China Agriculture View

BEIJING – Blind and excessive land exploitation in China’s urbanization may partially contribute to the sharp decrease of the country’s arable land and pose a threat to food security, a senior official has warned.

“We should not excessively turn farmland into urban areas. Grain security should be given priority,” Yang Weimin, secretary-general of the National Development and Reform Commission, the top economic planning body, said at a forum about urbanization strategy and planning over the weekend.

Yang said the country has approved more than 1,500 national- and provincial-level industrial development zones, the area of which account for nearly 1 million hectares.

“But not all places need to massively boost industrialization and urbanization. For example, we should leave major agricultural and ecological areas as they are and limit their urbanization,” he said.

Newly built urban areas in China had grown by 50 percent since 2000, while the urban population increase by only 26 percent during the same period, Yang said, which means the country’s speed in urbanizing land almost doubles the rate for the urbanization of the population.

Chen Xiwen, director of the office for the Communist Party of China Central Committee’s Leading Group on Rural Work, said last week that China’s arable land had declined by 8.3 million hectares in the past 12 years partly as a result of the country’s urbanization.

However, Chen said the pursuit of high urbanization was unnecessary and that ensuring balanced urbanization and rural development, and the development of both big and small cities, was more important.

City clusters, which have proven successful in countries such as Canada, Australia and Japan, could be effectively adopted in China’s urbanization, he said.

Each city in a cluster would have its unique function and develop specific industries. Better public services and residential functions in small cities and towns, and a more unified infrastructure network linking the big and small cities would help form an efficient city cluster.

The big cities could also transfer some of their functions to neighboring small and medium cities, to relieve the pressure brought by the growing population, he added.

Beijing plans to boost the scale and density of industries in its suburban areas, neighboring Tianjin municipality and cities in Hebei province, according to the capital’s draft 12th Five-Year Plan (2011-2015).

Downtown Beijing absorbs 62 percent of the city’s population and produces 70 percent of its GDP, which has caused problems such as worsening traffic congestion, said Zhao Hong, an economist with Beijing Academy of Social Sciences.

Transferring the capital’s industries such as manufacturing and logistics to neighboring areas will not only help form a more functional Beijing-centered city cluster, but also realize a population transfer, Zhao was quoted by the Beijing News as saying.

Efforts will be intensified to promote water conservation as well as the sustainable use of the precious resource, and the task will be a multi-trillion yuan national priority, a central policy document said.

The country will invest 4 trillion yuan (US$608 billion) into projects during the next decade to improve water conservation, Chen Xiwen, director of the office for the Communist Party of China (CPC) Central Committee’s Leading Group on Rural Work, said on Sunday.

He made the remarks at a news conference held by the State Council Information Office on Sunday, a day after the CPC central authorities issued their first document of the year on Saturday.

The country aims to double its average annual spending on water conservation over the next 10 years compared to the 200 billion yuan investment in 2010, according to the document, also known as the No 1 document.

The government will also encourage loans to, and private investment in, the water sector to ensure funding for conservation, it said.

The CPC Central Committee and the State Council regularly release the No 1 document at the beginning of each year to address government priorities.

This is the eighth consecutive year that the No 1 document has addressed rural issues, but it is the first to focus on water conservation.

“Floods and drought in recent years have exposed weaknesses in water conservancy infrastructures,” the document said, citing severe drought in Southwest China as well as severe flooding and mud-rock flows in many regions last year.

The document also said more efforts would be made to improve water quality and farmland irrigation, such as increasing areas under irrigation by 2.7 million hectares over the next five years.

Consequently, up to 10 percent of local land transaction fees should go to farmland irrigation projects, the document said.

Based on last year’s total land transaction fees, this figure is expected to be about 60 to 80 billion yuan, Chen Lei, Minister of Water Resources, told the news conference on Sunday.

Li Maosong, a researcher who specializes in disaster-reduction work at the Chinese Academy of Agriculture Science, said the development of water conservation is a long-term goal.

He said the primary task is to fully assess farmland in the country to identify specific irrigation needs.

Other points addressed in the document include:

The country aims to build effective flood control and drought relief systems by the end of 2020.

The harnessing of major medium- and small-sized rivers will be completed during the 12th Five-Year Plan (2011-2015).

The country aims to maintain annual water consumption at below 670 billion cubic meters in the next five years.

The central government will subsidize the maintenance of public benefit water projects in western regions and poverty-stricken areas.

The problem of water not safe to drink in rural areas will be eradicated by the end of 2015.

Growing demand at home will see China face tightening food supplies in the next five years, according to a top agricultural official quoted Saturday by the Shanghai Securities News.
Chen Xiaohua, vice minister for agriculture, said that he expects the country’s annual demand to rise by 1 percent a year between 2011 and 2015, with consumption of grain growing by 4 million tons a year, vegetable oil by 800,000 tons a year, and meat by 1 million tons a year.
“Our country is facing great pressure in the supply of agricultural products,” the Shanghai Securities News quoted Chen as saying at an agricultural meeting last Thursday.
A minimum annual output of 500 million tons must be guaranteed for the country to be fed self-sufficiently, with a population of about 1.3 billion and growing at a rate of 10 million a year, Agriculture Minister Han Changbin was quoted as saying by Economy & Nation Weekly magazine earlier this month.
“China has to fulfill its own food demand with its own production,” said Han.
The country’s grain production grew for a consecutive seventh year in 2010 to about 546 million tons, representing a 3 percent annual rise. Despite a good harvest, food prices, which make up a third of China’s consumer price index weighting, were 7.2 percent up in 2010 year-on-year.
Central authorities have promised to raise the purchasing price of grains to bolster production and set a lower limit of 120 million hectares of arable land to ensure food security. However, the country’s food consumption will outgrow prediction in the next 10 years, said Ding Shengjun, a researcher with State Grain Administration, in a report earlier this month. Ding predicted that the country’s grain demand would top 600 million tons by 2020, showing a significant supply gap.
China’s growing demand may fuel speculation on the global food market, which saw dramatic price rises in 2010 when extreme climates hurt wheat harvests in Russia, Canada and the corn harvest in Argentina.
Both wheat and corn futures prices at the Chicago Board of Trade grew about 50 percent last year, with a Morgan Stanley report predicting that international grain prices would keep rising in 2011.

BEIJING — Chinese farm produce prices rose for a third consecutive week in the one ending January 16, the Ministry of Commerce said Thursday.

One reason for the increase was the costs associated with vegetable growing have been relatively high during winter, the ministry said in a statement on its website.

The price of green peppers, cucumbers and eggplants all rose by at least 10 percent last week.

Meat and oil prices also continued to increase with the price of pork, mutton, and soybean oil up 0.2 percent, 0.7 percent and 0.3 percent, respectively.

Last year, rising food prices pushed up China’s consumer price index (CPI), the major gauge of inflation. China’s CPI hit 3.3 percent in 2010, compared with the government’s target ceiling of 3 percent, the National Bureau of Statistics said Thursday.

The price of producer goods also edged higher last week. The price of rubber and steel increased 1.1 percent and 0.9 percent, respectively.

(Reuters) – China’s National People’s Congress, or parliament, is proposing legislation on the management of genetically modified (GMO) food, the official Xinhua news agency said in a report seen on Monday.

The legislation will cover the import and export of GMO food and production, development and research of GMO grains.

China’s Ministry of Environmental Protection is preparing a law on overall GMO safety, while parliament’s agriculture and rural affairs committee is proposing a law specifically about GMO food, Xinhua said, without saying when it might become law.

China is the largest producer of GMO cotton, but it has been much more cautious about accepting GMO food than some other producers, such as the United States.

Last year the Ministry of Agriculture’s biosafety committee gave the first safety approval for GMO strains of rice and corn, paving the way for a large scale commercial production of those GMO strains within 2-3 years.

But the approval has caused controversy in the country about whether the GMO strain of rice, the staple food for 1.3 billion people, is safe.

Greenpeace said it found illegal sales of GMO rice in some markets in the country, sparking concerns that China may have loose management over GMO products, despite a similar regulation put in place by the State Council, or cabinet, in 2001.

Parliament is likely to pass a draft grain security law in 2011, which will strengthen the responsibility of local government officials to boost grain production to ensure ample supplies for the world’s most populous country.

In recent weeks, vegetable prices have been under the spotlight, and China’s State Council is taking measures to keep them under control. But with the new year and spring festival approaching, Chinese shoppers are set to buy more. The country’s Minister of Agriculture, Han Changfu, is confident both supply and prices will remain stable.

A few days ago, we followed the Agriculture Minister on a trip to Tianjin. Like Hebei and Shandong, Tianjin is a crucial vegetable supply base for northern China.

The autumn and winter vegetable planting period is critical for food supply. The Ministry of Agriculture has asked its local branches to guarantee production and supply, particularly during the two major festival periods.

Han Changfu, Minister of Agriculture said “The winter planting area has increased this year, and the variety of vegetables has also increased. We’re confident in vegetable supply, and availability during the two festivals should be guaranteed.”

Inclement weather has also dealt a heavy blow to some farming parts of the country. Hainan experienced severe rainfall in October, and the Ministry is increasing vegetable production in the province by 900 thousand tons. The planting area will also increased by 7 percent, and vegetable output nationwide will increase by 7.5 percent.

Not only the production of veggies, but the Ministry is also aiming to streamline the transportation process. It’s also expanding the farming area for produce bound for the northern part of China.

Doctor Fan Shenggen, director of the International Food Policy Research Institute (IFPRI), did not expect his comments criticizing China’s soybean policy of having double standards regarding GM soybeans at a meeting in China to incite resentment from America.

After the meeting upon returning to IFPRI headquarters in Washington, he received numerous calls and emails from American governmental organizations, representatives of grain giants and grain associations, informing him his words had gone against WTO principles of free trade.

Fan Shenggen is also the director of the international agriculture and rural development research center under the Chinese Academy of Agricultural Sciences. An internationally renowned grain expert, he believes China has made a strategic error regarding soybean policy which has led to the defeat of China’s non-genetically-modified (GM) soybean by its imported counterparts.

Actually, Fan Shenggen believes worries about China’s corn sector are more urgent and realistic. China’s corn imports increased by 56 times in the first seven months of this year on the level of the same period last year, totaling 282,000 tons. It imported 194,000 tons of corn in July, 148 times more than the previous July.

A Surge in Imports

Though this may not sound like much, this is the first time in 15 years that China has imported corn on such a large scale. The Financial Times has stated that, “the high growth rate of China’s corn imports has triggered people’s fears about the potential influence of China’s grain safety on the global agricultural commodity markets.”

Chicago corn futures have increased by over 50 percent in the past three months, reaching a historical high. Futures experts believe that this price increase is unreasonable and triggered by speculation.

However, other market players, the United States Department of Agriculture, and its Soybean Export Council and Grain Council, are full of high expectations. They even believe that China’s corn market will be as huge as its soybean market.

According to public reports, Thomas C. Dorr, President and CEO of the US Grains Council said recently that American corn providers might use their many years of experience opening China’s soybean market to open China’s corn market and eliminate Chinese people’s concerns about the safety of GM corn.

However, Chinese people’s views on GM corn are still greatly divergent.

In April the media reported that the New Hope Group, China’s largest private feed grain producer, imported a large amount of GM corn from America, which aroused public concern. Meanwhile, industry insiders are questioning the official figures on China’s corn storage.

The EO has learned from an anonymous source with the Ministry of Agriculture that up until now, China has imported 1.5 million tons of corn from America and has reached an agreement with the Argentinean government to import 5.5 million tons of corn in 2011.

America and Argentina are the two largest corn exporters in the world and almost all of their corn exports are GM corn. America’s corn exports account for 50 percent of global corn exports while Argentina accounts for less than 30 percent.

According to the above source, all of China’s corn imports for this past year and planned for next year are genetically modified. China’s largest state-owned corn importer is China National Cereals, Oils and Foodstuffs Corporation (COFCO) and its largest private corn importer is New Hope Group.

While the National Development and Reform Commission, the Ministry of Agriculture and the State Administration of Grain have attributed the explosion of China’s corn imports to the price gap between foreign and domestic corn, an anonymous high-level executive of the China Grain Reserves Corporation attributed the high imports to the official corn reserves being less than those of wheat and rice.

Fan Shenggen hopes China will not make the same mistakes regarding corn policy as it did with soybean. Latest statistics show, the dependence on foreign imports of China’s soybean sector has risen to 78 percent, and as early as several years ago foreign companies accounted for over 70 percent of China’s oil processing capacity.

The Myth of China’s Corn Reserves

China’s corn output and consumption volume have both exceeded 150 million tons in recent years. Around 90 percent of corn is used for feed and industrial consumption. Compared with wheat and rice, it is easier for corn to be influenced by the macro-economy.

The National Bureau of Statistics has revealed that China’s corn output reached 329.7 billion jin (a unit of measurement equal to 0.5 kg) last year, 3.9 billion less than that of 2008 while its corn consumption volume was 296.7 billion jin, a 7.8 billion jin increase on the level of previous year. A China Grain Net report has predicted that this year China will have a corn output of 330 billion jin.

Though it was widely believed that China’s corn output would be greatly reduced last year due to the major droughts suffered by China’s main corn production areas, data from the National Bureau of Statistics has shown that China’s output still exceeded demand. However, the data was kept secret until May and its accuracy was widely doubted when it was finally released.
Since March, the price of corn has increased progressively following the price surge of garlic and mung beans. It reached such a high price by April that even the National Development and Reform Commission and the State Administration of Grain were surprised. To rein in the corn price, the central government started a temporary auction of corn reserves on April 13. However, despite the sale of all corn reserves up for auction, the price of corn kept rising.

In the last ten days of May when the auction of corn reserves had been halted, the central government revised the trading rules of corn reserves so as to prevent corn processing companies from blindly hoarding corn, and continued releasing corn reserves; the price of corn decreased slightly. But less than a month later the price of corn resumed its upward climb and in August reached a new historical high of 1,976 yuan per ton.

Although at that time the price of wheat and rice also increased, the EO has learned from the National Development and Reform Commission, the Ministry of Agriculture and the State Administration of Grain that the central government is more concerned about the increase of corn prices. These three ministerial agencies have released dozens of policies to rein in the corn price increase.

The Strength of Downstream Sectors

What continued to drive up corn prices despite the Chinese government’s successive measures to tackle the increase?

While the National Development and Reform Commission and the State Administration have attributed the price rise to hot money, companies’ hording practices and farmers’ deciding to keep corn off the market, the EO has learned from many industry insiders that China’s corn demand now exceeds its domestic output.

Whether or not reserves are adequate is only one part of the whole picture. According to a high-level executive of New Hope Group, the volume of corn consumption increases every year thanks to the development of the livestock industry and its demand for feedstuff.

Another market player is foreign companies. Based on statistics from the China Feed Industry Association, by the end of 2008, there were 153 feed companies registered in Hong Kong, Macao and Taiwan, and another 282 foreign feed companies operating in mainland China. Compared with their Chinese counterparts, foreign feed companies usually possess large-scale investment, are larger in scope, and have high-level technology; most foreign companies are strategic investors.

A source from a Chinese feed company told the EO, foreign feed companies frequently expand their business in China through two methods: one is by being sole-owners and establishing subsidiary companies nationwide, a method preferred by Cargill Inc. and CJ Feed; the other is by conducting mergers or buying shares of other companies, a method used by ABN and Nutreco.

According to reports, foreign feed giants, including Cargill Inc. and CJ Feed, have been exploring investment options in the interior of China for the past few years, including large-scale agricultural investment.

For example, the Chia Tai Group has established over 130 feed companies, accounting for around 20 percent of China’s feed market. Other foreign feed giants, such as the Continental Grain Company, Purina and Cargill Inc., started establishing their position in China’s feed industry long ago.

The main downstream sectors of the corn industry are the cultivation industry and the processing industry, which have also been targeted by foreign countries.

In March 2009, the Chia Tai Group started a project in the Pinggu Distrcit of Beijing to raise three million layer hens. With a total investment of 582 million yuan, they can produce one-fifth of the total egg consumption volume of Beijing. The Chia Tai Group has also signed a contract to invest in the cultivation of 1.5 million layer hens, 15 million chickens and 50,000 pigs in Xinjiang.

The recent increase in meat and egg prices has further promoted the increased demand for corn. Conversely, the price fluctuation of corn will directly influence the prices of the above products. Without a doubt, this trend will continue even after the Spring Festival

Citizens in Haikou city had never before been so keen about growing their own vegetables.
But a close look into the green belt would betray their secret.

Instead of rose and Chinese redbud, the plants being grown were eggplant, spring onion, radish, Chinese cabbage, and others.

“We have already harvested the cole and eggplant twice. Now we almost do not need to buy vegetables,” said Lin Xiaofeng from the provincial capital city of south China’s island Hainan Province.

Lin’s family’s monthly income was a little more than 1,000 yuan, but data provided by the National Bureau of Statistics showed that prices of radishes, cucumbers and Chinese cabbage had soared by about 30 percent since October.

So Lin started growing vegetables in mid October.

Another citizen, a Ms Zhang, not only grows vegetable for herself, but offers them as gifts to others.

“Now a bunch of greens cost 3.5 yuan in supermarket, too expensive for some who earned barely some 1,000 yuan a month,” she said while watering her garden.

Located in the tropical zone, Hainan is China’s winter vegetable base.

But the rising vegetable prices, which began increasing this autumn, have driven many people there to grow vegetables themselves.

In other places like Fujian, Henan and Shaanxi Provinces, people grow vegetables in the streets, their courtyards or on their balconies. Also, some people who believe that flowerpots are too small for vegetables use discarded bath tubs for planting their gardens.

Of note, China’s CPI hit a 25-month high of 4.4 percent in October. Food prices, accounting for 74 percent of the weight in calculating the CPI in China, rose 10.1 percent during the month. Data showed that the price of vegetables climbed by 31 percent, and those of fruit rose by 17.7 percent.

According to Yuan Gangming, an economics researcher with Tsinghua University, China has experienced five rounds of price surges in the past, with the largest in 1988.

In that year, prices in some places were out of control. People flooded into markets, making panic purchase of necessities like oil and salt, purchasing enough for a year.

Price hikes this year have also worried ordinary people, as well.

On the Internet, a question asking “What can people buy with 100 yuan?” attracted the interest of many netizens.

“In 2000 I invited a friend to dinner. We ate a lot with just 50 yuan,” said a lady surnamed Zhou. “Now that a bottle of peanut oil costs 98 yuan, with 100 yuan you dare not go out with a friend.”

At that time, Zhou, who was in college, spent 200 to 300 per month as board expenses. But today a dinner for three at KFC could cost 100 yuan.

In the 1980s, due to the lack of vegetables, many Beijingers developed the habit of growing Chinese cabbage. High food costs have forced some to pick up this habit two decades later.

In Chaoyang district, several elderly people squat to wrap up cabbages with newspaper, while on balconies more cabbages were being dried in the sun.

Also, in Lanzhou, capital of northwest China’s Gansu Province, Liu, a grandmother, along with several neighbors buy entire bags of vegetables at lower prices. “Group purchasing may be a fashion among youngsters,” she said with a smile, “but now we are following the fashion.”

Even for group purchase, many housewives chose to get up early to “intercept” sellers.

“We will buy all your vegetables,” Tan, with four other elderly ladies, said. After bargaining, they bought 44 kilograms of bamboo shoots, eggplant, towel gourds and spring onions, costing 160 yuan, dividing up the vegetables and expenses.

Also, expensive food was replaced with cheaper food. Zhang Jie worked in a company in Beijing and ate apples every day because “an apple a day keeps the doctor away”.

“The price of apples almost tripled in the nearby supermarket and I eat pears now,” she said.

Today, shrewd supermarkets sees rising food price as a chance for promotions.

In Chengdu, capital of southwestern Sichuan Province, many supermarkets lowered prices of vegetables as a method to attract consumers.

“Although we earn less from vegetables, we succeed in attracting consumers who will buy other commodities. It is a way of promotion,” said a supermarket manager surnamed Zhang, who declined to be identified.

However, price increases of agricultural products didn’t seem to bring many benefits to farmers.
“We can earn 50 to 60 yuan a day, a little bit more,” said Li Guiying from the Xijiang village of Jiyuan city, the agricultural Henan Province.

“But our expenses rose as well,” she said.

“Prices of pesticide and fertilizer are all on the rise,” said Liu Xueyou from the Zhangzhuang village of Xinyang City in Henan. “Despite the rise of grain prices, about 70 percent of us (fellow villagers) lost money,” he complained.

Chinese Premier Wen Jiabao pledged Tuesday to ensure enough supply of grain, sugar, oil and vegetables, to stabilize food prices, and take temporary intervention measures when necessary.

Many provinces and cities, like Changchun of Jilin, Wuhan of Hubei and Guangzhou of Guangdong, provided subsidies to low-income residents to ensure their lives are not disrupted.

However, Hainan gardening authorities reiterated that growing vegetables in green belts, which meant changing the use of public land, was “against regulations and people could be fined 10 yuan a day for each square meter” they plant on.

But citizens said that tackling the “vegetable basket” problem was the key to restoration of the green belt.

“When I can buy cheap vegetables, why should I bother to grow them on my own?” Lin Xiaofeng asked.