Wheat in China

by bernat...(flickr.com)

Today I was exploring the Economic Research Service website of USDA, and attracted by a graphic and some analysis on Chinese wheat industry. Let see the graphic first:

We can see from the graphic that China had an increasing wheat trade deficit, until 1996, when the imports was almost equal to the exports. But then it worsened again in 2004.

China net trade of Rice, Wheat and corn (from ERS/USDA)

Bryan Lohmar summarized several reasons for the low production of wheat in China, in his report China’s Wheat Economy: Current Trends and Prospectsfor Imports:

  • Decreasing sown area in China
  • Low wheat prices: farmers moved productive land from wheat to high-value horticultural crops.
  • Policy changes, market development, and increasing commercialization in rural areas: many provinces abandoned the grain quota delivery obligation; instead, they accepted taxes and fees in cash.
  • Depleted resources, particularly water: both ground and surface water sources are showing signs of severe overexploitation

And he concluded:

China’s wheat production will likely remain at or below 90mmt for the foreseeable future. China will continue to expand horticultural production, especially for export markets. China’s wheat marketing institutions are becoming more market oriented and are moving beyond government intervention, and farmers are increasingly making decisions based on commercial considerations.

Is this the case for Chinese wheat production? Chinese wheat industry is going to be market-oriented and the government intervention is going to fail?

Well, it may be not. China is self-sufficient in wheat production last season, even when a series of flood and drought in several provinces have badly damaged the wheat and other grains’ productions in China, the wheat price is constantly going up, but it is basically self-sufficient. Chinese government considers food self-sufficiency as “a matter of national security”, and has been trying to subsidize the wheat production and sale in many ways.

What Leslie Hook wrote in this article at Financial Time precisely describes the whole picture:

China’s self-sufficiency policies are often costly for consumers as they drive up the cost of grain. But today, as world wheat markets shudder after an export ban from Russia and similar talk from Ukraine, China’s leaders are no doubt breathing sigh of relief.

Advertisements

Lost Appetite for Farmer’s Market

By dianaoftripoli (Flickr.com)

The dream of Zhi Zhang, a recent graduate from Xi’an Technical Collage, is to be a white collar businessman. The 24-year-old man knows it is much harder to find a job than helping his father´s business, a vendor’s stand in a farmer´s market, but selling vegetables and meat isn’t attractive at all. He wants to be someone elegant, sitting in the office room and dealing with documents and files, rather than fishes and cucumbers.

I heard his story from my mom, who is a regular customer of his father. Every morning the middle-aged man loads all the food into his pedal-operated tricycle at 4:00 a.m., drives to the market at 4:30 a.m. and begins selling food at 5:00 a.m., when his son is still sleeping in the bed. The other farmers in the market are all in their 40’s or 50’s as well.

Farmer’s market is smelly, young Chinese would say. This generation who was born after the economy reform and opening up in 1970s, isn’t anything like their parents. They would rather pay more in Wal-Mart or Carrefour than go to a farmer’s market. They like more choices. For those who live in inland cities, supermarket is the only place they can find tropical fruits or seafood or even imported food. They also like the feeling of shopping in a large supermarket, where the fluorescent light is lighting the food up and the air conditioners cooling the room down, where fruits and vegetables are arranged orderly in the shelves, while pork, steak and fish are already cut into pieces and frozen in plastic box. It is easy, clear, and convenient.

So when these young Chinese graduate from college, get a decent job and become the main customers, supermarkets find their firm foothold in China. Within the past two decades, supermarket companies have turned themselves from an alternative food supplier into a big player in food industry, penetrating not only well-developed areas such as Beijing, Shanghai and Guangzhou, but also remote villages and inland towns. With 45,587 locations nationwide, the supermarket industry boosted its annual turnover of 710.47 billion Yuan, 12.2 percent of the total sales of retail market in China in 2008.

Supermarkets/hypermarkets in China

Yet young citizens are not the only ones that turn back on farmer’s market, local governments abandon it too. In September 2001, Beijing local government announced that the farmer’s markets would be moved out of 3rd Circle Rd, the dividing line between the downtown and the outskirt, within three years. In the same year, Fuzhou and Guangzhou local governments respectively disclosed their plans to turn local farmer’s markets into supermarkets.

I feel sad for Chinese farmer’s market, which has been serving fresh food for China over the past four decades and providing millions job opportunities for people who migrate from villages to cities. But no one can help the market before solving its stubborn problem – food safety. Intensively issued by Chinese mainstream media in recent years, vendors selling meat are notorious for smearing pork with a chemical power to keep the meat fresh, and injecting water to make the meat weigh more, while peddlers selling vegetables and fruits are marked as “pesticide infectors”. In comparison, supermarket companies always have their regular chains of purchasing the food, and pay more attention to the food safety to build their brand reputation. No wonder Chinese favors them.

But even so, the Chinese farmer’s market is not dying. The regular customers of individual vendors, like Zhi Zhang’s father, are still in a big amount. Since the total cost of running a food stand in a farmer’s market, including rent, labor, maintenance and repair, is minimal, their food prices can be very competitive. A survey of thousands of Beijing citizens conducted by Beijing Industrial and Economic Bureau shows that the lower income households under 1000 Yuan income per month, or 148 US Dollar, only purchase in farmer’s market, while the lower-middle income households with an average income of 3000 Yuan per month, or 444 US Dollar, frequently purchase food directly from farmers as well. The main format of fresh food supply in China in 1970s is becoming an alternative market for cheaper food.

Rumors are saying that the local government is going to turn the land near my community, including the farmer’s market area, into a green belt. But it doesn’t matter for Zhi Zhang, who has packed the luggage and headed for job opportunities in big cities, where are crowded by the same ambitious young Chinese. It even doesn’t bother his father. With no successor come after, the vendor is going to retire very soon.

Goodbye to the farmer’s market, and good luck for the young man.

%d bloggers like this: