Policy Bank Ups Funding for Summer Grain Procurement

In another sign that Chinese officials are eager to keep farmers happy during a year of low crop prices, the Agricultural Development Bank of China (ADBC) pledged to increase financing for purchase of summer grains. ADBC allocated 150 billion yuan (over $20 billion) to fund purchase of this year's winter wheat, rapeseed, and the early-season rice crop, an increase of 40 billion yuan (about $5.5 billion) from last year. The announcement was made at the ADBC's June 13 meeting to launch financing of summer grain procurement.

The ADBC is the Chinese government's rural policy bank that finances procurement of commodities for government reserves and other rural policies, viewed as a backstop to stabilize markets. The bank's most recent public report for 2023 said ADBC financed more than half of grain that year with funds totaling 323.7 billion yuan issued by the bank. The 2023 report also showed a 70-percent increase in nonperforming loans that year. As of June 2025 the ADBC has not issued an annual report for 2024. Yesterday, the ADBC issued 14 billion yuan (nearly $2 billion) in bonds to fund its operations. 

The increase in the bank's credit funding is meant to prop up markets for summer-harvested crops. China's wheat and early-rice procurement prices in the first week of June are down about 4 percent from a year ago and the average rapeseed price is down 2 percent from a year ago, based on prices reported by China's National Food and Commodity Reserves Administration. 

Earlier this month China's grain reserve corporation announced procurement of wheat at minimum prices in Henan Province. ADBC funds will finance these purchases. Early rice procurement at minimum price is also possible this summer (the average price is currently close to the minimum set for 2025), but rapeseed is not covered by a minimum price program. Chinese authorities maintain reserves of early rice, wheat, and rapeseed oil that are rotated year by year. 

The ADBC's meeting held in Nanjing included the headquarters deputy director and officials from branches in summer grain-producing provinces. Officials were told that they must take the initiative in credit for summer grain purchases to ensure that farmers can sell their grain smoothly and to ensure market stability. The priority is to ensure funding for replenishing grain reserves and buying grain at minimum prices without cutting into private sector grain procurement. Officials said they would work with local authorities to address the problem of substandard grain procurement. 

China Wheat Prices Sinking Despite Drought Impact on New Crop

China's wheat crop was hit by drought this year, but authorities are nevertheless scrambling to prop up sinking wheat prices. Several years ago, Chinese officials made farmers tear up fruit trees and cash crops so more food grains could be planted. Now farmers are seeing low yields and bad prices for the wheat officials forced them to plant.

As reported here last month, there have been reports of sustained drought conditions in parts of China's wheat belt. During an inspection of the wheat harvest in Henan Province last week China's Minister of Agriculture and Rural Affairs Han Jun acknowledged that parts of the largest wheat-producing province had experienced sustained drought, but he insisted that efforts to ramp up irrigation had reduced damage to the crop. Most of the article recounted Han's urging of officials and farmers to boost wheat yields and improve disaster prevention efforts.

A report by futures market analysts gave an evaluation of the new wheat crop that government officials fail to provide. They concluded that wheat yield this year declined between 4% to 15% in most districts of Henan and Shandong, China's two largest wheat-producing provinces. The most serious declines were in western and northern parts of Henan, especially in hilly and mountainous areas where irrigation was not feasible. The regional breakdown was consistent with earlier reports of serious drought. Artificial rainfall added moisture in a few areas, but wheat stalks became prone to lodging. On the other hand, many districts in Shandong and the Xinxiang district of Henan had steady or slightly higher yields this year. 

Wheat analysts interviewed by 21st Century Business Herald gave similar reports of poor wheat yields in southern parts of Henan and mountainous areas where irrigation was lacking. Analysts said wheat that was harvested had good quality as measured by test weights, high gluten, and low vomitoxin.

The decline in wheat yields did not reduce China's crop enough to prevent wheat prices from falling. The National Bureau of Statistics producer price index for wheat in Q1 2025 was down 3.7% from a year earlier. Average wheat procurement prices posted by China's Food and Commodity Reserve Administration in the first week of June are 2%-to-4% lower than a year ago in provinces of the major wheat production belt. The decline is steeper in western provinces Sichuan, Gansu, and Xinjiang.

An analyst told 21st Century Business Herald that wheat prices are under downward pressure due to weak downstream demand from flour and feed mills who are cautious in purchasing wheat. The average wholesale price for flour reported by the Food and Commodity Reserves Administration is down 10.6 percent from a year ago.

Wholesale prices reported by Administration of Food and Commodity Reserves.

On June 6, officials announced the launch of market intervention purchases of wheat in Henan Province at the minimum price level of RMB 2380 per metric ton. This is the first time the minimum price purchase program has been activated since 2020. 21st Century Business Herald said the decision to launch the intervention in Henan was due to prices falling below farmers' "psychological defense level."

Procurement prices reported by Administration of Food and Commodity Reserves.
Minimum price for wheat set annually by National Development and Reform Commission.

Economic Daily commentator Li Hui emphasized measures authorities are taking to make it easier for farmers to sell their wheat. In addition to launching the minimum price procurement, Li cited this year's purchases of new wheat to "rotate" grain reserves, an increased number of purchasing points and offering of rest areas, cups of tea and heatstroke prevention medication at grain purchasing warehouses as measures to facilitate farmers' grain sales in the summer heat. Over the past two decades officials have often trumpeted measures to make grain sales more convenient. They fear a repeat of rural dissatisfaction that threatened to boil over in the late 1990s when government grain stations refused to buy grain, downgrading it, or by issuing IOUs as payment. 

The futures analysts' report estimated that area planted in wheat was steady this year. They noted that wheat area had expanded in 2023 and 2024 after officials used aggressive tactics to force farmers to convert land from fruit orchards and cash crops to grain fields. ...Are some of those farmers now annoyed that they are losing money on wheat they were forced to grow? 

Market analysts are also watching a convergence between sinking wheat prices and rising corn prices. Putting a floor under wheat prices may prevent corn and wheat prices from reaching parity, an event that might encourage even more use of wheat in animal feed.

Chinese State Farm Tiptoes into Brazil: What's Going On?

China's Hulunbuir State Farm Group signed an agricultural cooperation agreement with Brazil's National Agricultural Society in February 2025. What is this Chinese company with an unpronounceable name? We're likely to see more of these companies in the global agricultural space, so let's take a look at who they are.

"Hulunbuir" is a Mongolian name for the district of Inner Mongolia where one of hundreds of Soviet-style state farms were set up in the 1950s to consolidate communist party control over empty parts of the country. Hulunbuir is made up of grasslands that resemble the U.S. Great Plains or parts of Brazil's interior. In recent years these bureaucratic operations have been dressed up as companies with new names like Hulunbuir State Farm Group. Statistics indicate State Farms control 7.2 million hectares of cropland and produce 5-to-6 percent of China's grain output. 

One of Hulunbuir Group's farms. Source: Hulunbuir web site.

Brazilian news media have referred to Hulunbuir as a "giant," probably based on its claim to have nearly 1 million acres of cropland and an even larger area of grassland. The land is owned by the State, the farm reports to the agriculture ministry, and its farmers are employees. Unlike China's smallholder farms, State farms have access to bank loans and they are included in the government's budget. 

The Hulunbuir agreement appears to have been hastily put together as part of a diplomatic scramble to build goodwill in Latin America led by Inner Mongolia. 

Online Brazilian sources indicate a deputy leader from Hulunbuir arrived in Brazil in late January with several underlings to sign a vague agreement to cooperate with the Brazilian Agricultural Society. Two weeks later Inner Mongolia's communist party secretary arrived in Brazil with a big delegation to sign 17 agreements at an investment and trade meeting and other events with an agricultural focus. Inner Mongolia news media reported that the trip had been ordered by Xi Jinping and was framed in Xi's rhetoric about "building a shared future." The trip was so important that it was made during the Chinese New Year holiday. 

The Hulunbuir agreement with the Brazilian Agriculture Society is apparently not a priority in China. It was not mentioned in the Inner Mongolia account of the trip, although Hulunbuir's agreement with a Uruguayan company in the second leg of the trip did rate a brief mention. The trip was not apparently covered by any other Chinese media. Hulunbuir Group's web site says nothing about the Brazilian agreement. The site has not posted any news items since an announcement last December of a meeting to instruct people how they should think about religion.

 

A Brazilian source described the February signing of the Hulunbuir Group's cooperation agreement as a guiding instrument for long-term cooperation with no specifics. Seeds and animal breeding were identified as priorities by both the Inner Mongolia story and the Brazilian report.  

An article in Portuguese based on a March virtual meeting claimed that the Chinese company would begin looking for land to grow soybeans, corn and cotton in Brazil in order to expand its global operations. A June 4 article on a Brazilian site hyped the deal as "China Conquering Brazil" and reported that the Chinese group plans to bring "modern irrigation systems, soil management and seeds genetically adapted to extreme environments."

Hulunbuir Group's web site shows that the group is a sprawling web of a dozen companies engaged in crop and livestock farming, food processing and petroleum. Farming is done by hundreds of employees who have land assigned to them.

Farm equipment subsidies get a lot of attention. The site includes a list of more than 800 farms operated by employees and subsidiaries within the Hulunbuir Group that received a total of roughly $1.5 million in subsidies to buy tractors, harvesters, hay balers, planters, and guidance systems ("Bei Dou" China's version of GPS) last year.

Another article last week described John Deere's contribution to modernization of Hulunbuir Group over the last 40 years during a visit to Deere's factory in Tianjin China.  

Hulunbuir farms probably receive subsidies for planting crops. Inner Mongolia's government promises farms will receive subsidies for corn, soybeans, potatoes, a corn and soybean improvement project, and extra subsidies for farms that grow crops on a large scale. One farming company in the Hulunbuir Group mentions receiving a subsidy of about $300 per acre to grow wheat. Despite the massive landholdings, farm equipment, buildings and animal housing shown on the web site, the company's farms and employees receive payments for being located in a "poverty alleviation" area. 

A Chinese Ministry of Agriculture and Rural Affairs article reported in 2024 that 11 of China's state farm companies had 84 foreign cooperation projects in 34 countries. Their overseas holdings included about 384,800 acres of land including 127,200 acres that produced 914,000 metric tons of grain. These projects are meant to serve Chinese diplomatic objectives as well as produce food and other materials like rubber. 

While the numbers sound impressive, the article cited a number of problems. The authors observed that State Farms lack production and management capabilities needed to compete globally, don't enjoy the subsidies and financial support they receive in China when operating abroad, have heavy debt burdens, and lack personnel with international business experience. 

Fourteen years ago, a massive state farm group in Heilongjiang Province called Beidahuang ("Great Northern Wilderness") Group launched soybean ventures in Brazil and Argentina that flopped. Beidahuang is now involved in the expansion of the Santos Port in Brazil. Hulunbuir Group appears to lack international experience. I could not find any evidence of other Hulunbuir Group overseas projects besides the newly signed cooperation agreements. 

The Tianjin State Farm Group's experience in Bulgaria may help evaluate Hulunbuir's foray into Brazil. The Tianjin Group was selected to operate in Bulgaria about 12 years ago as a back door to the European Union that would ship corn back to China and offer technical assistance. In its first year, the Tianjin Group was apparently duped when it was leased worthless Bulgarian land and couldn't communicate with workers. It became engaged in wine and rose fragrance businesses. With a puzzling mix of commercial and technical assistance objectives and volatile corn market, shipments of corn to China have been inconsistent over the years. In 2024 imports from Bulgaria totaled 76,400 metric tons.

We will be seeing Hulunbuir Group and similar Chinese companies in the agricultural space and they should be taken seriously. But no one should expect them to be an unstoppable juggernaut just because they're huge and have pretty pictures, huge buildings and shiny equipment. 

Fungus smuggling: bioterrorism or China-funded research in a U.S. lab?

A pair of Chinese scholars were caught allegedly trying to smuggle a dangerous fungus into the United States. The case has been portrayed as an agroterrorism plot, but a careful look suggests this was more likely a case of ambitious scholars utilizing an American lab on the down-low to conduct China-funded crop protection research. This is not meant to excuse the smuggling of a dangerous pathogen, but jumping to a false conclusion could unnecessarily heighten U.S.-China tensions.

The case was announced June 3, 2025 by the U.S. Attorney's Office of the Eastern District of Michigan and widely reported in U.S. news media as an act of possible agro-terrorism. Mr. Zunyong Liu (刘尊勇) was caught at the Detroit airport trying to smuggle a fungus called Fusarium graminearum (禾谷镰孢菌) into the United States. Liu was refused entry and sent back to China. He was working with Ms. Yunqing Jian (简云清), a Chinese citizen conducting research at the University of Michigan who had advised Liu on how to smuggle the fungus. Ms. Jian has been detained as a flight risk.

Nearly every article on the event assumes the pair were engaged in a sinister bioterrorism plot, but ABC News reported reactions from U.S. plant pathologists who pointed out that the fungus is already present in the United States and suggested that Jian and Liu were likely motivated by career advancement. A deeper dive bolsters this conjecture.

Fusarium graminearum is a big problem in China that constantly threatens the country's wheat crop. The Chinese Government allocates millions of dollars to prevent a disease called wheat fusarium head blight (小麦赤霉病) or wheat scab caused by the fungus. A fungicide to prevent wheat scab is one of several chemicals sprayed on China's wheat crop, a so-called "one spray and three preventions" organized by government officials each spring since 2012.

Illustration of wheat scab disease. Source: Nantong City plant protection station.

In April this year, Jiangsu Province official media described how Yangzhou University's plant protection faculty were advising a State-owned farm on strategies to prevent wheat fusarium rust. The article emphasized that the political importance of grain production demanded that careful measures be taken to prevent and control wheat fusarium head blight. 

Last month Anhui Province announced a new program funded with RMB 652.67 million (over $90 milllion) to set up a system of forecasting the risk of wheat scab developing across the province during the growing season.  

Drone sprays wheat crop in Anhui Province April 2025
source: Hefei Online.

The Chinese government also funds research to address the wheat scab problem. Articles on wheat scab research in Chinese journals date back to the early 2000s. In a 2024 article in Chinese technical journal Modern Agrochemicals two Nanjing Agricultural University professors described the serious problem of wheat scab in China, chemical control, fungicide resistance and reduction of vomitoxins.

Last month China's communist party paper Sci-Tech Daily celebrated progress on a government-supported project conducted by multiple Chinese research institutes to breed wheat varieties resistant to Fusarium head blight and to improve fungal disease prevention. China's Ministry of Agriculture and Rural Affairs selected the project as an achievement of the ministry's "Spark Technology" program.

The alleged fungus smugglers Ms. Jian and Mr. Liu both are affiliated with research institutes at Zhejiang University, which Sci-Tech Daily identified as leader of the Fusarium control research project. Google scholar shows Jian and Liu co-authored numerous academic papers on experiments examining resistance of Fusarium graminearum to compounds that were published in international scientific journals such as Nature Communications, New Phytologist, and Journal of Advanced Research. The publications identify both Jian and Liu as affiliated with State-supported labs for rice biology and molecular biology of plant pathogens and insects at Zhejiang University in China. 

A counter-terrorism expert told CBS news that Jian and Liu's efforts to conceal the fungus indicated the couple were carrying out a terrorism plot, but this is a non sequitur. Chinese scholars do not need to be engaged in a bioterrorism project to engage in deceit and skirting of rules. The smuggling and deceit Jian and Liu engaged in are standard in China, even for prestigious scholars. In China rules are viewed as inconveniences to be evaded when they stand in the way of opportunity. 

Piecing together details, a possible scenario that led to the smuggling is as follows. 

When Ms. Jian went to the U.S., she and Mr. Liu probably continued their research project on Fusarium in China with Chinese government funding. On her visa application Jian did not state that she would work on Fusarium, so presumably she was in Michigan to work on another project led by her host scientist. 

Jian therefore had no basis for obtaining a U.S. permit to bring the material into the country. Lacking a permit Ms. Jian probably smuggled Fusarium into the U.S. so that she could surreptitiously continue her work with Liu as a side project in the lab where she was working at the University of Michigan. Mr. Liu was caught bringing in the latest batch.

This does not exonerate the couple. Smuggling a hazardous substance into the country is a serious violation of law. Ms. Jian also apparently utilized a U.S. university laboratory to conduct research funded by the Chinese government without authorization or knowledge of the lab's director.

The framing of the case is the concern. The does not look like a state-sponsored plot. Ms. Jian's and Mr. Liu's backgrounds do not suggest a terrorism or bioweapon motive. We should not jump to the conclusion that this incident is proof that China is planning a biological attack. (Of course this does not disprove that possibility either.)

China's rejections of U.S. food shipments are rising

China continued rejecting relatively large numbers of U.S. food shipments in the first 4 months of 2025, according to Chinese customs reports. A rising trend in Chinese rejections of U.S. food shipments has been underway since 2020 for no particular reason.

The European Union and United States had the largest number of food shipments rejected by China's customs inspectors during the first 4 months of 2025. China's customs administration reported rejecting 207 shipments of food from the European Union and 154 shipments of U.S. food during January to April 2025. These two trade partners were way ahead of others in rejections. Japan had the 3rd-largest number of rejections with 81, followed by Brazil (68), Malaysia (66), Vietnam (54), and Taiwan (50). In all, China rejected 1,180 shipments from 50 countries and regions with a volume of 19,187 metric tons. 

Chart shows trade partners that had 50 or more rejections.
Compiled from China customs administration reports.

Most rejections of U.S. foods so far this year fell in several categories: 47 shipments of pork offal, chicken feet, and beef (HS 02 and 1602) from prominent U.S. companies, 47 shipments of beer, cider and other beverages (HS 22); and 35 shipments of food ingredients and dietary supplements (HS 21). Others were scattered over various food categories. January-February rejections of U.S. food were composed mainly of beer, cider, food ingredients, and supplements from two U.S. suppliers. Meat was prominent in the March-April rejections. 

Chinese inspectors cite a variety of problems for rejections. Most problems cited are incomplete or problematic paperwork or labels that do not conform with Chinese regulations. Improper additives and degraded or contaminated products make up a smaller portion of rejections. U.S. beer rejections are cited mainly for labeling and packaging problems. U.S. meat was rejected for documentation, detection of disease, degradation, failure of visual inspection, and detection of growth-promoting compound ractopamine. 

Note that these rejections do not include shipments of bulk commodities like soybeans and grains that comprise a large value of China's agricultural imports from countries like the U.S., Brazil, and Australia.

China's rejections of EU foods were composed largely of swine offal (heads, tongues, feet) from Denmark rejected for an unnamed animal disease and pork from Spain rejected for containing a testosterone compound. Other EU products rejected included a range of products such as beer, tea bags, nutrition supplements, and energy bars.

China has rejected food shipments from over 100 countries since 2018, but the EU (1,935 rejections during 2018-24) and Japan (1,733 rejections) stood out as the trading partners with the most rejections. The U.S. was third with 1,404 rejections. Others in the top 5 were Vietnam (1,278 rejections) and Taiwan (1,242 rejections). 

The U.S. is one of just a few of China's trading partners whose rejections of food shipments have been on a rising trend. China's annual rejections of U.S. food rose from 99 during 2020 to 476 in 2024. This year's 154 U.S. rejections during January-April were up from 119 during the same period last year. 

Rejections of food shipments from Japan, India, Thailand and Malaysia peaked in 2021. Rejections of EU food fell during 2022 and 2023 before more than doubling in 2024 due to a surge of pork rejections. Rejections of food shipments from Taiwan, Vietnam, Indonesia fell after peaking in 2022. 

Compiled from China customs administration.

Brazil and the Philippines are among the few countries with rising rejections of food, but their rejections are fewer in number. China rejected 110 Brazilian shipments and 45 Philippine shipments in 2024. The rise in Brazilian rejections last year was driven by the surge of meat rejections reported here in February: most were beef and chicken feet rejected for documentation issues, a hormone compound, and failure of physical inspections. Philippine shipments rejected included seafood, supplements, noodles, and snack foods like banana chips, rejected mainly for documentation problems.