. 1 Document. Among the recommendations are big job-creation programs, a stratified public assistance program for rural people, and organizing work units and companies in coastal provinces to assist poor western provinces. 

Another reflection of the poor state of the Chinese economy is a renewed initiative to force employers to pay overdue wages to migrant workers. The document instructs cities to allow migrants with steady employment to participate in urban life and let their children go to school. Instructions to improve nutrition of rural school children, expand coverage of rescue and protective institutions for juveniles and improve care for children left behind in villages by migrant parents and for children in "difficult situations" are also included in the document.

A section on rural governance reveals the regime's fear of rural instability and gives some hints about the chaos in many parts of China's countryside. There are instructions to improve the mechanism for cracking down on gangsters, gambling, rural drug abuse, pyramid schemes and fraud in agriculture, and curbing the spread of "village tyrants" and evil forces of family clans. Another danger to the regime is religion--the document calls for stronger management of rural religious affairs. 

Other rural hazards are reflected by instructions to investigate and rectify safety risks in rural road traffic, gas, fire protection, and self-built houses.

Farmer's Lawsuit Against Chinese Pork Conglomerate Attracts Attention

A Chinese pig farmer's million-dollar lawsuit against a pork conglomerate with a $28-billion market cap is attracting an inordinate amount of attention in Chinese financial news media. The agriculture ministry has pledged to investigate. It is not clear why this dispute has attracted so much attention, but it shines a light on the dramatic change in China's hog industry over the past 5 years.

According to Cailianshe and National Business Daily Chang Xianyun, general manager of Hongfu Farming Company, signed a contract in March 2024 to purchase 152 breeding sows from Nanyang City Wolong Muyuan Farming LLC, a subsidiary of Muyuan Foodstuff which claims to sell more than 60 million swine annually and currently has a market cap of 203 billion yuan (about $28 billion). Both companies are located near Muyuan's headquarters in Henan Province's Neixiang County. Ms. Chang has reportedly purchased pigs from Muyuan for 16 years.

Ms. Chang, the farmer, told news media that one pig died soon after arriving at her farm on April 4 last year (3 sows were never delivered due to signs of illness). Five days later some sows showed symptoms of illness. Later in April sows began aborting, having stillbirths and dying, and the disease spread throughout the farm. Ms. Chang claimed that a total of 3,416 sows and piglets died in the two months after purchasing the sows. Lab tests showed that Porcine Reproductive and Respiratory Syndrome (PRRS, aka "blue ear disease") was present in 11 blood samples. On January 6, 2025 Ms. Chang sued Wolong Muyuan, asking for 6.8 million yuan in compensation (about $934,000) for the loss of more than 3,000 pigs she says were infected by sows she purchased from the company last year. 

Chang Xianyun recalled that Wolong Muyuan Co. initially offered 2.9 million yuan in compensation but later withdrew the offer. Ms. Chang's civil suit claims that the company did not follow quarantine procedures and improperly used a homemade vaccine. A Muyuan spokesperson told news media that 3rd-party testing showed the strain of PRRS on Chang's farm was different from the strain in Muyuan's region and insisted that Muyuan had not had a case of PRRS in 3 years. 

The quarantine certificate that accompanied the sows specified "commercial pigs" instead of "sows." The procedures for breeding sows are more stringent than for commercial pigs. Ms. Chang alleged that Muyuan saves money by designating sows as commercial pigs because testing is more stringent and more costly for breeding animals. 

According to Interface (Jiemian) News Ms. Chang reported her allegations to the Ministry of Agriculture and Rural Affairs (MARA), the Shenzhen stock exchange and the Securities Regulatory Commission. The agencies said they have instructed their provincial counterparts to begin an investigation of her allegations against Muyuan, but a company spokesperson and the local veterinary bureau said they had not been informed of any investigation. 

Interface News reported that such disputes are common in the swine industry. A Beijing lawyer told Interface that Muyuan had a longstanding practice of blurring the distinction between breeding stock and commercial pigs in their contracts. Another industry person told Interface that this goes against the practice of clearly distinguishing between animals for breeding and for commercial production. 

Regarding the illegal vaccine allegations, a Muyuan spokesperson told Interface News that Muyuan injected a serum made from blood, which the person described as a widely used and effective way of preventing PRRS. 

Muyuan, founded in 1992 and publicly listed in China in 2014, known for its integrated production model, from R&D, breeding and feed production, piglet propagation, hog fattening, and slaughter. 

A Muyuan industrial complex in Henan Province. Source: China Fortune.

Muyuan benefited from policies that were ramped up to expedite recovery of pork supplies during 2020-21. Fifteen kinds of local government support policies included various subsidies, incorporation of pig farms in land use planning, close cooperation with regulators, support for processing plants, credit support, industrial parks, and establishment of disease-free zones. Local officials in Muyuan's area were instructed to arrange quarantine and inspection points to facilitate Muyuan's development, to clarify the authority and responsibilities of inspectors issuing animal quarantine certificates, and to expedite inspections to ensure pigs were released promptly and in good condition.

Muyuan's share price was in the doldrums for years until it rocketed upward during the recovery from ASF. According to Interface News, Muyuan's pig sales grew from 10.25 million to 71.6 million head between 2019 and 2024. In return, Muyuan supports the communist party's policies. Muyuan is the model company in adopting swine diets that reduce soybean meal use, in reducing production costs, in digitizing agriculture, and it brags about its role in Xi Jinping's poverty alleviation drive. The local government in Neixiang aimed to gain prestige by building Muyuan into a Fortune 500 company.

Monthly averages of Muyuan stock price.

Muyuan's poverty alleviation program also played a role in turning Muyuan into a pork behemoth. Its strategy used State bank loans and collaboration with local government to expand its operations in 62 counties across the country. A news media account of a poverty alleviation project near Muyuan's headquarters describes a highly capital-intensive complex consisting of a feed mill, rows of high-rise hog barns, and a meat processing plant. Poor families appear to be mostly passive participants. "Cooperatives" are formed as a mechanism to consolidate the village's collectively owned land into big parcels that are then leased out to Muyuan to build its pig complexes. The cooperative appears to function as a pass-through for bank loans to finance barns and other infrastructure for Muyuan's operations. The cooperative makes small payouts to villagers funded by the lease payments from Muyuan, and villagers may be hired as laborers on farms or slaughterhouses. 

Meanwhile, Muyuan has played a role in the rapid disappearance of independent hog farmers. A November 2024 Yicai article cited African swine fever (ASF) as a "catalyst" that accelerated the fading of small- and medium-scale farms. According to Yicai, last year the National Animal Husbandry Station reported that China had lost 13 million small and medium-sized swine farms in less than 5 years. Rapid expansion by Muyuan and other giant pork companies in the recovery from ASF drove down prices, forcing out independent farms. Yicai cited examples of farmers who raised thousands of pigs as independent entrepreneurs but ended up with huge debts due to ASF and other disease outbreaks and unexpected declines in hog prices. A veterinarian who owned a hog farm that sold 200,000 pigs annually also cited high costs of compliance with environmental regulations. He reported investing millions of yuan in facilities and equipment to protect the environment but said many of his colleagues shut down their operations.

Yicai noted that many independent pig farmers shut their farms and applied for lucrative jobs with large companies like Muyuan. One company executive found that more than 7,000 workers in their company's breeding operations had previously raised pigs on their own. With experienced pig breeders in short supply, some of these pig-farmers-turned-employees earn salaries of 1 million yuan per year (about $150,000). Muyuan and several competitors planned to set salary guidelines to stop bidding wars for employees with swine-farming expertise, but China's anti-trust authority ordered the companies to abandon the plan.

When Chinese hog prices plummeted in 2021, many independent hog farmers who stayed in business switched to a so-called "second fattening" strategy that abandons breeding sows to specialize in the final fattening phase of swine production. Zhu Zengyong, swine industry expert at the Chinese Academy of Agricultural Sciences, judges that the strategy is intended to make quick money and avoid higher risks of disease in the breeding stage. Zhu told Interface News the popularization of the "secondary fattening" production model was partly to blame for the blurred distinction between breeding and commercial sows that is at the heart of Chang Xianyun's dispute with Muyuan. 

Interface News said Muyuan announced a "2-line breeding model" in a 2019 annual report, a switch from the common 3-line hybrids of Landrace, Large White, and Duroc breeds. The 2-line strategy was popularized during the extreme shortage of sows after the ASF epidemic to speed up the expansion of pig supplies. An unnamed industry expert told Interface News that he worries that the 2-line breeding model is undermining the industry by degrading the body shape and reducing the meat yield of pigs. The expert observed that the number of pigs with PRRS and other disease problems has increased since 2023. Disease prevention and control issues are putting the industry under increased pressure

Muyuan attracts a lot of attention in China. Muyuan's financial data has been questioned by some commentators in China's finance world, and last year questions circulated again about the veracity of information about the company. Muyuan sued a gaggle of Chinese social media personalities who posted sensational exposés about Muyuan to drive traffic to their videos on Douyin. 

It is unclear whether Ms. Liu's lawsuit is another attention-grabbing stunt or a real dispute about shady practices by a corporate giant. It does, however, highlight the dramatic replacement of "backyard" farmers with sprawling pork conglomerates and the "make money fast" mentality that drives agribusinesses in China -- microenterprises and corporate behemoths alike. 

Will China Strengthen Farm Subsidy Incentives?

China's farm subsidies need to have stronger production incentives--that was the argument made in an Economic Daily commentary earlier this month. WTO rules, bureaucracy, and dual roles as rural entitlement vs. production incentive have kept China's subsidies surprisingly ineffectual despite their massive size--China reported about 1.4 trillion yuan (roughly $200 billion) in farm support in its most recent notification to the WTO filed last September. 

The Economic Daily commentator criticized China's practice of announcing and distributing crop subsidies with a long lag, usually months or even a year or more after the crop has been planted. The commentator lamented that some farmers call the subsidies "blind boxes," like receiving a gift-wrapped box with little idea of what's inside. 

The commentator asserts that subsidies are an important tool for the State's mobilization of agricultural production and its preservation of national food security. The commentator notes that China has many types of grain subsidies, including minimum prices for rice and wheat, an arable land fertility protection subsidy given to all grain farmers, soybean subsidies, subsidies to encourage production of niche crops like quinoa and buckwheat, and some localities subsidize farming entities that consolidate land into scaled up farms and/or subsidize companies that provide farming services as an agricultural "trusteeship" or "mechanized farming cooperative." 

The commentator says the lag in subsidies has become a pain point for farmers. In some places the arable land fertility protection subsidy is announced after spring planting has started. In some places, wheat farmers don't get news about the farm machinery subsidy until after seedlings have started growing. The commentator says rice farmers commonly ridicule policy announcements that come after the crop is already growing. On the other hand, the commentator claims that there have been some instances where farmers ploughed up fields and replanted them overnight after the subsidy payment level was announced.

There are several reasons for the lack of precision in China's farm subsidy payments. The Economic Daily commentator attributes the problems to bureaucracy and delays in collecting data and issuing payments. She says these can be addressed by establishing a policy calendar that establishes dates for announcement of subsidies and utilizing information technology to gather data on farmers' plantings and to issue funds, 

The commentator does not mention two other interrelated reasons: unclear objectives of the payments and WTO rules. 

China first began issuing small subsidy payments to farmers when the country entered the WTO. Compliance with WTO rules gave officials an excuse to dismantle a "protective price" system invented in the 1990s that engorged a sprawling grain procurement bureaucracy. In 2004, provinces used a portion of a "grain risk fund" (previously used to finance grain-buying stations) to create tiny cash payments distributed to grain farmers. They added a small subsidy for improved seeds and a subsidy for machinery purchases. In 2006 an input subsidy was added to compensate farmers for rising fertilizer and fuel costs. 

Design of the subsidy payments was constrained by WTO rules that place limits on subsidies that are potentially market-distorting. China tried to avoid subsidies that gave farmers strong production incentives so they would not count against the WTO-imposed cap on subsidies--for China the limit is no more than 8.5% of the gross value of any commodity. The subsidy limit was one of the most contentious parts of the WTO accession negotiations and the last to be settled.

Chinese authorities had multiple objectives for farm subsidies. The first batch of subsidies was hailed as a symbol that the communist party actually cared about farmers--a sentiment that was in doubt at the time when farm prices were depressed, rural officials heaped fees and taxes on farmers, and WTO membership was widely believed to have sold out Chinese farmers. However, when officials wanted to prove their commitment to food security, they would stress that the subsidies functioned as a production incentive. 

Within a few years after their introduction China's farm subsidies were widely criticized as ineffectual due to their tiny size, lack of incentives, and anecdotes of subsidies given for land that no longer produced crops. Some farmers got a half-dozen deposits of various subsidies in their bank accounts and didn't know what they were for.

During 2014-16 officials consolidated the seed subsidy, grain payment, and input subsidy into a single payment that would go only to farmers who actually planted grain. They called it an "arable land fertility protection subsidy" (aka "support and protection payment") but did not demand that farmers take any measures to improve soil fertility. Officials told the WTO the new payment was not market distorting so it could be exempt from limits. For domestic audiences, Chinese officials said the subsidy was a critical policy for encouraging farmer to produce grain. 

Since 2012 China has introduced subsidy payments for soybeans, cotton, corn, and rice. Again, they tell the WTO stories about how payments operate so they can be excluded from subsidy limits. Many other subsidies are just never disclosed to the WTO. The impact of these crop-specific subsidies is still questionable because the payments seem to be based on the previous year's planting and are not distributed until after the current year's crop is harvested in the fall. That brings us back to the criticism lodged by the Economic Daily commentator this month.

Will Chinese officials be inclined to re-couple subsidies to production without fear of WTO sanctions? With WTO's enforcement capabilities weakened, perhaps China can give up the cat-and-mouse game and feel free to follow the commentator's advice and give its subsidies stronger production incentives.

China's Feed Output Dropped 6.6 MMT in 2024

China's production of livestock feed totaled 315 million metric tons (MMT) in 2024, down 6.6 MMT (-2.1%) from the previous year, according to a report from China's feed industry association. The 2024 output was still the second-largest output level on record. This was the first decline in China's feed output since it tumbled 8.8-MMT in 2019 during China's African Swine Fever epidemic. 

According to the report, the value of feed industry output declined 10% and operating income fell 11.9%. 

By comparison, official data released by China's National Bureau of Statistics show production of meat and eggs (consumers of most of the feed) increased marginally, by 356,000 metric tons, in 2024. Feed output was 2.38 times the output of meat and eggs.

Source: compiled from China Feed Industry Association reports.

Feed for hogs comprised 45.7% of the output, followed by meat poultry (31%), aquaculture (7.2%), ruminant feed (4.6%), pet food (0.5%), and feed for other animals (0.8%). 

Source: Compiled from China Feed Industry Association data.

Hog feed also accounted for most of the decline in feed output, falling 5.84 MMT (down 3.9%). By comparison, pork production fell by a relatively modest 883,000 metric tons last year. Feed for cattle and sheep plunged by 2.22 MMT (down 13.3%), aquaculture feed output was down 824,000 metric tons (down 3.5%), and feed for laying hens was down 383,000 metric tons (down 1.2%). Feed for meat poultry was the bright spot, rising 2.43 MMT (up 2.6%). Poultry meat output was up 970,000 metric tons. Thus, changes in hog and poultry feed use were both much larger than the corresponding changes in meat output. Feed conversion ratios are typically around 3:1 for hogs and under 2:1 for poultry.

Source: Compiled from China Feed Industry Association reports.

According to the report, production of amino acids reached 6.026 MMT, skyrocketing by 21.7% in 2024. Production of vitamins, however, fell 2.9% to reach 1.425 MMT.

The dynamics of soybean meal and corn use in feed reported are inconsistent with import trends. The report said use of soybean meal by feed manufacturers declined by 2.06 MMT in 2024, but China's customs data show that imports of soybeans increased by more than 6 MMT in 2024. According to the report, use of corn increased 7.93 MMT, while imports of corn decreased by 13.4 MMT. The report said use of wheat in feed plummeted by 52.8% and use of rice decreased 51.3%. The report did not mention sorghum or barley use in feed. 

Shandong Province was clearly the leader in feed manufacturing with output of 46.48 MMT in 2024. Guangdong Province produced 36.8 MMT, and Guangxi Autonomous Region produced 23.8 MMT. Thirteen provinces posted declines in feed output, including a 1.4-percent decline in Shandong's output, while Guangxi's output rose 3.7 percent and Guangdong's output rose 2 percent. 

Shandong posted the largest decrease in hog feed output, with a decline of 1.58 MMT. This is consistent with other news that hog production has been moving out of Shandong due to disease problems and shifting to southern provinces. Henan and Hubei Provinces also had large declines in hog feed output, while hog feed production grew in Guangxi. Shandong is the dominant poultry feed producer, and its output increased 2 percent.

China's GMO Crops Tied Up by Conflicting Interests

China, a country that claims to love science and does everything fast, has spent 3 decades feuding over genetically modified crops. Scientists and farmers saw benefits of pest-resistance and reduced spraying of chemicals, but industry leaders envisioned building a non-GMO wall to shield China from imports and gain an advantage in the soybean market. The story illustrates that China is not as monolithic as most people think. The tangle of conflicting interests and industry protection undermines China's progress more often than outsiders realize.

Last year S&P Global proclaimed that, "The Chinese government has recently taken steps to establish a clear path for the approval and commercialization of [genetically modified] GM crops"--about 40 years after GM varieties were widely adopted in the U.S. and more than 30 years after GM soybeans were adopted in Brazil and Argentina. 

Chinese leaders and consumers had been enthusiastic supporters of genetically modified crops in the 1990s. Pest-resistant GM cotton was rapidly adopted in China when it became available at the end of that decade. A handful of GM varieties of corn, soybeans and rice were already being evaluated in the early 2000s, but they were never (legally) released to the market. 

China's WTO membership in 2001 changed everything. Chinese negotiators had agreed to low tariffs and no import quotas on soybeans, leaving them vulnerable to competition from imports. (China was allowed to install a quota system for corn, wheat, rice, and cotton that allowed authorities to limit the volume of imports when they wanted to.) Ministry of Agriculture economists came up with the idea of using GMO regulations as a nontariff barrier to protect the domestic soybean industry. The strategy was to create two separate markets for soybeans. Imported GM soybeans, corn, cotton, and canola would be approved for sale in China only after a years-long testing and approval process (that could not begin until approvals had been granted in the exporting country), and these could only be used in processing of feed, edible oils, or textiles. Non-GM soybeans, corn, or rapeseed grown in China and used for food products would have much lower hurdles for approval and were expected to be sold at premium prices. 

During the year before and after WTO accession China's authorities passed an agricultural GMO law, introduced a GMO food labeling regulation, and created separate soybean futures contracts for GM and non-GM soybeans on the Dalian Commodities Exchange.  

A 2011 article by a deputy director of The Ministry of Agriculture's Agricultural Trade Promotion Center explained the strategy. He recommended that China should spend more on building non-GM soybean areas in northeastern provinces (this was attempted through a series of "soybean revitalization" initiatives in Heilongjiang Province) and create a non-GM soybean brand to meet demands for non-GM soybean products domestically and in Japan, South Korea, and Europe, enabling China to sell non-GM soybeans at premium prices.

Heilongjiang Province plays a critical role in China's adoption of GM crops since it is the largest producer of China's soybeans and corn. Heilongjiang's agriculture is also dominated by the powerful system of State farms established in the 1950s to defend the lightly populated region from Soviet aggression. Heilongjiang State Farms--supervised by the Ministry of Agriculture--had invented a "Green Food" concept in the 1990s to promote its pristine farming environment, mainly to boost exports to Japan and other countries worried about pesticides and heavy metals in Chinese foodstuffs. 

A 2023 China Quarterly paper by Singapore-based scholars explained how conflict between Heilongjiang Province's objective of protecting its soybean industry and the central Chinese leadership's push to promote GM technology illustrated the clash between local interests and central policies. Heilongjiang Province's soybean association's campaigns were key in turning Chinese public opinion against GM crops and in formulating a GM-free strategy for Heilongjiang. 

The clash came to a head in 2016 when China's State Council announced its intent to push ahead with research and commercialization of GM crops while promising to maintain the world's strictest regulatory system to satisfy the country's many GM food skeptics. A 5-year plan for science and technology issued that year called for commercialization of pest-resistant GM corn and herbicide-resistant GM soybeans by 2020. The following year, state-owned ChemChina paid $43 billion to acquire Syngenta, a Swiss farm chemical company that produces genetically modified seeds.

That same year in December 2016 Heilongjiang Province revised its food safety regulations to ban production of GM crops, ban sale of GM seeds, and prohibit the production, trading or selling GM foods in the province.  (This blog has previously covered the 2016 Heilongjiang GMO ban.) Commercialization of GM crops would undermine the business strategy of keeping the province GMO-free. The ban prompted critiques from official news media. Apparently central officials leaned on Heilongjiang to fall in line with the pro-GM policy--the province lifted the ban 6 months after introducing it and revised its food safety regulations again.

In 2023 the Ministry of Agriculture and Rural Affairs (MARA) science education office posted a terse statement claiming that false information had been spread on the internet regarding Heilongjiang's food safety regulations. The post did not explain what information was false, and a response from Heilongjiang's agriculture and rural department included in the post said its second revision of provincial food safety regulations banned illegal production and processing of edible GM agricultural products. 

Six months later a longer response on social media platform QQ from someone writing as "Doubt Explorer" ("Agriculture Ministry Responds: Heilongjiang Province Can Plant Genetically Modified Crops, Approval from Administrative Agricultural Departments is Sufficient") explained that Heilongjiang had canceled its GM food ban, and its new revision of regulations only banned production of GM crops if they were planted in violation of national laws and regulations. This post insisted that Heilongjiang officials had issued materials praising GM crops as "a great invention of mankind" that "will bring huge economic and social benefits to the development of human society." Since no GM food crops had been approved when Heilongjiang's regulations were announced in 2016, "Doubt Explorer" reasoned that the regulation simply banned planting GM crops without authorization. Doubt Explorer claimed that GM varieties--if they are approved by the Ministry of Agriculture and Rural Affairs--could be planted throughout the country, including Heilongjiang. 

The non-GM market segmentation strategy was still being pushed in some circles. In 2022 Chinese customs authorities promoted the segmentation strategy by creating a new harmonized system code that distinguished imports and exports of non-GM soybeans from GM soybeans. A long essay in Economic Daily in 2022 (posted on the agriculture ministry's web site) discussed the market segmentation strategy at length and argued that China's non-GM soybeans should use their "competitive advantage" to meet demands in China and overseas in a segmented market alongside GM soybeans. The article also suggested that prices for non-GM soybeans could be set independently of imported GM soybeans...with a premium price due to the "scarcity" of non-GM soybeans in the world.

Economic Daily pointed out that China needed to protect the "non-GM purity" of Chinese soybeans to make this strategy work. Allowing GM soybeans to be grown in China threatened to contaminate non-GM crops. 

Chinese authorities allowed a trickle of approvals for GM corn and soybean varieties developed by 26 Chinese seed companies and set up a seed production base in Gansu Province, but as of 2024--four years after the 2016-2020 5-year plan had envisioned full commercialization--GM corn and soybeans could only be grown in 20 trial counties. At an official press conference in January 2024 a MARA official was evasive when asked whether the completion of trials meant that GM corn and soybeans could be legalized or would still be subject to some limits. 

Apparently, not everyone in Heilongjiang was on board with the GM-free strategy. "Doubt Explorer" pointed out that 6 GM soybean varieties and a GM corn variety are being planted on a trial basis in Heilongjiang, and a soybean-crushing company affiliated with Heilongjiang's State Farm system imports large amounts of genetically modified foods annually. A query on the China Customs Administration web site shows that companies registered in Heilongjiang Province imported 1.68 million metric tons of GM soybeans and 563,232 tons of non-GM soybeans during 2024. (Nearly all of the non-GM soybeans imported by Heilongjiang companies came from Russia which shares a long border with Heilongjiang.)

One comment on the "Doubt Explorer" post from Heilongjiang Province insisted, "the Ministry of Agriculture has no control over what is planted in Heilongjiang," describing it as the country's "last food fortress." Another comment from Ningxia Autonomous Region said he/she had observed that the northeastern provinces have been the most opposed to GM crops, and the commenter invited farmers to plant GM crops in the northwest if northeastern provinces don't want to grow them. A comment from Jilin Province reported that friends who planted GM corn and soybeans had only sprayed Roundup once and saved the cost of multiple pesticide applications. The Jilin commenter predicted that all crops would eventually be genetically modified. A commenter from Beijing said, "You are too naive. The Ministry of Agriculture's representative represents the State's thinking." 

Southern Rural News, a Guangdong-based news outlet, reported in its "unofficial" survey of farmers who planted GM crops in 2024 that pest resistance had prompted adoption of GM corn in central Liaoning Province, west-central Jilin, and parts of Heilongjiang. A farmer in Jilin Province shifted 3000 mu (nearly 450 acres) to GM pest-resistant and glyphosate-tolerant corn. He said his net returns went up due to fewer pesticide sprayings, fewer weed problems, and higher sales price due to lower mycotoxins and better kernel quality. The article was vague about how the GM corn was marketed and did not mention whether it was segregated from non-GM corn. Some companies issued announcements that they would refuse to buy GM corn. GMO test strips were widely sold in northeastern China. 

Southern Rural News noted that all the approved GM seeds are produced by Chinese breeding institutions, a nod to China's other objective of freezing multinational seed companies out of China's market. The Chinese companies are not selling seed cheaply, though. Southern Rural News reported that the price of GM corn seed is generally higher than conventional seed, and they cannot grow GM corn from saved seed. The article noted that it takes 5-to-8 years to of R&D, testing, market launch, and regulatory filings for new GM seed varieties with an estimated cost of $136 million.

Meanwhile, China's grain and oilseed producers face a crisis. China's corn crop was reportedly record-large with record-high yields in 2024, but some observers thought the numbers were inflated. Corn imports boomed from 2020 until they dropped last summer. Southern Rural News reported that demand for GM corn seed was curbed last year as some farmers switched to growing potatoes and sunflowers, probably motivated by falling corn prices. 

During an inspection of Heilongjiang's soybean industry last month China's agriculture minister learned that many soybean farmers were losing money and urged officials to provide subsidies, buy up soybeans for reserves, and add soybean processing capacity to encourage farmers to keep planting soybeans. Xi Jinping's "important directive" to boost soybean self-sufficiency and the 23-mmt target for soybean output in 2025 set by the 14th five-year plan have been memory-holed. Instead, the slogan this year is to keep soybean production at the 20-mmt level reported for the last 3 years. 

Back in 2016 the current agriculture minister, Han Jun, announced the pro-GMO initiative when he was rural policy advisor to the State Council. In his tour of soybean-producing areas last month he called for improvements in soybean yields, high-oil and high-protein varieties, but did not mention GM crops. 

China's rejections of meat imports spiked in 2024

Rejections of imported meat by China's customs authority more than tripled in 2024. It is unclear whether problems in meat shipments suddenly increased last year or whether the spike in rejections reflects an effort to bring relief to struggling Chinese meat producers by rejecting imports. 

A compilation of monthly reports of rejected food imports from the Chinese customs web site showed that 778 shipments of beef, pork, chicken, lamb, and deer meat were rejected at China's border last year. The spike in rejections was unusual: China's number of meat rejections had never even reached 300 in previous years (the customs administration took over inspection in a 2018 revamp of border authorities). 

Source: Compilation of monthly reports of rejected food shipments posted on China Customs website.

Rejections increased for each kind of meat, but beef and pork accounted for most of the increase in rejected shipments. China rejected 435 beef shipments, up from 60-to-80 rejections in previous years. Pork rejections increased to 186 in 2024 from about 40-to-70 in previous years. Rejections of chicken posted a smaller increase from 86 to 112 shipments. Rejections of lamb are fewer in number but they have been on a rising trend from 10 in 2019 to 43 last year. 

The rejected shipments by weight totaled 5,633 metric tons, comprising just 0.08 percent of China's 6.7 million metric tons of meat imports in 2024. Rejected pork and chicken shipments included mostly containers of 20-to-27 metric tons while rejected beef shipments were smaller--often 10 to 1000 kilograms. Thus, pork shipments comprised about half of rejected shipments by weight. 

China rejected meat from dozens of countries. Fourteen countries had beef shipments rejected, but Australia had the largest number (144). Of 8 countries with pork rejected, Denmark had the largest number of shipments rejected (101). Brazil had the largest number of chicken shipments rejected, and New Zealand accounted for more than half of rejected lamb shipments.  

Increases in rejections stood out for Australia, European Union countries, Brazil, Argentina, and the USA. The United States had rejections of beef shipments (43), pork (37), and chicken (17). Rejections of Denmark's pork stood out because China had only rejected 10 Danish pork shipments in total over the previous 5 years. Nearly all the rejected Danish shipments came from a prominent company. All the leading meat companies in Europe, North and South America had shipments rejected. 

Source: Compiled from reports on China Customs Administration website.

Only a few shipments were rejected for finding spoiled meat, including many of the rejected U.S. shipments and Russian and Brazilian chicken shipments. Overall, most beef, chicken and lamb shipments were rejected for not having all their documentation in order. Most of the Australian beef rejections were for documentation problems. 

All the Bolivian beef rejections and about 25 Brazilian beef rejections were for detection of a drug used to control ticks. One company told news media that China suspended its Greely, Colorado plant due to detection of the growth compound ractopamine in its shipments, but the two shipments of U.S. beef rejected for ractopamine as reported by China customs listed other companies as the producers. 

In contrast, most of the pork rejections were for detection of an unspecified animal disease, including nearly all the rejections of Denmark's pork. Some Spanish pork was rejected for containing testosterone.

Is China using rejections by customs inspectors to slow down meat imports? China's beef producers have been suffering from steep financial losses due to falling prices over the last two years. The surge in rejections of European pork coincided with China's announcement of an antidumping investigation of European pork and an accusation of overcapacity in European pork industry issued by China in June. News media reported China suspended beef shipments from two U.S. facilities on the same day in May.

Cloud-based Farming Scams Proliferate in China

Four Chinese government departments issued a warning about “cloud-based" farming scams ahead of the lunar new year holiday this week. 

The warning posted jointly by the Ministry of Agriculture and Rural Affairs, Bank Supervision authority, public security bureau, and State Administration of Market Supervision alerted Chinese citizens that cloud-based cattle, fish, tea, and vegetable farming frauds have become rampant. The Ministry of Agriculture issued a similar warning about cloud-based farming frauds last September.

A "cloud cattle farm" in Ningxia Autonomous Region
featured on China Central TV (reposted on Youtube).

One scheme featured in a November article invited investors in Shanghai's posh Xuhui District to invest RMB 5000 to own a cow on an overseas farm with the promise of high returns. Investors were invited to view videos of the farm and monitor their cow's daily life on a video feed. One investor raised his investment to RMB 3 million before he learned that "his" cattle had been bought back by the company in exchange for coupons giving him ownership of 60,000 pounds of beef he had no way of redeeming. The company let him put the beef up for sale on consignment but there were no takers. Shanghai police found that the farm did not actually exist and the video footage had been borrowed from elsewhere. 

According to this week's warning, the frauds often hype science and technology-based farming and other hot topics like rural life, organic ecology, smart agriculture using forged videos and pictures of farms and ranches to fabricate or exaggerate the actual production conditions. They promise low risk and unrealistic high returns. The fraudsters use the Internet and mobile apps to conduct operations and collect and disburse funds. Some operate like a ponzi or multi-level marketing scheme by paying off early investors with money from later investors or inducing participants to recruit more people to join to expand the pool of funds. 

Illustration from a November article warning against
fraudulent online farming investment schemes.

Ironically, China's agriculture departments have used similar fraudulent approaches to promote agricultural ventures for decades. The Internet is littered with shiny images of space-age-looking farming ventures. Agricultural officials constantly hype high-tech farming practices by installing highly subsidized equipment and facilities on model farms and demonstration villages. They then bring in teams of village officials on sponsored tours to observe the new techniques. Officials then borrow money to build the facilities in their home villages which promptly fail because they are unviable without subsidies received by model farms. Failed techniques and farming enterprises have been promoted with staged, doctored, or photoshopped images since the Great Leap Forward and Dazhai, including schemes to feeding wheat straw to cows, communal livestock-raising compounds decimated by disease, seed subsidies used to push lousy seeds from a local monopoly, fake farmer cooperatives set up by officials to meet quotas or run by companies to get tax breaks, intercropping corn and soybeans, and countless abandoned greenhouses.

China's 2024 Ag Imports Shrank in Value

China's agricultural imports declined 7.9 percent during 2024 to reach $215 billion, according to data posted on the customs administration website. The 2024 value was lower than each of the 3 preceding years. Agricultural exports were up 4.1 percent to reach $103 billion.

Source: Data from China Customs Administration December reports.

The top two agricultural import categories by value both declined. Soybeans ($52.75 billion in 2024) fell 10.9 percent, and meat ($23.38 billion) fell 15.1 percent. Cereal grain imports ($15 billion) were down 28 percent and fish & shellfish imports ($18.5 billion) were down 6.2 percent. Edible oils imports ($10.6 billion) were down 17.8 percent. Fruit, rubber, cotton and wool and beverage imports were up for the year.

The decline in value of imports partly reflected a decline in prices. Customs reported that the volume of soybean imports for calendar year 2024 reached a record 105 million metric tons, up 5.6 million metric tons from the previous year according to the customs report. The volume of several other import categories declined less than their value. Imports of cereal grains reached 50.19 million metric tons, 8.9-mmt less than the previous year. Meat imports totaled 6.7 million metric tons, down 9.7 percent from the previous year.

The volume of China's corn imports was down 13.5 mmt, nearly cut in half from 2024, while wheat and rice imports were down less than 1 mmt each. Barley and sorghum imports were up from the previous year. Imports of palm oil were down 1.5 mmt and imports of soybean oil and rapeseed oil posted smaller declines. Beef imports were up 140,000 metric tons, but imports of other types of meat were all down from the previous year. Imports of fish and dairy were also down. 

A year ago China's customs data was apparently doctored to make the soybean import total come in just under 100 mmt for 2023. There seems to have been no such shenanigans this year. China Grain Net's analysis of the 2024 trade numbers acknowledged that soybean imports had broken through 100 mmt and commented that soybean imports fulfill demands of the common people in view of China's land resource limits and pressure on environmental resources. China Grain Net went on to acknowledge that reliance on imports challenges China's national food security "...in the current context of intensified competition among major powers and increasing uncertainty in the external environment."

Calculations based on the customs data and production of domestic soybeans show soybean imports constituted 83.6 percent of China's soybean supply in 2024. Similar calculations show 7.1 percent import reliance for cereal grains and 6.5 percent import reliance for meat. 

Shrinking agricultural import values present a picture of weak consumer demand and economic deflation that present a more serious concern for China's rural economy. China Grain Net commented, "...under the condition of weak domestic grain demand, imports of low-priced grain from abroad may increase supply pressure, drag down grain prices and affect farmers' income from grain production."

The National Bureau of Statistics reported sharp declines in producer prices for grains and oilseeds for Q4 2024 (corresponding to the fall harvest season). Wheat prices were down 11 percent, corn prices were down 17.7 percent, rice was down 4.6 percent, and oilseed prices were down 3.9 percent from a year earlier. Cattle price plummeted 22.7 percent, sheep prices were down 9 percent, and poultry prices were down 2.3 percent. Hog prices were up 12.9 percent from a year ago, but the hog industry downsized by cutting slaughter 3.3 percent.

Preventing rural areas from relapsing into poverty was one of the watchwords for communist party officials stressed in last year's "Document No. 1" as well as the December 2024 rural work meeting. Officially, primary sector (agricultural) GDP grew 3.5 percent in 2024, falling behind the overall GDP growth rate of 5 percent and weaker than growth in manufacturing and service sectors. Fixed asset investment for the primary sector was up only 2.6 percent, despite much publicity about building "high standard fields." 

The National Bureau of Statistics reported that nearly 300 million rural people had non-farm employment during 2024, up 2.2 million (0.7 percent) from the previous year. The increase seems implausible given the contraction in construction and service sectors--two top employers of rural migrants. However, the increases of last two years have been among the slowest ever. Employment in rural areas grew only 0.1 percent in 2024 after declining 2.8 percent the previous year, suggesting an especially weak rural economy. 

Source: Calculated from China National Bureau of Statistics.

The dollar-value of average monthly nonfarm wages earned by rural people has been stagnant for four years as modest gains in wages are offset by depreciation of the Chinese currency against the dollar.

Source: Calculated from China National Bureau of Statistics data.