Tuesday, April 17, 2018

Soybean Tariffs to Boost State-Owned Companies?

China's big state-owned soybean importers will not be affected much by proposed 25-percent tariffs on U.S. soybeans, according to a Chinese Business Journal article posted on numerous web sites yesterday.

The article appears to be a propaganda piece portraying the possible tariffs as an opportunity to boost the role of state-owned enterprises in China's soybean industry and freeze out multinational grain traders. The lack of named sources and the journalist's stringing together of propaganda memes suggests the article is propaganda masquerading as news for investors.

The reporter notes that three of the top soybean importers are state-owned companies--COFCO, Beidahuang, and Sinograin.

The China Business Journal reporter, writing under an apparent pseudonym, quotes an unnamed employee of an unnamed state-owned enterprise who said that officials from unnamed "government departments" have been asking Chinese companies about their soybean import volume, how much they import from the United States, and what their plans are for purchasing this year.

"The tariffs will have an extremely small effect on us large companies," the state-owned company employee told the reporter, "Because U.S. soybeans are only one-third of our purchases."

"The effect of the soybean tariffs is not extremely large," the article repeated several times in various forms throughout the article.

According to the reporter, the U.S. futures price dropped 5.25 percent after China's proposed 25-percent tariff on U.S. soybeans was announced. "But our company is not affected much, because we hedged our soybean purchases," the employee explained.

An investment analyst told the reporter that Brazilian soybeans cannot replace U.S. soybeans if China imposes the tariffs. Brazilian soybean prices are rising as the market anticipates a rush of Chinese buyers to South America who will compete for a limited supply of beans. Brazil already exports more than half of its soybeans, and about three-fourths of those exports already go to China.

The article segues to another propaganda talking point: Brazilian and Chinese State-owned companies can link up to trade soybeans directly, bypassing "ABCD" multinational trading companies. The investment analyst says he went to Brazil where he found that Brazilian companies were eager to learn about matters like Chinese customs clearance, inspection and quarantine so they could export soybeans directly to China without selling through an ABCD intermediary.

A representative of a Brazilian state-owned company said he had come to China to make deals with Chinese state-owned companies for direct trade in soybeans.

The Brazilian said, "We have a small order from a Chinese state-owned company to test the water."

The reporter then moves on to the old complaint that imported soybeans are destroying the Chinese soybean processing industry by depressing prices.

The reporter learned from a multinational grain trading company that the market for domestic Chinese soybeans is very limited. In particular, he said there was virtually no market for soybean meal produced from domestic soybeans because the price is too high.

The article gloms on to the "quality" mantra circulated by officials this year to claim that the "low end" oil and meal products from crushing imported soybeans have little momentum from consumer demand as it shifts to high-end products. Premium products of domestic non-GMO soybeans have better prospects, the journalist suggests.

In fact, the opposite is true. Imported soybean volume grows faster than expected year after year. The Chinese government had to step in to buy extra domestic soybeans produced in northeast China this year because there was not enough demand.

Saturday, April 14, 2018

Food Security AND Quality Promised by China Grain Reserve

China's food security strategy will prioritize quality over pure volume of grain, according to the head of the country's new State Administration of Grain and Commodity Reserves. Authorities will vomit their huge store of sub-par grain reserves into the market, induce farmers to grow high-quality grains consumers want, create a network of labs to test the grains, build grain industry parks housing millers and traders who will profit from premium-priced products, and crack down on corrupt operators in the system.

The grain and commodity reserve administration created by China's recent government realignment was inaugurated April 4, 2018. It will be responsible for managing national strategic reserves of grain, cotton and sugar under the direction of the National Development and Reform Commission. The new bureau takes on responsibilities of the former State Administration of Grain, Ministries of Civil Affairs and Commerce, and National Energy Administration.

In a Peoples Daily interview Zhang Wufeng, the reserve bureau's director (previously communist party secretary of the State Administration of Grain that it replaces), gave assurances that the "food bowls of Chinese people must remain tightly in their own hands" but Zhang also prioritized accelerated disposal of excessive inventories of corn, rice and other commodities to reach "rational" levels as soon as possible.

Zhang observed conflicts arising from changes in Chinese society. On the production side, China has surpluses of some commodities (i.e. corn and rice, although he did not mention them) and deficits of others (soybeans, again not mentioned specifically). Zhang observed that Chinese consumers had transitioned from simply getting enough to eat to "eating well, eating healthy, eating with assurance, and eating with convenience," but he fretted that China lacks supplies of environmentally friendly and high quality foods.

Zhang promised to align the grain reserve system with market demand. He also said adjustment of China's crop mix and rotation of crops and land retirement are necessary. The reserve bureau has no responsibility for crop production, but he promised to scientifically set the minimum prices for wheat and rice, coordinate reserve procurement and sales, and pay more attention to the potential consumption (of what they procure?)

A "China quality grain project" (优质粮食工程) kicked off last October (by Zhang) is the grain reserve bureau's contribution to the national rural revitalization strategy, according to Zhang. This project aims to upgrade the quality of China's grain and edible oils by improving post-production services, establishing a national system of third-party grain-testing organizations, and revamping quality control guidelines for grains, flour, noodles, and edible oils by 2020. The Ministry of Finance allocated 5 billion yuan ($790 million) for the project in 2017. By implementing the "China good grain and oil action plan," Zhang promised to complete "the last kilometer" for quality grain and oils to reach the dining tables of each consumer’s family.

Zhang promised to transform China from a "big" grain-producing country to a "strong" grain-producing country by giving top attention to quality and creating value chains based on deriving profits from quality products. Model cities and counties, specialty industry parks, and leading backbone companies will be components of a modernized grain economy. Zhang pledged that food security will be maintained by coordinating "government and market, the current situation and long-term prospects, production regions and consuming regions, domestic and foreign, security and development."

Authorities will continue to intervene in markets through "macro control" using central government reserves as "ballast stones" and local reserves as "the first line of defense." Zhang promises to nurture state-owned enterprises--through mixed ownership--while supporting small and medium enterprises in the grain market. The reserve bureau will speed up development of a national electronic grain exchange platform and brokering grain trade between grain-producing provinces and grain-deficit provinces.

Finally, Zhang sends a message to corrupt granary operators by promising to demand grain "quality" and "honesty" from both government and industry through strict party governance, high standards for cadres, and concentrated action plans featuring "great investigation, quick correction, strict law enforcement" to root out "hidden risks." A hot line has been set up for the public to report malfeasance in the grain marketing and storage system.

Wednesday, April 11, 2018

Spring GMO Seed Crackdown in China

With spring planting approaching, Chinese provinces are cracking down on illegal trading, testing, and planting of genetically modified seeds.

A March notice issued by Heilongjiang authorities warned farmers not to buy illegal GMO seeds sold as "pest-resistant or weed-resistant," offered free testing for seeds they already have, and urged farmers to report any merchants selling illegal GMO seeds.

On March 29, Heilongjiang Province officials promised to go to fields with rapid-testing kits to check for genetically modified corn and soybeans.

On April 9, Shandong, another of the biggest agricultural provinces, announced its campaign to crack down on organizations doing research on GMO crops, trials, production, marketing, processing, and imports of genetically modified material.

The same day, Inner Mongolia officials said they will focus on illegal sale and falsely labeled GMO seeds for corn, rapeseed, soybeans, sunflowers, and potatoes.

China allows research organizations to experiment and conduct trials of genetically modified seeds as long as they are approved and reported to the Ministry of Agriculture and closely controlled and monitored. But no genetically modified grain or oilseed crops have been approved for commercial planting in China.

In February China's Ministry of Agriculture reported that they caught seven companies conducting trials of genetically modified corn that were either unreported or illegal during 2017. Da Bei Nong Ltd. Co (aka DBN) was caught growing 8 kinds of GMO corn in unreported intermediate trials on a test plot in Heilongjiang covering over an acre of land. (In 2016, a DBN executive pleaded guilty to stealing corn seeds from test plots in the United States and sending them back to China in popcorn jars.)  Another Beijing seed company was also caught growing 8 kinds of GMO corn on about 1.8 acres in Heilongjiang. Five other companies and a company associated with Jiangsu's Academy of Agricultural Sciences were caught growing small amounts of GMO corn ranging from 5 to 150 stalks in a seed-breeding area in Hainan Province. All the trials were suspended and material destroyed.

According to one article, the Ministry of Agriculture's report alarmed many Chinese consumers who worried that genetically modified corn is already in the country's food system.

The provincial crackdowns are probably intended to assure consumers that authorities are tightly regulating GMOs, as they have promised to do many times. However, the crackdowns also suggest that there are already significant quantities of illegal GMO seeds sold and planted in China.

Sunday, April 8, 2018

MOFCOM: Peoples Republic of Shoppers

The blizzard of tariffs and trade rhetoric is overshadowing China's "new concept" of opening its economy to give its consumers access to better quality products. China's Commerce Minister Zhong Shan finished off a March 11, 2018 press conference dominated by questions about trade conflicts with a discourse on how MOFCOM plans to push ahead with plans to "give city and rural people more abundant choices, much more convenient services, and a more comfortable experience" by upgrading shopping opportunities for Chinese consumers and giving them access to imported high quality products. 

The initiative to shift China's drivers of growth from investment and exports to consumer demand was introduced by Xi Jinping at the October 2017 "19th Party Congress." The idea has been dressed up with the awkward Maoist slogan "Change in the Main Social Contradictions," and propaganda organs have explained how meeting consumer demands for quality and comfort fit neatly into China's historical progress toward a communist society.

Minister Zhong explained that 400 million of China's 1.4 billion people have entered the "middle class," and the main problem ("contradiction") has shifted to satisfying peoples' desire for a better life [from the 1950s-era problem of developing industry and modernizing agriculture in a "backward" country, according to the Peoples Daily]. Zhong cited the estimated $200-billion of overseas shopping done by Chinese citizens as evidence that China's economy does not supply the high quality products its consumers want. "Foreign purchases reflect the insufficient supply of quality products in the country and their high price," Minister Zhong said.

MOFCOM will work on initiatives to innovate in product marketing and distribution, expand consumption, and increase effective supply in three areas of work.

First, establish domestic platforms for consumption. Pedestrian malls for shopping will be developed to make cities more livable and to serve as a "beautiful calling card" for cities. Community shopping networks of convenience stores, food markets and other outlets should provide a commercial network of daily shopping within 15 minutes of residences. In the countryside, a network of market towns with shops and services will be part of a makeover of the countryside. E-commerce will be greatly developed, with integration of "online" and "offline" commerce.

Second, promote consumption and reduce costs to consumers by broadening access to the market, reducing tariffs on imported cars and some daily consumer products, opening the market to telecommunications, medical, education, elderly care services.

Third, improve consumer confidence in products they buy through rectifications and consolidation of the Internet and rural markets and by establishing a traceability system for agricultural products.

Tariffs announced last week on items such as imported pork, cherries, apples, grapes, plums, cranberries, pistachios, almonds, and macadamia nuts go in the opposite direction by cutting off Chinese consumers from high quality products.

Sunday, April 1, 2018

China's Soybean Retaliation: No Good Options

Official China has been mum on its intent to strike back against U.S. soybeans in the trade war brewing between the two countries. While online commentators in China agree that soybeans are the logical target for retaliatory tariffs, several have concluded that the impact on Chinese buyers and consumers makes this an undesirable option.

Last week, former Minister of Finance Lou Jiwei recommended striking back first at American soybeans, then cars, then aircraft, in remarks at an economic forum in Zhejiang Province last week.

A more developed argument for targeting U.S. soybeans appeared in a March 30 Global Times column by Cheng Guoqiang, Professor at Tongji University in Shanghai and former long-time researcher/advisor on farm trade for the State Council's Development Research Center. Cheng advocates "necessary countermeasures" against U.S. soybeans in accord with WTO rules to "defend China's national interest," "defend the spirit of WTO," and to counter "protectionist" U.S. measures that "show contempt for the multilateral trading system."

Cheng argues that retaliation against soybeans will have the greatest impact since they are the no. 2 U.S. export to China, with 2017 sales valued at $14 billion. Soybeans account for 58% of U.S. agricultural exports to China and 11% of all U.S. exports to China. He points out that U.S. soybean farmers rely heavily on exports, with 44% of production exported and 62% of those exports going to China last year.

Cheng claims that soybeans are politically strategic because production is concentrated in Midwestern States that were critical to President Trump's victory in the 2016 election. Cheng thinks pressure from these agricultural states will bring Trump to the bargaining table.

As the northern hemisphere begins its planting season, Cheng claims that clamping down on U.S. soybeans could encourage farmers in the Black Sea region and other areas to plant more soybeans and reach their "suppressed" potential as soybean suppliers. He suggests that South American producers could also receive a "signal" to produce even more.

Several other essays on the topic appearing last week briefly recounted the same arguments for targeting soybeans and puzzled over why soybeans were not included in the initial list of U.S. products China has targeted for retaliation:
These commentaries drilled deeper into the data about soybean trade and production than Dr. Cheng did, and each arrived at conclusions like "The Intellectual's" statement: "China and American soybeans are inseparable" ["中国离不开美国大豆"].

Each commentator recounts the meteoric growth of China's soybean imports--from 300,000 metric tons in 1995 to 96 million metric tons (mmt) in 2017. Imports grew 14 percent during 2017. China now consumes nearly a third of the world's soybeans and produces only 4 percent. "The Intellectual" commented that, "Soybeans are indispensable to China." Chinese people cannot maintain their much-improved living standards without imported soybeans, he wrote. 

China imports an estimated 85 percent of the soybeans it consumes, according to the "striking back" authors."The Intellectual" explains that the extreme reliance on imports came about due to a strategic choice to focus limited land resources on producing high-yielding cereal grains. Wheat, corn and rice yield 3 times as much grain per acre as soybeans, "so soybeans had to be the victim" as China sought to meet food security targets, "The Intellectual" explained. 

With China's current soybean yield of 1.8 metric tons per hectare, it would need 53 million hectares of farmland to grow the 97 mmt of soybeans the country imported during 2017. China currently plants about 7 million hectares of soybeans and 35 million hectares of corn. China says it has 135 million hectares of cultivated land in total.  

China imports such a large share of the world's soybeans that there would be nowhere else for China to fill its soybean deficit if it stopped buying U.S. soybeans. Last year China's imports equaled 64 percent of the 151 mmt of soybeans traded in world markets. While China is the world's biggest buyer, it has little bargaining power because there are only two major supplying countries. The "striking back" authors reported that Brazil supplied 53 percent of China's soybean imports and the United States supplied 35 percent last year. Argentina is the third supplier with a 7 percent share. "Our country basically has to choose between importing from Brazil and the United States," the "striking back" authors commented. 

There is no other supplier that could fill China's deficit if U.S. soybeans were limited. China's growing demand has already prompted a huge increase in Brazilian production that has reduced reliance on the United States. Blogger Shi Hanbing argues that Brazil already supplies half of China's soybean imports and has reached its limit as a supplier. Moreover, he points to USDA reports that say both Brazil and Argentina are expected to have diminished soybean harvests this year, shrinking potential soybean supplies. 

In view of these facts, all three commentators conclude that the main impact of imposing a steep tariff on U.S. soybeans will be to increase the cost of soybeans to Chinese buyers. The commentators anticipate that the higher cost of soybeans will have a "chain reaction" passing on price increases to meat and vegetable oil in China, causing an increase in the CPI. 

The "striking back" authors recommend that China save retaliation against soybeans as its "ace card." Blogger Shi suggests that the Chinese population eat less meat and switch to eating salads. 

For now, China seems to have little recourse to retaliate against U.S. soybeans without hurting itself, perhaps as much as it hurts U.S. soybean growers. In the long run, this will surely prompt Chinese leaders to double down on their efforts to nurture new soybean suppliers in order to reduce China's reliance on two soybean suppliers. 

Ironically, a similar effort by Japan many years ago helped catalyze the emergence of China's top supplier. After a U.S. export embargo during the 1970s raised questions about its reliability as a supplier, soybean importer Japan looked to diversify its soybean supply by investing in Brazil--a minor soybean producer at the time. A lot of other events, R&D, and policies had to line up to make it happen, and it took decades, but Brazil has now emerged as the top soybean exporter in the 21st century. Brazil's massive supplies also are the chief reason for low soybean prices--the "unfair" phenomenon Chinese soybean commentators normally chatter about and blame on the United States.

Now Chinese government and agribusiness leaders will surely get busy trying to create the next Brazil somewhere in the world. 

Wednesday, March 28, 2018

China Subsidizes Buyers and Producers of Corn and Soybeans

Two of China's top grain-producing provinces announced subsidies for buyers of corn and soybeans layered on top of generous subsidies for growers. For some corn, it is possible that three different subsidies could amount to 38 percent of the farm price, and subsidies could add up to nearly half of the purchase price for soybeans.

On March 23, Heilongjiang and Jilin Provinces announced a subsidy for processing plants and feed mills that buy corn and soybeans harvested in the provinces during 2017. The subsidy for corn purchases is 100 yuan per metric ton purchased in Jilin Province and 150 yuan in Heilongjiang. The subsidy for soybeans purchased is a whopping 300 yuan/mt in both provinces.

The corn purchase subsidy is aimed at industrial processors that make starch and alcohol products from corn with at least 100,000 mt of annual capacity and feed mills with at least 50,000 mt of capacity. The soybean subsidy is aimed at companies that make food products from soybeans, such as tofu, soy flour, soy milk, dried tofu, pickled tofu, fermented bean curd, dried bean curd, extruded soy products, fermented soy products, soy-based protein supplements, bean products processing and 13 or more soybean food products like bean sprouts, bean paste, with capacity of 5000 mt or more.

The average purchase price of corn in Heilongjiang is about 1725 yuan/mt, so the 150-yuan corn purchase subsidy equals 8.7% of the purchase price in that province.

The average purchase price of soybeans is 4140 yuan/mt, so the 300-yuan purchase subsidy equals 7.2 percent of the price.

Farmers in Heilongjiang also get producer subsidies of 133.46 yuan per mu for growing corn and 173 yuan/mt for growing soybeans. The payments are awarded based on the actual area planted in these crops (15 mu = 1 hectare of land). Jilin Province also gives these subsidies, but the Jilin Government has not announced the amount.

Let's convert the Heilongjiang producer subsidy payments to yuan/mt. Assuming a corn yield of 400 kg/mu (6000kg/ha), the corn subsidy equals 333.65 yuan/metric ton. That's equal to 19.3 percent of the 1725-yuan/mt purchase price. Assuming a soybean yield of 140 kg/mu (2100kg/ha), the soybean producer subsidy equals 1235.7 yuan/metric ton, which is equal to 29.8 percent of the 4140-yuan/mt purchase price.

We're still not finished. China has a nationwide "support and protection subsidy" for all farmers who plant grain crops. This subsidy consolidates the previous "three subsidies" (direct payment, improved seed subsidy, and general input subsidy). Land planted in corn and soybeans or any other grain crop is eligible for this subsidy. According to government publicity, farmers get a subsidy based on their land holding unless they plant non-grain crops, leave land idle for multiple years, or build structures on the land. "New-type farmers" who rent-in land are eligible to receive the subsidy if they have an agreement specifying whether lessor or lessee receives the subsidy payment.

In theory, the "support and protection" subsidy is supposed to fund land fertility improvements, but an announcement of the subsidy in Heilongjiang makes no mention of this, nor does it mention any conditions for receiving the funds. The announcement proclaims, "If you register your land, then you can get the subsidy!" The announcement also emphasizes that this is separate from (i.e., in addition to) the corn and soybean producer subsidies. Thus, in Heilongjiang a farmer who plants corn on his land should get the support and protection subsidy and the producer subsidy for corn. Same for those who plant soybeans.

In Heilongjiang, the support and protection subsidy is 71.78 yuan/mu this year (Again, Jilin has not announced its subsidy). If corn is planted on the land and the yield is 400 kg/mu, the support and protection subsidy equals 10.4 percent of the current corn price in Heilongjiang. If the land is planted in soybeans, the support and protection subsidy equals 12.4 percent of the current soybean price.

2017/18 Subsidies in Heilongjiang Province
Corn (assume yield 400 kg/mu):
  Processor purchase subsidy 150 yuan/tonne 8.70%
  Corn producer subsidy 133.46 yuan/mu 19.30%
  Support and protection subsidy 71.78 yuan/mu 10.40%
Potential total corn subsidy 38.40%
Soybeans (assume yield 140 kg/mu)
  Processor purchase subsidy 300 yuan/tonne 7.20%
  Soybean producer subsidy 173 yuan/mu 29.80%
  Support and protection subsidy 71.78 yuan/mu 12.40%
Potential soybean subsidy 49.40%
note: 15 mu = 1 hectare of land. Processor subsidy available only for corn and soybeans purchased March 23 - April 2018, 2018.

The window for the processor subsidies is relatively short--only corn and soybeans purchased between March 23 and April 30 will be eligible. This subsidy appears to be intended to ensure that leftover corn and soybeans at the end of the marketing season gets purchased before authorities begin auctioning off corn reserves in May--which is expected to push prices downward.

In total, the Heilongjiang government could pay out three subsidies equal to 38 percent of the value of corn and over 49 percent of the value of soybeans for the relatively small volume that receives all three subsidies. It would appear that all corn produced in Heilongjiang should at least be eligible for the producer subsidy and the support and protection subsidy--a total of 29.7 percent of the purchase price. Similarly, all soybeans in Heilongjiang should be eligible for these two subsidies--equal to 42.2 percent of the purchase price.

Farmers nationwide get the support and protection subsidy. But the three northeastern provinces (Heilongjiang, Jilin, and Liaoning) and Inner Mongolia are the only regions that have the producer subsidies for corn and soybeans. So far only Heilongjiang and Jilin have the corn and soybean processor subsidies. Thus, northeastern farmers are the most heavily subsidized farmers in China.

Wednesday, March 21, 2018

China Views on Dumping and Farm Subsidies

Two recent Chinese commentaries reveal commonly-held beliefs about American farm subsidies that are behind Chinese antidumping and countervailing duty investigations of U.S. farm products like chicken, distillers grains, sorghum, and maybe soybeans.

A March 7 article, "Influence of U.S. agricultural subsidies on world agricultural trade" from the State-supported Futures Daily was posted on the Ministry of Commerce's WTO information web site and a number of other Chinese sites. The unidentified author asserted that imports of sorghum from the U.S. "receive subsidies from the U.S. government," which allow them to be exported to China at a price lower than the "normal value," and "there is a significant degree of dumping." The implicit assumption is that the Chinese price is the "normal" value, and any price lower than the Chinese price must be abnormal--the "middle kingdom" is the center of the world, after all.

A March 20 article by a commentator with the nationalist Global Times, "Subsidized American Soybean Exports Seriously Pressure China's Soybean Farmers," says "everyone knows" China must impose strong limits on imports of soybeans from countries that give huge subsidies that create an "unfair advantage." This author recites statistics to show that America dominates the world soybean market, has been increasing soybean production, and is responsible for excess supply in the world.

These claims of U.S. dominance contrast with recent American news media reports fretting about loss of soybean market share to Brazil and China's purported preference for Brazilian soybeans.

The sorghum commentator asserts that the U.S. government boosts farm exports using export credit guarantees, "export expansion plans," and "huge subsidies" for fuel, fertilizer and pesticides. The soybean commentary acknowledges that the U.S. government says its subsidies are a small proportion of farmers' income and comply with WTO rules, but he dismisses these claims and accuses the United States of "sabotaging WTO rules."

A logical fallacy common to Chinese findings of "dumping" is to assert that a correlation of two data items proves that one causes the other. The sorghum author explained that "the price continued to decline as large volumes of U.S. sorghum entered the China market." The Ministry of Commerce's announcement of the sorghum investigation correlated declining Chinese sorghum prices with high imports of U.S. sorghum.

A Ministry of Agriculture report on the 2016/17 sorghum market, however, attributed the decline in Chinese sorghum prices to declining Chinese corn prices. This report observed that Chinese farmers planted 32 percent more sorghum in Heilongjiang Province, 15 percent more in Jilin Province, and 22 percent more in Liaoning Province during 2016 compared to the previous year--at the same time the Ministry of Commerce claimed imports of sorghum were depressing profits for Chinese sorghum farmers.

The soybean commentator asserts that imports of U.S. soybeans caused a decline in Chinese soybean production. In fact, the decline in Chinese soybean production was due to Chinese farmers' corn-planting mania generated by a high corn price guaranteed by the Chinese government that made corn much more profitable than soybeans. While the soybean commentator celebrates the long history of soybean-planting in China, under communist authorities soybeans have always been a minor crop because plans and policies favored grains that have higher yields per hectare.

Thirty-eight years ago, a USDA report on China's agricultural market situation commented: "China will again attempt to expand soybean production in 1980, although past efforts have had little success." Stagnant soybean production in China is nothing new.

The sorghum author asserts that the United States became the leading agricultural exporter using a "low price plus high subsidy" strategy. To prove this, the Chinese writer cites USDA estimates of farm production costs and returns for 1975 to 2014 for six major commodities which show that costs exceeded revenues in most years. Although "farmers couldn't make money from the market, they were able to maintain their income by receiving subsidies from the government," the Chinese author concluded.

It's true that farmers in the United States make money in some years and lose money in other years, but the losses are not as pervasive, nor as big as the Chinese author concludes from scanning the USDA estimates. He does not understand that the USDA's cost estimates include a large proportion of imputed "opportunity costs"--the market value of family labor and land owned by the farm family. Cash expenses for many farms are less than the full "economic costs" in the USDA accounts.

USDA estimates of cash income for the farm sector as a whole show that government payments equal about 2-to-3 percent of gross income for farms. The net cash income for U.S. farmers peaked at $135 billion in 2012 and 2013 and is forecast to be just $92 billion in 2018. Direct payments from the government did not make up for the decline in income--in fact, payments from the government fell from $11 in 2013 to an expected $9.2 billion in 2018.
 Source: data from https://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/data-files-us-and-state-level-farm-income-and-wealth-statistics/

Most U.S. farmers and their spouses work at off-farm jobs to make ends meet and to get health insurance coverage. USDA estimates show that farming families receive about 80 percent of their income from nonfarm sources. Moreover, Chinese critics do not understand that American farmers are business-men and -women who invest and borrow hundreds of thousands or millions of dollars and spend years buying and renting land to build up a viable farming operation.

Chinese critics also implicitly presume that countries should be self-sufficient. The sorghum essayist notes that "commodity surpluses are the main feature of U.S. agriculture, so the industry is extremely reliant on exporting." The soybean commentator criticizes the United States for producing more soybeans than are needed by the U.S. market, creating "surpluses" in the world market. Why wouldn't a country with a large endowment of highly productive farmland export commodities to densely populated countries?

Chinese critics overstate the dominance of U.S. commodities. High world prices during 2007-08 and 2011-12 encouraged farmers all over the world to produce more cotton (India), corn (Ukraine), and soybeans (Brazil). Brazil's expansion of soybean production--mostly to sell to China--is the dominant source of recent growth in soybean supplies. Brazil accounted for nearly half of China's soybean imports last year.

A few Chinese writers understand U.S. farm programs better than most Americans. In a November 2017 Farmers Daily essay, Ke Bingsheng, an agricultural economist and president of China Agriculture University, explained that U.S. farm subsidies are constantly evolving and being revised. Prof. Ke explained that the 2014 Farm Bill had hundreds of pages and is incomprehensible even to those who understand all the English words. He warned readers that they could arrive at erroneous interpretations if they don't understand the historical background of U.S. policies.

Prof. Ke recalls lessons he learned about American farm policy from conversation with USDA officials during a trip to the United States. More open discussion and interaction like Prof. Ke has engaged in would help dispel mistaken presumptions that result in both sides talking past each other on these issues.