Monday, June 26, 2017

China Wants Tractor Trade-up

China's farm machinery industry is  looking to trade up to more advanced tractors and equipment, according to officials quoted in Peoples Daily last week. A 13-year-old subsidy for farm equipment purchases failed to break the low-end product mix, so now Chinese officials are keen on subsidizing research and development. 

The remarks were made by officials commenting on their inspections of farm machinery manufacturers in Jiangsu and Shandong Provinces, China's leading regions for the ag equipment industry. According to Peoples Daily, progress in retooling the farm machinery industry is a key focus of "supply side reform" and an important means of revitalizing the economy. While China is already the world's top manufacturer of farm machines like tractors, combines, plant protection equipment, agricultural water pumps, officials have targeted the industry as one of ten categories for upgrades in the plan for "China Manufacturing 2025."

The inspection tours focused on the innovative capacity of the manufacturers. Zhang Baowen, an official with the Central Democratic League, visited Jiangsu, a province declared as a model farm machinery industry province despite its tiny per capita endowment of farmland.

Zhang asked each company he visited two questions: "Did you make the engine yourself?" and "Did you manufacture the transmission yourself?" At one company Zhang asked the questions as he gazed at a large tractor. The manager responded in the affirmative, saying, "We do all the R&D ourselves." Zhang responded with a thumbs-up and a hearty, "Good, good, good! Your R&D is very strong!"

While Jiangsu farm equipment sales have soared in recent years, the products are mainly medium- and low-end equipment. Zhang Baowen complained that the industry still relies on foreign joint ventures and imports for high-end equipment. And there is "room for improvement" in the quality of Chinese farm machinery, Zhang said. Energy-saving engines, special sensors, continuously variable transmissions, intelligent control units in large tractors, and environmental protection equipment are areas where China is behind, he said. Zhang thinks the strong Internet industry in Jiangsu will help the farm equipment industry innovate.

Jiangsu Province is pouring money into the industry. In 2016, the province budgeted 900 million yuan ($130 million) for upgrading strategic industries. The province has another 1.6 billion yuan ($235 million) for industry and information transformational upgrades. There are "awards" for machinery and reduced value added taxes. Moreover, the government nationwide has been subsidizing as much as 30 percent of the cost of agricultural machinery purchases since 2004. Jiangsu is said to budget about 1.5 billion yuan ($220 million) for the machinery subsidy annually.

Chen Xiaoguang, another Democratic League official and retired engineering professor, inspected manufacturers in Shandong Province and declared it a "big agricultural machinery province," but noted that it had a few problems. According to Chen, the farm equipment industry lacks core technologies, has insufficient support for public R&D platforms, and protection of intellectual property rights is weak. Chen criticized the machinery purchase subsidy program for taking too long to incorporate new types of machinery into the list of eligible products.

Chen stressed the need to eliminate institutional barriers and to rely on the market for resource allocation and innovation capacity. However, the first step he offered was to improve government policy and regulatory system to accelerate agricultural mechanization. He called for stronger property right protection to encourage bold innovation. Finally, he called for recognizing the coordinating role of the main market players in resource utilization, technology and personnel development.

Friday, June 23, 2017

Subsidies = Profit in China's Largest Grain Province

This month, a Grain and Oils News journalist reported dramatic changes in cropping patterns in parts of China's Heilongjiang Province following the removal of the support price for corn. While the article emphasizes the greater market orientation of planting decisions this year, the journalist's investigations also suggest that fat subsidies account for most of the profits earned by farmers in China's largest grain-producing province.

Some traditional soybean-producing areas of Heilongjiang Province where corn was dominant last year have now reverted to soybeans, according to the journalist's survey this month in Heilongjiang, China's northernmost region bordering Russia's Far East and its largest grain producing province. In the northern third to fifth temperature belts--around cities such as Bayan and Heihe--corn production has been cut as much as 70-80 percent this year. Officials have ordered farmers to switch land to soybeans, minor grains, and other beans. Corn remains the predominant crop in the first and second temperature belts in southern parts of Heilongjiang around the provincial capital Harbin--officials have decreed that corn is suited to this region, so it remains king there.

In Hailun City, a major soybean-producing region, soybean plantings last year were 113,300 ha and corn plantings were 80,000 ha. This year, soybean area is reportedly up 59 percent--estimated at 180,000 ha--and corn area has fallen 33 percent--to 53,300 ha. One farmer in Suihua City told the reporter that 50 percent of the 200 hectares around his village had been switched from corn to soybeans.

In the Jiusan (no. 93) state farm area, 113,30 ha of corn and 108,600 ha of soybeans were grown last year, but this year soybeans became the dominant crop. Corn area plunged to 39,300 ha, and soybean plantings reportedly jumped to 153,300 ha in the Jiusan state farm area.

A seed dealer in northern Heilongjiang said his sales of soybean seeds are up 35 percent from last year and corn seed sales are down 65 pecent, reflecting the shift from corn to soybeans. This year, soybeans account for half of his seed sales, up from 20 percent last year.

The Grain and Oils News article reiterates all the government talking points about "marketization" of corn and targeting crops to their advantaged areas, but the journalist also reveals that farmers in China's top grain province continue to rely on subsidies and a rice price support in making their planting decisions. The journalist estimates that farmers would not earn any profits on corn at this year's price without a subsidy. Profits are better for soybeans, he said, but they rely on even bigger subsidies.

In Beilun City's Sanhe Village--a "farmer cooperative pilot village"--farmers have shifted their 800 hectares of land into soybeans but still plant 10 percent of their land in corn. For soybeans, farmers get a 150 yuan per mu subsidy for growing them in contiguous fields (monocropping) plus a "target price subsidy" payment  of 120 yuan per mu--a total subsidy of 270 yuan per mu (about $240 per acre; other reports suggest the target price subsidy will be replaced this year by a direct payment that does not depend on the price). For corn, farmers in this village get a subsidy of 190 yuan per mu (about $170 per acre, which includes a "cooperative subsidy" specific to this model village). According to the reporter, fields of corn in Sanhe Village would incur a net loss of 90 yuan per mu without the subsidy, but farmers get a 100-yuan profit when the subsidy is taken into account. Fields of soybeans would lose 60 yuan per mu without subsidies, but they earn a profit of 220 yuan per mu with their subsidies.

In Haibei Town, the journalist reports that a 150-yuan-per-mu subsidy plus the target price subsidy has induced farmers to plant more soybeans.

Rice is the only crop in Heilongjiang that still has a support price. A farmer named Yang in Suihua City has 30 mu of his own family's land and rents 38 mu of land from others. The subsidy for rice is only 67 yuan per mu (this is probably the "support and protection payment"). The production cost is estimated at 500 yuan per mu, while land rent is 667 yuan per mu. With a yield of 515 kg per mu and a price of 2.6 to 2.8 yuan per kg, plus the subsidy, farmer Yang reportedly earns a profit of 900 yuan per mu on his own and 220 yuan per mu on rented land for growing rice. Other reports say the minimum price for japonica rice was cut for the first time this year to 3 yuan/kg to prevent a massive shift of land from corn into rice production in this region.

Another impact of the lower corn price this year is a reduction in land rents, while costs of chemical inputs and labor has been relatively steady.

The reporter says that corn processing enterprises are benefiting from the combination of lower corn prices this year and government subsidies for processing corn. One company that processes 1.2 million metric tons of corn annually is operating at full capacity and has 60,000 metric tons of corn in inventory. The company has bought corn from reserves at two auctions at a price of 1380 yuan/mt and expects to buy 40,000 mt monthly at the auctions. They are expanding production to build market share as well as to bring down unit costs. The company sells corn starch products to pharmaceutical and beer manufacturers in Harbin. They hope to expand production by 1 million metric tons to sell to the thriving paper-making and food businesses in southern China.

Prospects are mixed for soybean processors in Heilongjiang. Many small and medium soybean processors remain idle due to shortages of cash and outmoded technology. They say they are caught between the expansion of state-owned and foreign-invested processors. Those with stable sales channels are benefiting from the expansion of domestic soybean output.

Saturday, June 17, 2017

Good Wheat Crop But Price Held High

China's winter wheat crop is bigger and better in 2017, according to propaganda from the Ministry of Agriculture's Press Office. The harvest was 80-percent complete this week, and high quality, high yields, and an improved mix of varieties are evident, according to the Ministry.

Other news reports concur that the winter wheat region of central and eastern China has had good weather for this year's harvest. Only a few areas have been hit by heavy rains that degraded the quality of the crop last year; some areas of Shandong and Hebei reportedly accelerated harvest ahead of expected rain last week. The Ag Ministry reports that its program of coordinated wheat spraying averted pest and disease problems. Agricultural officials also brag that their guidance and quality wheat model-farming areas have increased the supply of high- and low-gluten wheat varieties that wheat millers previously had to import to make western-style breads, cakes, and snacks.

A report from China Grain Net agrees that the quality of this year's wheat is good, but surmises that the overall size of the crop is down this year. Supplies in the market are tight because a large proportion of last year's crop was purchased for the state reserve, according to this report. Imports are also restricted by a tariff rate quota.

In 2016, authorities purchased over 28 million metric tons of wheat at the minimum price--40 percent of all wheat purchased by all enterprises and nearly 22 percent of China's entire wheat crop. (To put this in perspective: the 28 million metric tons of wheat purchased and placed in storage last year is more than the output of all but five other countries in the world.)

According to China Grain Net, final demand for wheat flour is tepid now, and demand for wheat bran for feed is not especially strong either. However, traders have been buying the new wheat crop aggressively, because commercial inventories of wheat are thin.

Prices are still relatively strong in China because supplies in the market are artificially restricted. The government is holding on to reserves it built up by buying up wheat at minimum prices in past years.

China Grain Net says the Chinese wheat market still has abundant supplies, considering that the government's reserve corporation is still holding relatively high inventories. Auctions have offered 3 million metric tons of wheat from reserves each of the first two weeks of June, but less than 200,000 metric tons were sold. Wheat offered was mostly produced in 2014, but some was as old as 2009. Reports say the availability of newly harvested wheat has cooled demand for the old wheat being offered at auction. On June 20, another 3.1 mmt of reserve wheat and 144,000 metric tons of old imported wheat will be auctioned.

The major wheat-producing provinces have announced the start of purchases of wheat at minimum prices. Market prices for wheat in many places exceed the 118 yuan/50kg minimum price set for 2017 (about $ 9.40/bushel--and double current market prices in the U.S.), but prices are at or below the minimum in a number of districts.

Henan Province announced its minimum price program on June 6, assuring the public that it has 10.4 mmt of storage space in 955 warehouses available for this year's wheat. The government's agricultural policy bank has earmarked enough loans to buy up 12.25 mmt of wheat at support prices and to finance 2.25 mmt of "marketized purchases." Although world prices have fallen in recent years, the Henan announcement explains that the minimum price program is meant to shore up the enthusiasm of farmers to plant grain by assuring them of a minimum price for their crop.

The Agricultural Development Bank of China issued a document this week stressing the importance of the minimum price program for summer grain procurement, and it urged provincial bank branches to work with local grain officials and grain reserve corporation branches to make sure funds are available for grain purchase, that there are no "empty spaces" in its procurement program, and that no IOUs are issued to farmers selling grain. Counties targeted for poverty alleviation will get special treatment to expedite funds for grain-purchase loans.

Shandong Province grain bureaucrats held a meeting to organize wheat marketing where officials were told that maintaining wheat production and boosting rural incomes are essential tasks to keep rural people satisfied and to keep the Central Communist Party Committee at ease.

Friday, June 9, 2017

China MOA Ag S&D Estimates June 2017

China's Ministry of Agriculture cut its estimate of 2017/18 corn output by 1.5 million metric tons in its June "China Agricultural Supply and Demand Estimates" (CASDE) report, based on drought conditions in parts of northeastern China. The yield was cut slightly due to hail that damaged new corn plants in some areas. The new estimate of 2017/18 corn output is about 8 mmt less than 2016/17, and nearly 13 mmt less than 2015/16. MOA now estimates that demand for corn will exceed supply by 1.7 mmt in 2017/18.

China corn supply and demand (Ministry of Ag, June 2017)
Item Unit 2015/16 2016/17 June 2017/18 May 2017/18 June
Planted area 1000 ha 38,119 36,760 35,840 35,590
Harvested area 1000 ha 38,119 36,760 35,840 35,590
Yield Kg/ha 5,893 5,973 5,948 5,947
Production MMT 224.63 219.57 213.18 211.65
Imports MMT 5.52 1 1 1
Consumption MMT 194.09 210.72 214.07 214.07
--Food MMT 7.65 7.82 7.89 7.89
--Feed MMT 121.01 133.03 135.03 135.03
--Industrial use MMT 54.17 58.25 59.75 59.75
--Seed MMT 1.7 1.61 1.57 1.57
--Loss and other MMT 9.56 10.01 9.83 9.83
Exports MMT 1 0.3 0.3 0.3
Surplus MMT 36.05 9.55 -0.19 -1.72
*2015/16 import volume shown in CASDE should be 3.2 mmt

The decline in corn area estimated by CASDE is 3.2 percent, slightly less than the 4 percent drop estimated by the National Bureau of Statistics planting intentions survey earlier this year. Another survey of over 5200 farmers in 22 provinces conducted in April found farmers planned to cut corn acreage by 10.9 percent.

The Ministry of Agriculture sent drought mitigation teams this week to western Liaoning, southeast Inner Mongolia, western Jilin, western Heilongjiang, northern Hebei and the Shandong peninsula. These areas have suffered from low rainfall, high temperatures, and windy conditions since April.

CASDE's June soybean S&D is unchanged from May. Some farmers in western Liaoning and easter Inner Mongolia were able to replant soybeans after rains came May 21-23, but young soybean plants were damaged by a late frost in parts of Inner Mongolia and Heilongjiang. Soybean area is setimated to be up 10.4% in 2017/18. Imports are expected to hit 89 mmt for 2016/17 and 93 mmt for 2017/18.

China soybean supply and demand (Ministry of Ag, June 2017)
Item Unit 2015/16 2016/17 June 2017/18 May 2017/18 June
Planted area 1000 ha 6,590 7,156 7,899 7,899
Harvested area 1000 ha 6,590 7,150 7,899 7,899
Yield Kg/ha 1762 1758 1785 1785
Production MMT 11.61 12.57 14.1 14.1
Imports MMT 83.23 89.45 93.16 93.16
Consumption MMT 96.67 103.69 108.59 108.59
--Crushing MMT 82.89 89.01 92.50 92.50
--Food MMT 10.35 11.18 12.04 12.04
--Seed MMT 0.54 0.6 0.6 0.6
Loss and other MMT 2.89 2.9 3.45 3.45
Exports MMT 0.12 0.14 0.22 0.22
Surplus MMT -1.95 -1.81 -1.55 -1.55

Cotton yield for 2017/18 was raised slightly, on good growing conditions. Imports were increased 100,000 mt to 1.1 mmt. Cotton stocks are expected to fall nearly 1.6 mmt in 2017/18.

China cotton supply and demand (Ministry of Ag, June 2017)
Item Unit 2015/16 2016/17 June 2017/18 May 2017/18 June
Begin inventory MMT 12.8 11.11 9.23 9.23
Planted area 1000 ha 3,267 3,100 3,200 3,200
Yield Kg/ha 1,510 1,555 1,523 1,572
Production MMT 4.93 4.82 4.88 5.03
Imports MMT 0.90 1.00 1.10 1.10
Consumption MMT 7.59 7.69 7.59 7.69
Exports MMT 0.01 0.01 0.01 0.01
End Inventory MMT 9.13 9.23 7.61 7.66

2016/17 China edible oil production is estimated at 26.57 mmt, up 270,000 mt from last month’s estimate. Cottonseed and sunflower oil production is expected to rise because of better cotton yields, and increased sunflower imports. Soybean oil production was reduced by 40,000 mt due to a downward adjustment in the proportion of domestic soybeans used for oil.

China edible oils supply and demand (Min Agriculture, June 2017)
Item Unit 2015/16 2016/17 June 2017/18 May 2017/18 June
Production MMT 25.29 26.57 26.85 27.07
--Soy oil MMT 14.74 15.58 15.92 15.92
--Rapeseed oil MMT 5.6 5.64 5.71 5.71
--Peanut oil MMT 3 3.18 3.24 3.24
Imports MMT 5.81 5.6 6.2 6.2
--Palm oil MMT 3.39 3.25 3.75 3.75
--Rapeseed oil MMT 0.77 0.75 0.85 0.85
--Soy oil MMT 0.59 0.58 0.58 0.58
Consumption MMT 31.29 31.46 31.63 31.63
--Urban MMT 21.01 21.5 21.65 21.65
--Rural MMT 10.28 9.96 9.98 9.98
Exports MMT 0.13 0.13 0.13 0.13
Surplus MMT -0.32 0.58 1.3 1.52

The 2017/18 estimate of sugar area is 14.72 million hectares, up 9% from 2016/17. Sugar cane area is estimated up 7.9% from last year; sugar beet area is up 16.1%. This month’s estimate of 2016/17 sugar imports is 3 mmt, reduced 500,000 mt from last month’s estimate. The forecast for 2017/18 sugar imports is 3.2 mmt, adjusted down 300,000 mt from last month. The main reason is the implementation of safeguard measures starting from May 22. Duties will be assessed on imports of sugar outside of the tariff rate quota for 3 years.

China sugar supply and demand (Ministry of Ag, June 2017)
Item Unit 2015/16 2016/17 June 2017/18 May 2017/18 June
Planted area 1000 ha 1423 1351 1472 1472
--sugar cane 1000 ha 1295 1183 1277 1277
--sugar beets 1000 ha 128 168 195 195
Yield




--sugar cane MT/ha 60.3 60 60 60
--sugar beets MT/ha 53.85 52.5 52.5 52.5
Sugar output MMT 8.7 9.29 10.47 10.47
--sugar cane MMT 7.85 8.24 9.23 9.23
--sugar beets MMT 0.85 1.05 1.24 1.24
Imports MMT 3.73 3 3.5 3.2
Consumption MMT 15.2 15 15 15
Exports MMT -2.92 0.07 0.07 0.07
Surplus MMT -2.32 -2.78 -1.1 -1.4

Tuesday, June 6, 2017

China Ag Imports Boom--Except for Corn

China's agricultural imports during the first four months of 2017 totaled $39.8 billion, up 17.2 percent from the same period last year, according to data issued by China's Ministry of Agriculture. Agricultural exports were $22.3, billion, up 2.3 percent.

Imports of most items grew at a robust pace, but corn imports were down 82 percent from a year ago, as China focuses on de-stocking its domestic inventory of corn. Sorghum imports were down nearly 20 percent, and imports of distillers grains--hit with antidumping duties this year--are down 77.8 percent. Cassava imports were steady and barley imports were up 170 percent.

China's wheat imports rose 94.1 percent from a year earlier due to tight supplies of good quality wheat in China. Tight supplies of good quality cotton also pushed cotton imports up 43.2 percent from last year.

Soybean imports were up 18 percent. Rapeseed imports rose 41 percent, as imports filled a gap left by lower sales of depleted rapeseed oil reserves.

January-April China Agricultural Imports
Commodity Imports Change from year ago
1000 metric tons Percent
Wheat 1,685 94.1
Rice 1,339 -0.6
Corn 310 -82.8
Sorghum 2,368 -19.9
DDGS 246 -77.8
Barley 3,269 170
Cassava 3,038 -2
Cotton 570 43.2
Cotton yarn 671 6.1
Sugar 1,087 30.9
Soybeans 27,537 18.0
Rapeseed 1,704 41.1
Palm oil 1,676 16.9
Rapeseed oil 335 -0.3
Sunflower oil 224 23.6
Soybean oil 145 13.8
Pork  453 11.8
Pork offal 433 6.6
Beef 216 16.6
Lamb 99 8.1
Milk powder 400 3.6

China Corn Auctions Cool Off?

Since early May, China has sold 21.3 million metric tons of corn from its massive reserve through 14 sales and auctions. There are doubts about whether the market can continue to absorb corn at this pace.

A mid-April 2017 survey found eight starch mills in northeastern China were operating at full capacity, and millions of tons of new capacity is under construction. The price of corn was down 30 percent from a year ago due to the cancellation of the temporary reserve program. Northeastern starch production had regained its competitiveness, and substitution of imported cassava starch is down. Export rebates for starch encouraged production, and processors were running at full tilt in anticipation of the June-30 end of subsidies for industrial processing of corn. Processors have built up unusually high inventories.

Cofeed.com estimates that starch production for the month of May was about 2.1 million metric tons, and they estimate capacity utilization at 75 percent. They estimate starch inventories were up 32 percent in May. Cofeed.com estimates that processors in most provinces are losing money.

According to another report from Cofeed.com, fuel ethanol production has also bounced back and China has swung from ethanol importer to exporter. In the first four months of 2017 China's ethanol exports totaled 42,701 liters, more than the export volume for all of last year. Traders say the export rebate and subsidies for processors revived export sales. Saudi Arabia accounted for two-thirds of sales, and North Korea was another buyer.

Analysis by Futures Daily sees signs that the pace of corn auctions is cooling off based on weakening prices and a decline in the proportion of corn sold in more recent auctions. Agricultural Futures Net agrees that a lower success rate in the June 1-2 auctions, high inventories held by processors in the northeast, and losses by starch manufacturers signal slower sales in June.

Saturday, June 3, 2017

China Plan Envisions Farm Business Transformation

China has unveiled a plan to turn its rural people into a legion of modern farmers. The State Council released "Ideas on Accelerating Formation of a Policy System to Nurture New-type Agricultural Businesses" on May 31, 2017. The document aims to create a prosperous countryside by nurturing diverse types of market-oriented moderate scale farms, cooperatives, and agribusinesses in place of the fragmented, small-scale subsistence farms that have covered China's rural hinterland for centuries.

The document calls for setting up a policy system to nurture new-type farm businesses by 2020 that will extend credit to farmers, open diverse market channels, provide training, recruit university graduates to serve as village officials, give farms and agribusinesses favorable tax treatment, and escalate spending on farm aid that complies with WTO rules.

China's Minister of Agriculture Han Changfu called the new-type farmer initiative an important document that helps rural people, improves rural people, and enriches rural people. Minister of Agriculture Han Changfu said new-type agricultural operators engaged in agricultural production and services are now in a key growth period, and they have a great need for guidance. Nationally there are 870,000 family farms, 1,888,000 farmer cooperatives, 386,000 agricultural industrialized business organizations (including 129,000 dragon head enterprises), and 1,150,000 agricultural socialized service organizations.

[By comparison, China's village collectives have nearly 250 million families with tiny land-holdings. China's National Bureau of Statistics reports 267 million rural people are engaged in nonfarm employment (either as migrants or near their homes). The rural population is estimated at 603 million and employment in "primary industry" is 219 million.]

No peasant will left behind. The plan emphasizes that China's modern agriculture will be built on the foundation of the family-based rural land contracting system adopted by most of the countryside during 1978-84, and it promises to retain rural households as the core of the new farming operations. Cooperatives and alliances will link farmers together; and service organizations and businesses will provide mechanical, pest control, technical advisory services, and agribusiness will link farmers with markets.

The plan adopts a market-driven approach that combines industrial policy and marketing of branded products with poverty alleviation, but it insists that government policy guidance is necessary. The plan also calls for "green" production, environmental protection, resource conservation and sustainable development.

A survey of 2615 family farms, farmer cooperatives, and agribusinesses conducted by Renmin University last year provided a more concrete picture of new-type ag business operators. The survey found that new-type business operators have a much higher level of education than traditional farmers, are younger, and more often men. They have larger scale operations, are more technically proficient, better financed, and utilize more social resources.

The survey evaluated farm businesses not just on their own success but also on their ability to lead and "pull along" rural people. Agribusinesses were most influential in providing loan guarantees, information, marketing, and employment. Half of farmer cooperatives paid dividends and shared profits with members, but the average coop had only 42.5 members. Family farms had little influence on their neighbors.

Officials hope new-type businesses will provide financing for small farms since rural commercial banks only give about 7 percent of their loans to farmers. The Renmin University study found that about a fifth of new-type farm businesses provided financial services to other farmers. About 16 percent made loans to farmers, and 17 percent guaranteed loans for other farmers. About half of agribusiness enterprises provide financing arrangements for purchases of inputs like livestock, feed, seed, or fertilizer. Many cooperatives had established internal mutual aid credit funds.

The survey found about a fourth of new-type farm businesses provide information to other farmers. Much of this appears to be feed and veterinary medicine companies providing farmers with information about their products and some technical advice. However, the report concluded that the coverage of rural households by such information dissemination is still small, and noted that information is seldom updated.

The survey authors estimated that new-type farmers influence only about 8 percent of the rural population and concluded that there is a lot of room for improvement in the leadership role of new-type ag business operators. Survey authors ascertained that the slowing Chinese economy had stifled progress on developing the rural leadership role of new-type farm business operations.

While the new-type farm business idea sounds innovative and visionary, it is basically a warmed-over re-launch of past efforts. A dragon head enterprise initiative launched in the 1990s had a similar objective of leading hordes of small farmers into big markets. Chinese leaders have reported huge numbers of cooperatives formed since a new cooperative law ten years ago, but enthusiasm among farmers seems to be lukewarm.

The plan to transform farming maintains the focus on profits and markets that has worked so effectively to enrich Chinese peasants since the 1980s. However, retaining collective land ownership, limits on size and scope of farmer organizations to keep their power in check, and monopolizing banking hamstrings new-type business operators, necessitating the big subsidy build-up envisioned to facilitate the transformation.