This is China’s third subsidy notification since its 2001 accession to the global trade body. The previous notifications were in 2010 (for calendar years 2002-2004) and 2006 (for calendar years 1999-2001).

The new data shows a dramatic increase in recent farm subsidy provision, which grew from 310 billion RMB yuan to 593 billion RMB yuan – or approximately US$85 billion – over the four year period. The growth reflects a long-term trend towards increased support for agriculture in China, all of which has been reported as green box.

According to these new figures, China made no outlays on trade-distorting subsidies in the WTO’s ‘amber’ or ‘blue’ boxes. Blue box subsidies are production-limiting measures that are considered trade-distorting by the global trade body; amber box subsidies are the most trade-distorting form of permitted support under the WTO system.

The only trade-distorting payments provided fell below the permitted ‘de minimis’ ceiling, which is equivalent to 8.5 percent of the country’s value of production under a special agreement reached when China joined the global trade body in 2001. De minimis spending is a category of trade-distorting support that is currently allowed in small amounts under WTO rules – usually up to five percent of the country’s value of production.

For the year 2008, China reported positive de minimis support for cotton, rice, corn, rapeseed, soybeans, and pork, although support for none of these products exceeded three percent of the value of production, and in most cases was far lower.

Instead, over half of the support provided was classed as ‘general services’ payments that do not distort agricultural production or trade. This category covers research, pest and disease control, extension and advisory services, and infrastructure.

One particular sub-category of general services reported represented as much as 166 billion RMB yuan in 2008, or a little over one quarter of all subsidies notified. Described as ‘other general services’, it included the operating costs of buildings and facilities, and the salaries, expenses, and pensions of agricultural agency staff.

General services subsidies for infrastructural services were also important, representing 125 billion RMB yuan or one-fifth of all spending: these covered outlays for services such as flood control engineering, draining and irrigation facilities, rural roads, and soil and water conservation.

Environmental, food security spending rises

Financial support for most measures increased over the period, with spending on environmental measures increasing by around 40 percent to reach 68 billion RMB yuan in 2008. Payments for public stockholding for food security increased by around 30 percent to reach 58 billion RMB yuan, while payments for natural disaster relief jumped five-fold to reach 55 billion RMB yuan. The subsidy increase is linked to a series of reforms that China has introduced in recent years that aim to improve farmer welfare, reduce rural-urban disparities and improve domestic demand.

However, in a notable exception to the general trend towards increased farm support, subsidies for domestic food aid fell from 99 million RMB yuan to 64 million RMB yuan over the same time.

While direct payments to farmers also nearly doubled, they still represent less than four percent of total farm support – in contrast to other WTO members such as the EU, where such payments account for a significant share of the subsidies provided to producers.

Although China is also entitled to provide agricultural input and investment subsidies under a clause providing ‘special and differential treatment’ to developing countries, Beijing reported that no such payments were made.

While in absolute terms China’s farm subsidies are now close to the levels provided by agricultural trading giants such as the US and the EU, on a per capita basis the country’s farmers continue to receive far less than their counterparts elsewhere (see Bridges Weekly, 7 September 2011 and 26 January 2011, respectively).

With the new subsidy notification, China joins other countries such as the US, Japan, and India, which have all also recently submitted new farm support data to the WTO (see Bridges Weekly, 7 September 2011 and 15 June 2011, respectively). China and India both recently came under fire from the US for not notifying their subsidies to the global trade body on a regular basis.

The forecast is lower than what the market expects, as estimates around July had already placed the volume at 6 million tons or above in the period, analysts said.

“The figure is probably closer to somewhere between 5 million and 10 million tons,” said an analyst with the influential Shanghai JC Intelligence Co. agriculture consultancy.

The CNGOIC reports also said China bought 3 million-4 million tons of corn in the first half of the year, and may import 1.5 million tons of wheat in the 2011-12 crop year.

The wheat import volume may reach 2 million-3 million tons, the JCI analyst said.

-By Chuin-Wei Yap, Dow Jones Newswires; 8610 8400 7704; chuin-wei.yap@dowjones.com.

(END) Dow Jones Newswires

October 24, 2011 23:50 ET (03:50 GMT)

Covering 300,000 square meters, the center will serve 260 million citizens in north China. The center will process 2.3 million metric tons of vegetable protein and 900,000 metric tons of cooking oil products every year.

The development project was initiated on April 28, 2009 with a total investment of 4 billion yuan ($620.2 million), 2.6 billion yuan of which was spent to build the center.

Ning Gaoning, president of COFCO, said the launch of the project in Tianjin marks a “breakthrough” for the company, as it will allow COFCO to be ranked among the world’s largest cooking oil processors.

Zeng Liying, deputy director of the State Administration of Grain said the center will help COFCO to become more competitive.

The China National Grain and Oils Information Centre (CNGOIC) also said 2011 soybean output was expected to fall 10.5 percent from last year to 13.5 million tons.

CNGOIC said last month that corn output was expected to rise to 181.5 million tons, while soybean production would fall 7.9 percent to 14 million tons.

The centre also estimated China will process 55 million tons of soybeans this year, which would represent an operation ratio of about 55 percent, down from last year’s 64.9 percent and 61.9 percent in 2009.

At one end, small family farms are buckling under the weight of volatile prices, disease and rising costs.

At the other end, industrial-scale farms are becoming part of the landscape. But between these two options is a new cooperative venture that combines the personal attention of the family farm with the economic advantages of a corporation.

Yang Zhongxi, 44, of Qinyang, Henan province, has had to change his farming methods recently.

He used to raise more than 100 pigs at a time, making him the most prolific pig farmer in his village. In May 2010, he spent 100,000 yuan ($15,700) building a new barn capable of holding 200 pigs, plus hundreds of ducks and chickens.

But higher costs and lower returns took their toll and he quit the pig business earlier this year. Only the birds inhabit the big new barn.

“The cost of raising hogs has soared this year,” he said. “Four or five years ago, a baby pig cost 300 yuan. It is double that now.”

It has always been a high-risk business, but local farmers welcomed it, Yang said. “Generally, we could still make money.” Ten years ago, 15 or 16 small-scale breeders lived in his village. Now only two are left.

Yang said the price of feed, usually field corn, increased in his village by 0.4 yuan a kilogram early this year. A pig usually requires 300 kg of feed during its five-month growth period, so feeding each pig suddenly cost an extra 120 yuan. Five years ago, Yang said, the cost of raising a hog totaled about 1,000 yuan; now it’s about 1,500 yuan. The selling price, 2,500 yuan, hasn’t changed.

“Doing city jobs only paid 10 to 20 yuan a day years ago, and people would rather raise hogs,” Yang said. “But now, people make 100 yuan a day by doing city jobs. Who would choose breeding pigs?”

Too much work

Ten miles away, Li Qinying barely maintains her hog barn. Twenty pigs live in what used to hold nearly 150, and they are the last she will raise.

“It’s too tiring,” said Li, 54. “People say the more plowing and weeding, the better the crop. It doesn’t make sense in this industry.

“Epidemic prevention is a big problem,” Li said. Early last year, dozens of young pigs got sick and died overnight. The cause remains a mystery. “It is hard to accept because I took them as my babies and sometimes didn’t step out of the pig house for months.”

The wildly fluctuating price also is killing Li’s passion for raising pigs.

A couple of weeks ago, she heard that the market price had hit 20.4 yuan a kg, and she planned to sell some pigs. But the price dropped to 19.2 yuan the next day. “The final deal was just 18.2 yuan. That hurt me badly.”

More reason

Li is among many family breeders across the country who have chosen to leave the business since an outbreak of H1N1 flu in 2008. Steadily rising costs have deterred them, too, and one result was a near 60 percent jump in pork prices early this year.

Jin Yingfu, director of Qinyang husbandry bureau, said Henan has produced 50 million hogs on average every year, accounting for nearly 10 percent of the country’s total. Qinyang’s average production is more than 200,000, ranking it in the middle range.

The production has come from nearly 26,000 family breeders in Qinyang. Ninety percent of them have fewer than 1,000 pigs. Fewer than 25 have 1,000 to 4,000 pigs.

That is changing. “Many small-scale breeders withdrew from the market early this year in view of the rising breeding costs as well as the epidemics,” Jin said.

From January through March, the market price for hogs in some cities in Henan held at 14 to 15 yuan a kilogram, according to the Henan Statistics Bureau. It climbed in the second quarter, and peaked near 19 yuan a kg.

However, Jin said the rising price didn’t inspire farmers to buy many more piglets. “Farmers worried about another sharp drop in meat prices due to oversupply.”

To drive down pork prices and avert fluctuations longer term, the central government invested heavily in the industry to feed its growing middle class, which is consuming more meat. The government decided in July to resume a 2.5 billion yuan (about $389 million) subsidy to spur pig breeding and prevent future supply shocks.

The subsidies are based on production. The minimum is 200,000 yuan for producers of 500 to 900 hogs, and the maximum is 800,000 yuan for producers with more than 3,000 hogs. Small family pig farmers, then, are left out.
Fewer family raisers

China, the world’s largest pork consumer, also is the largest producer, with about 50 million tons of meat each year to feed its 1.3 billion people and 55 percent of global production. However, production is increasingly concentrated.

Through the mid-1990s, more than 90 percent of the country’s pig breeders were those small family farms, each producing 40 to 50 hogs a year. Then farmers began to reduce their risk by cooperating with big companies.

In neighboring Hunan province, the number of breeders with fewer than 50 pigs dropped 30 percent in recent years, Zhou Xiaorong, president of the Hunan Meat Association, told Xinhua News Agency in July. In East China’s Shandong province, an estimated 90 percent of breeders raise at least 50 pigs, according to the Shandong Hog Raising and Selling Association.

The Ministry of Agriculture said that in 2007, half of China’s hogs were produced by 2.2 million breeders raising more than 50 hogs at a time. The next year, those breeders provided 62 percent of the hogs.

Better option

About half an hour’s drive from downtown Zhengzhou, 35-year-old Zhou Hui is taking care of 40 pregnant hogs. She and her husband live in a small white house that connects two hog barns. The couple are not family breeders, but work for a large-scale company, Chuying.

The company, based in Henan, sold about 660,000 hogs last year. It developed a “staging” breed mode that has attracted thousands of participating farmers.

Chuying divided the traditional raising process into four stages – pregnancy, delivery, care of baby pigs, and raising them to market size. The farmers are guided by trained technicians and are involved in just a single process, which can prevent the spread of disease.

To get into Chuying’s No 1 Breeding Base, a car passes twice through sanitation showers about 300 meters away. Technician Liu Qingfeng said visitors cannot enter unless two days have elapsed since they visited another farm, and they must wear protective clothing.

“Pigs are easily susceptible to illness,” he said. “For safety’s sake, even the breeders do not go out of the base before they finish a single breeding process.”

Liu said family pig farmers lose 17 to 20 percent of their pigs to illness, but the rate in Chuying’s system is 5 to 6 percent.

The No 1 Breeding Base covers 133 hectares and has more than 400 barns, each holding about 40 pigs. The young ones arrive weighing 25 to 30 kg and will reach 100 to 160 kg over three months.

Chuying has 80 other breeding bases in the province, each with a single stage. The workers, who are independent contractors, are paid according to how much work is required, not the specific job or stage they are involved in. The stages vary in length, from about 40 days to 90.

Breeders take 10 to 15 days off after finishing a stage, and the work provides steady income without the fears associated with unstable meat prices.

Zhou and her husband earned 120,000 yuan last year, taking in twice the number of hogs than most people. “This job is easy and gives me more freedom,” Zhou said. “At least we don’t need to punch a time card, like white-collar workers.”

Zhou and her husband started to work with Chuying in 2003. Last year they bought a two-floor apartment in Xinzheng, a 10-minute drive from the farm.

“Our life doesn’t sound like a traditional hog breeding family, right? Group working gives us confidence and safety that we could hardly imagine before,” Zhou said.
Bigger map

Of the 609 million hogs China raised in 2008, only 1 percent came from hog producers raising more than 50,000 pigs every year. US-based Smithfield Foods has about 900,000 sows producing 14 million market hogs annually, making it the world’s largest producer of hogs.

China is on its way toward large scale. A growing number of companies have laid out plans to build massive industrial-scale pig farms. Chuying is investing 4 billion yuan to build a 400,000-hectare organic pig-breeding farm in Henan that would have an annual capacity of 1 million hogs.

Sichuan-based New Hope Group, China’s top animal feed producer, plans to expand its own hog production by 3 million in the next three years to tap growing domestic demand.

Thailand’s CP Group has started construction of a 500,000 hogs-a-year farm in Shandong province. The company is also building two farms to produce 1 million pigs a year, one each in Guangdong and Henan provinces.

Li Minghui, a research fellow with the Chinese Academy of Agricultural Sciences, said that more family pig farmers have signed up with larger scale companies. “Small breeders have very limited capability to withstand market risks,” he said. “The structure change will benefit both raisers and consumers.”

Increasing exports

The US Department of Agriculture recently published a report, “US pork exports to China are increasing”. It cited China’s strong economic growth, market demand for pork and declines in China’s pork production.

US exports to the Chinese mainland reached 192,500 metric tons (valued at $169 million) in the eight months ending in February 2011. Exports to Hong Kong (most of which are re-exported to the mainland) added 63,600 tons ($92 million) to this total.

According to the US Meat Export Federation, US pork exports to the mainland jumped 1,492 percent in the first half of 2011.

“We cannot simply say that increasing imports will hurt Chinese raisers. It takes time for us large-scale companies to hold a bigger share of the market,” said Wu Yide, Chuying’s board secretary.

“Imported meat or foreign investment will not shake an industry that has existed in China for thousands of years.”

Because the appraisal value of the proposed transferred equity has not been ultimately confirmed, the final equity transfer price will be determined and stated clearly in the formal Equity Transfer Agreement. In accordance with the Letter of Intent, within 15 days from the signing date of this Letter of Intent, China Modern Agriculture shall pay an early security deposit of equity transfer to Jinshangjing Company with the total amount of RMB 14MM. The final Equity Transfer Agreement will be signed within 90 days from the signing date of this Letter of Intent.

The acquisition is expected to add approximately $4.5MM to the net profit for the year ending June 30, and the annual production capacity of fresh milk will be increased by about 30,000 tons.

About China Modern Agricultural Information

China Modern Agricultural Information, Inc. is a high-tech livestock company specializing in the breeding of cows and calves, the production and sale of milk, the sale of organic fertilizer, as well as the promotion of agricultural information. For more information please visit http://www.hljzhongxian.com/zx/eng_zx .

Cautionary Statement Regarding Forward Looking Information

Certain statements in this release concerning our future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our 8K/A dated March 31, 2011, and other recent filings. These filings are available at http://www.sec.gov/ . We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: China Modern Agricultural Information, Inc.

China remains one of the largest markets for Canada’s canola crop, but exports to the country have been hampered since 2009 when China placed import restrictions related to blackleg, a common fungal disease in canola. Currently, canola that tests positive for blackleg can only be delivered to crushing facilities far away from where China grows its own rapeseed crop.

“This is tremendous news for our canola producers and processors and is a testament to our strong and collaborative working relationship with China,” said Canadian agriculture minister Gerry Ritz in the news release.

“This development demonstrates that the growing Canada-China commercial relationship is benefiting Canadian farmers and their families,” added Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, in the release. “We value and welcome the continued access as China is now the world’s second-largest economy. It is important that we further develop our trading relationship with China to create opportunities for hard-working Canadians”

The announcement is part of an ongoing strategy to achieve a stable trading environment with China for Canadian canola, said the release.

“We welcome China’s commitment to work in partnership to maintain trade in canola while jointly tackling research to reduce the threat of blackleg,” said Canola Council of Canada President JoAnne Buth in the release.

During the first ten months of the 2010/11 (Aug/Jul) crop year Canada had exported 692,000 tons of canola to China, making it the fourth largest export destination, according to the most recent Canadian Grain Commission data as of the end of May. That compares with the previous year when Canada had sent 1.841 million tons of canola by the end of May.

According to the international potash fertilizer price negotiation disclosed on June 30, the CIF (cost insurance and freight) price of potash fertilizer for import into China was set at $470 per ton for the second half of this year. The price has risen $70 per ton compared to that of the first half of this year, a price increase of 17.5 percent, the newspaper reported.

According to Li Qiang, a spokesperson for Sinochem Group, the international price rise of potash fertilizer is partly caused by the international price rise of raw materials and resources. “However, the most important and fundamental reason is the intensified monopoly of the international suppliers in this field”, the newspaper cited Li as saying.

Feng Mingwei, the deputy general manager of Sinofert Holdings Limited, the largest fertilizer importer in China, said “Our dependence on imported potash fertilizer is at a rate of above 50 percent averagely. It is a threat to our national food security.”

In a bid to cope with the price rises and potash fertilizer shortages, China needed to establish a strategic fertilizer reserve system for the off-season as well as strengthen the “negotiation mechanism of potash fertilizer import”, Feng told the reporter.

The crackdown comes as misuse of such chemicals has increased in recent years.

A draft of the revised regulation was posted on the website of the Legislative Affairs Office of the State Council on Wednesday for public comment by the end of August.

According to a statement on the website, the revised draft improves the current regulation, which was issued in 1997, in areas of a production register, quality control, marketing, and the use and administrative management of pesticides.

For example, the draft requires pesticide manufacturers to set up systems to record the raw materials and quality of products to ensure that every process in the production conforms to quality standards.

The draft also requires local authorities to conduct reviews of the registered pesticide products and to ban or limit their use in cases where there are risks to product safety, people’s health or the environment.

The move is seen as another major effort by the central government to address safety issues related to agricultural products after the State Council, the Cabinet, announced earlier this month it would ban 10 types of highly toxic pesticides from registration and sale.

China is the world’s largest pesticide producer and consumer, with pesticide production hitting 2.26 million tons in 2009, according to the National Bureau of Statistics.

At present, annual usage of pesticides in the country remained at 1.3 million tons, 2.5 times the global average, official figures showed.

The number of registered pesticide products in China has reached 27,000, a sharp increase from 9,747 in 1999. More than 2,000 companies are producing the chemicals, Ministry of Agriculture figures showed.

However, in recent years, incidents involving pesticide misuse have attracted growing concern among the public about food safety.

In February 2010, many provinces banned the sale of cowpeas that had been grown in South China’s Hainan province because high levels of the toxic pesticide isocarbophos were detected.

In April 2010, nine residents in Qingdao, East China’s Shandong province, were poisoned after eating toxic garlic that had been polluted with organic phosphorus.

“The central government needs to crack down on substandard products that are flooding the market,” an industry insider told China Daily on Thursday, without giving his name.

Li Shilin, director of the agricultural technical station in Anhui province’s Fengtai county, said technical services and guidelines on the proper use of pesticides are needed urgently among local farmers.

“Most farmers do not have enough knowledge of pesticides and currently their purchases and use of the chemicals are based on their limited experience,” he said.

“Excessive doses of pesticides used in agriculture can happen easily and may harm public health. But so far, many farmers have not realized this,” he said.