Dim Sums: Agricultural Markets in China

According to the Economic Observer newspaper, Chinese residents desperate for safe milk powder after the melamine adulteration incident are importing foreign milk powder through the mail. The postal bureau in Suzhou reported that it processed 65 shipments amounting to over 750 kg. of milk powder during October 1-15. Meanwhile, the Harbin Daily boasts (with no apologies or concerns) that Heilongjiang Province has been pumping out record-setting exports of milk powder. Heilongjiang Province exported 30,000 metric tons of milk powder during the first 9 months of 2008, a 40% increase from last year. That was 51.5% of the whole country's exports. Major markets for the stuff were Venezuela (joke's on you Comrade Chavez), Africa, Taiwan and Hong Kong. In other Chinese dairy news, third quarter financial reports for major dairy companies were grim. Sales were down and losses of several hundred million yuan were reported for major companies. The exception was Beijing Sanyuan whose milk ...

Last week China made a big splash by announcing plans for a huge stimulus package to revive its economy and show the world how important and resonsible China is. Having spent 40-to-50% of GDP annually over the past decade on building roads to everywhere, a railroad over the Himalayas, new sports stadiums and airports in every major city, subways, mag-lev trains, bullet trains, a rather large dam, and three huge water diversion projects, Chinese bureaucrats are now assigned to come up with ways to spend $586 billion more, mostly on infrastructure. As one newsletter put it, "The hills are alive with the sound of building." Authorities are even thinking about building low-cost housing for rural migrants in cities (although developers used to building high end luxury projects may not go along with this.) China has also put new emphasis on protecting farmland. It has set a "red line" for the minimum amount of farmland and a minimum grain planted area threshold. It just a...

On November 13, the National Development and Reform Commission (NDRC) announced a “National Grain Security Mid- and Long-term Plan” to build a network of grain production areas to guarantee food security. The plan is full of sloganeering and doesn't give specifics. The plan sounds like pretty much what the government is already doing, but it lays out China's general approach to grain policy. It hearkens back to the days of central planning and dredges up the nearly-forgotten but still intact "governors' responsibility system" as the government worries about being able to feed its population. The document stresses that China can't rely on grain imports because its demand is so huge it could outstrip world supplies. The country will concentrate on building a set of production regions based on good production conditions, high production level and maintaining ecological protection, pay close attention to research to increase local grain production plans and measur...

China's industrial use of corn has been booming over the last few years. Chinese analysts estimate that starch, alcohol, and related industries use about 40 million metric tons of corn annually compared with about 92 mmt used for animal feed. The starch industry has a history of booms and busts. The industry apparently is overbuilt and Chinese industry reports indicate some starch products are in surplus and a large share of some products are being exported. According China National Grain and Oils Oct. 30 Corn report: China’s corn starch exports for Jan-Sept 2008 totaled 397,000 mt, up 74% from same period last year. From 1992-2006, exports were never more than 200,000 mt. The total for calendar year 2007 was 342,000 mt, which will be surpassed this year for a new record. The main reason is that domestic starch production is in a serious surplus situation; the excess is exported. This year China’s corn starch exports mainly go to SE Asia and other Asian countries, including 27.2% t...

China' National Development and Reform Commission announced the minimum procurement prices for wheat produced in 2009. Usually the minimum price is not announced until May, just before the wheat harvest and 6-7 months after it was planted. This time they announced the minimum price in October, early enough to influence planting decisions. Minimum prices for last 3 years (yuan/50 kg) 2007 White 72; Red 69; Mixed 69 2008 White 77; Red 72; Mixed 72 2009 White 87; Red 83; Mixed 83 [corrected May 25, 2009]

The professors haven't had a chance to publish their erudite articles explaining the causes of this year's food price spike yet, and already world commodity prices are dropping like a rock--faster than anyone anticipated. So are ocean shipping rates. The whole food price landscape is changing. Where a few months ago Chinese authorities were desperately trying to protect consumers from “food inflation,” now they are desperately trying to support prices for farmers while world prices are dropping. The China National Grain and Oils Information Center (CNGOIC) weekly report on edible oils markets describes the soybean situation. In coastal regions where most soybeans are imported, prices have fallen from about 3800 yuan/mt to 3150 yuan/mt over the past 4 weeks. Soy oil and meal prices are also weakening. The landed cost of soybeans arriving in November (including duty) is expected to be 3100 yuan, which is lower than the price of soymeal. Chinese authorities have announced that the...

The Chinese Communist Party held a high-profile meeting—the third plenum of the 17th party congress if you want to be precise—which focused on rural affairs. In the lead-up to the meeting, there were many expectations floated that watershed reforms would be issued. Much was made of the fact that 2008 is the 30-year anniversary of the 1978 reforms that broke up the failed farm commune system, awarded farmers leases to plots of land, and started China on its unprecedented economic boom. The document released on October 12 goes on and on (the English translation is 22 pages in a Word document) about principles and strategies, etc. I do not see any major reforms here—it looks to me like a validation of strategies China has been pursuing in recent years. The aspect that received the most attention leading up to and during the meeting was the prospect for giving farmers greater rights over their land, including the possibility of transferring it and consolidating land into bigger farms. I ha...