Tuesday, January 23, 2018

China Farm Output Up Marginally in 2017

China's agricultural output grew marginally, farming's share of the economy continued to shrink, and farm prices were down sharply for a number of commodities during 2017, according to agricultural production data released by the National Bureau of Statistics last week.

Value-added in agriculture, forestry, and fishing grew 4.1 percent during 2017, slower than China's overall GDP growth rate of 6.9 percent. The primary sector's share of GDP continued its decline, falling to 7.9 percent of GDP during 2017.

Investment in agriculture is growing rapidly, making up for years of neglect. According to the Bureau's investment data, fixed asset investment agriculture, forestry and fisheries grew 11.8 percent during 2017, faster than the 7.2-percent growth in total fixed asset investment and one of the fastest-growing sectors. However, agriculture still received just 3.9 percent of all China's fixed asset investment during 2017. (Investment by rural households is excluded from these figures, but rural households don't invest much in agriculture.) Fixed asset investment in primary processing of farm products (e.g., grain milling, vegetable oil processing, meat processing) grew 3.6 percent, and investment in food manufacturing grew just 1.7 percent.

China's grain output grew 0.3 percent during 2017 as a 1-percent rise in yield offset a 0.7-percent decline in area planted. Corn output was down 1.7 percent, while rice and wheat production each rose 0.7 percent. Output of soybeans surged 12.4 percent, and other beans were up 5.6 percent--reflecting the shift of land out of corn into alternative crops. The 14.6-million metric tons of soybeans produced was small in comparison with the volume of soybean imports (86 mmt for Jan-Nov 2017), and soybean imports grew even faster (15.8 percent) than soybean production. Cotton production rose 2.7 percent, reflecting growth in output in Xinjiang Autonomous Region and a sharp decline in central and eastern provinces. According to the National Bureau of Statistics, 74.4 percent of China's cotton was produced in Xinjiang last year.


China's output of major crops, 2017
Item Unit
Output
Change from prev. yr. (%)
Grain output MMT 617.9 0.3
Grain area planted Mil ha 112.2 -0.7
Grain yield MT/ha 5.5 1.0
Cotton output MMT 5.5 2.7
Cotton area planted Mil ha 3.2 -4.3
Cotton yield MT/ha 113.2 7.3
Corn output MMT 215.9 -1.7
Wheat output MMT 129.8 0.7
Rice output MMT 208.6 0.7
Soybean output MMT 14.6 12.4
Other beans MMT 4.6 5.4
Tuber output MMT 34.2 1.3
Vegetable output Mil Ha
NA
1.7
Vegetable area MMT
NA
-0.3
Medicinal crops MMT
NA
3.5


Production grew 1 percent or less for most types of livestock in China during 2017. The number of hogs slaughtered increased 0.5 percent from 2016 and pork output was up 0.8 percent. Poultry meat production was up .5 percent and egg output fell 0.8 percent. Beef cattle slaughter rose 1 percent and beef production increased 1.3 percent, according to the National Bureau of Statistics.

China livestock production, 2017
Livestock production Unit
2017 amount
Change 2016-17 (percent)
Hogs slaughtered Million 689 0.5
Pork MMT 53.4 0.8
Beef cattle slaughter Million 51.62 1.0
Beef MMT 7.26 1.3
Poultry slaughter Billion 12.41 0.3
Poultry meat MMT 18.97 0.5
Egg production MMT 30.7 -0.8


The National Bureau of Statistics reported that overall agricultural producer prices were up 3.5 percent, but the only major category showing price gains was forestry and fisheries (up 4.9 percent). Corn prices fell 2.9 percent and vegetable prices were down 4.4 percent (due to a warm winter that boosted production in north China during 2017). Hog prices fell 14 percent, egg prices were down 7.2 percent, and poultry prices were down 3.3 percent in 2017.
China agricultural producer prices (change, 2016-17)
Commodity
Percent
All  3.5
Crops -0.5
  Corn -2.9
  Vegetables -4.4
Livestock -9.2
  Hogs -14.0
  Poultry -3.3
  Eggs -7.2
Forestry and Fisheries 4.9

Sunday, January 21, 2018

China S&D Estimates Jan 2018

A recent spurt in Chinese corn prices works against China's "supply side structural adjustment" which aims to shift production from corn to other crops to reduce excess supplies of corn. Profitability of corn could undermine these plans by inducing China's farmers to plant another huge corn crop this spring while the world is already awash in excess corn supplies.

The January 2018 China Agricultural Supply and Demand Estimates (CASDE) explained that farmers in the northeastern provinces have been holding back corn in anticipation of rising prices. The influx of cash from corn producer subsidies recently distributed allowed them to pay back loans without having to sell corn to generate cash; this allowed them to hold on to their corn longer. However, CASDE says the national average wholesale corn price is expected to remain stable at 1600-1700 yuan/mt, "constrained by high inventories."

An MOA news conference on the 2018 outlook for agricultural markets pronounced that the de-stocking of excess corn inventories and price-stabilization had surpassed expectations last year. In late December the average price of corn in northeastern provinces was 1580 yuan/mt, up 7.3 percent from the fourth week of October and 16.9 percent higher than a year earlier. In the north China plain the average corn price was 1660 yuan/mt, up 2.4 percent from late October and up 4.3 percent from a year earlier.

MOA agrees that corn looks profitable, but officials warned farmers not to "blindly" expand planting of corn this spring. They warned that there is little room for further increases in corn prices ahead of the Chinese Spring Festival holiday in February. Officials say changes in the corn markets are one of four topics to focus on  in 2018, and they called for local officials to continue urging farmers to switch from corn to minor grains and beans in marginal production regions as spring planting arrives.
China corn supply and demand (Ministry of Ag, Jan 2018)
Item Unit 2016/17  2017/18 Nov 2017/18 Dec 2017/18 Jan
Planted area 1000 ha 36,768 35,100 35,445 35,445
Harvested area 1000 ha 36,768 35,100 35,100 35,100
Yield Kg/ha 5,971 5,986 6,091 6,091
Production MMT 219.55 210.11 215.89 215.89
Imports MMT 2.46 1.50 1.00 1.20
Consumption MMT 210.72 215.62 220.96 220.96
--Food MMT 7.82 7.89 7.89 7.89
--Feed MMT 133.03 135.03 138.35 138.35
--Industrial use MMT 58.25 61.3 63.3 63.3
--Seed MMT 1.61 1.5 1.59 1.59
--Loss and other MMT 10.01 9.83 9.83 9.83
Exports MMT 0.08 0.3 0.5 0.5
Surplus MMT 11.21 -4.31 -4.57 -4.37
In their December 2017 CASDE report, MOA adopted the newly-released National Bureau of Statistics 215.89 mmt official estimate of 2017 corn production. This estimate is nearly 6 million metric tons larger than CASDE's previous estimate (210.11 mmt), making it hard to show that China is making progress in reducing its corn inventory. If the Bureua's larger estimate of production had been inserted in CASDE's November balance sheet without making adjustments, it would have meant that China's corn supply would have exceeded its consumption during 2017/18. CASDE avoided this by raising its estimate of corn consumption for animal feed, which gave the balance sheet a -4.57 mmt deficit in December. The January deficit was reduced to -4.37 mmt after the estimate of 2017/18 corn imports was raised to 1.2 mmt.

(Last year, CASDE ignored the National Bureau's higher estimate of 2016/17 corn production for about five months. This year CASDE adopted the Bureau's official estimate the same month it was announced.)

Ministry of Agriculture officials seem vexed by low international prices for corn and soybeans. At the MOA press conference, the director of economic information observed that low prices in international markets have been putting increasing pressure on Chinese grain and oilseed markets. CASDE notes that global corn supplies are abundant, and the C&F price of U.S. corn arriving at Chinese ports is 1550-1650 yuan/mt, down 100 yuan from the previous month and the lowest in two years, CASDE said. CASDE raised its estimate of corn imports based on strong demand.

CASDE's soybean analysis also cited downward pressure on U.S. soybean futures prices due to expectations of a big harvest in South America. The average C&F price of imported soybeans is 3050-3250 yuan/mt, while the average price of domestic soybeans is 4175-4375 yuan/mt. Estimated 2017/18 imports remained at 95.97 mmt. A slight reduction in domestic soybean production was the only change in CASDE's soybean balance sheet.
China soybean supply and demand (Ministry of Ag, Jan 2018)
Item Unit 2016/17  2017/18 Dec 2017/18 Jan
Planted area 1000 ha 7,208 8,194 8,099
Harvested area 1000 ha 7,202 8,194 8,099
Yield Kg/ha 1,796 1,817 1,802
Production MMT 12.94 14.89 14.6
Imports MMT 93.49 95.97 95.97
Consumption MMT 108.11 110.56 110.56
--Crushing MMT 92.90 94.38 94.38
--Food MMT 11.18 12.04 12.04
--Seed MMT 0.64 0.64 0.64
Loss and other MMT 3.39 3.5 3.5
Exports MMT 0.12 0.22 0.22
Surplus MMT 0.01 0.08 -0.21

CASDE raised its estimate of 2017/18 cotton output to 5.64 mmt (slightly higher than the National Bureau of Statistics December estimate of 5.49 mmt). CASDE raised estimated cotton imports to 1.1 mmt. CASDE estimates that cotton stocks will fall from 8.75 mmt to 7.27 mmt during 2017/18.
China cotton supply and demand (Ministry of Ag, Jan 2018)
Item Unit 2016/17  2017/18 Dec 2017/18 Jan
Begin inventory MMT 11.11 8.75 8.75
Planted area 1000 ha 3,100 3,293 3,293
Yield Kg/ha 1,555 1,662 1,714
Production MMT 4.82 5.47 5.64
Imports MMT 1.11 1.00 1.10
Consumption MMT 8.09 8.22 8.22
Exports MMT 0.01 0.01 0.01
End Inventory MMT 8.94 7.00 7.27

China edible oils supply and demand (Min Agriculture, Jan 2018)
Item Unit 2016/17  2017/18 Dec 2017/18 Jan
Production MMT 27.36 27.81 27.82
--Soy oil MMT 16.27 16.51 16.5
--Rapeseed oil MMT 5.74 5.71 5.71
--Peanut oil MMT 3.18 3.26 3.26
Imports MMT 5.78 6.28 6.03
--Palm oil MMT 3.34 3.75 3.85
--Rapeseed oil MMT 0.8 0.85 0.85
--Soy oil MMT 0.71 0.65 0.3
Consumption MMT 31.68 31.9 31.9
--Urban MMT 22.97 23.4 23.4
--Rural MMT 8.71 8.5 8.5
Exports MMT 0.17 0.17 0.17
Surplus MMT 1.29 2.01 1.78

China sugar supply and demand, January 2018
Item Unit 2016/17  2017/18 Dec 2017/18 Jan
Planted area 1000 ha 1396 1456 1456
--sugar cane 1000 ha 1225 1267 1267
--sugar beets 1000 ha 171 189 189
Yield
--sugar cane MT/ha 61.8 60 60
--sugar beets MT/ha 55.2 52.5 52.5
Sugar output MMT 9.29 10.35 10.35
--sugar cane MMT 8.24 9.15 9.15
--sugar beets MMT 1.05 1.2 1.2
Imports MMT 2.29 3.2 3.2
Consumption MMT 14.9 15 15
Exports MMT 0.12 0.07 0.07
Surplus MMT -3.44 -1.52 -1.52

Wednesday, January 17, 2018

China's New "Agricultural Diplomacy"

China is seeking a more influential and assertive role in global agriculture and is making agriculture part of broader geopolitical initiatives in its new era of "agricultural diplomacy" under Chairman Xi Jinping. Is China ready for this role? Is the world ready for China?

The strategy was laid out in "Our Country's Agricultural Diplomacy Enters a New Era,"a December 26, 2017 propaganda essay by Farmers Daily propagandists. The writers expounded on the more prominent role given to agriculture in foreign affairs since Xi Jinping ascended to the top leadership position five years ago.

The article recites "Chairman" Xi's slogans that proclaim China as now open to the outside world. It cites key international meetings where agriculture was emphasized, with special emphasis on Xi's kick-off of the One Belt One Road initiative during a 2013 summit with Kazakhstan's president.

The "clear message" proclaimed by the article is that China is greatly increasing its voice and influence in global agriculture, and China’s international cooperation in agriculture is growing faster, deeper, and stronger than ever before. As Xi's leadership moves into a new phase in his second term, Chinese diplomats and agribusinesses will go abroad and host international meetings and trade shows to "tell an even more vivid story."

"Agricultural diplomacy" is a broad concept that includes China's growing trade in agricultural products, free trade agreements, foreign investment in agribusiness, foreign aid, technical exchanges, China's role in rule-setting and international organizations, and promoting Chinese cultural heritage in farming. The idea of "farm diplomacy" was floated by Xinhua News Service propagandists describing Xi's trip to Latin America in 2014 but it vanished until mentioned in last month's Farmers Daily article. "Agricultural diplomacy" as described by Farmers Daily is a broader initiative based on guiding principles of open trade, mutually beneficial development, and links between farming, industry and services guide the growing collaboration with foreign countries in agriculture.

China envisions a leadership role in global agricultural governance, including an active role in international organizations, in making the rules for agriculture, and in trade negotiations. The article cites recent international meetings of agricultural ministers held by international organizations APEC, G20, ASEAN and BRICS where China purportedly played a leading role. At the 2016 G20 held in Xi'an, attendees were invited to support China's "grand plan for international cooperation."

China is seeking a more active role in international rule-making bodies like the Codex Alimentarius, OIE, and International Plant Protection Convention. China is overhauling its own standards for foods, farm products, and pesticide residues.

China wants to push for more "fair and rational" agricultural trade rules by engaging in negotiations on items like agricultural and fishery subsidies and concluding bilateral and multilateral trade agreements. By establishing the basic principles for negotiations, Chinese industries will have "more time and space" for development and further deepen relations with countries along the "belt and road" path. China plans to coordinate its agricultural trade policy and make use of trade remedy measures like anti-dumping duties and safeguard measures against distillers grains and sugar.

In another signature Xi Jinping initiative, China is pushing other countries to recognize its agricultural heritage and culture. China claims a leading role in the UN's Food and Agriculture Organization protection of agricultural heritage, with a third of the items accepted for protection so far.

Over the past 5 years, "the Chinese dream, Chinese programs, and Chinese thinking were accepted by the international community," the propagandists wrote.

Drawing another subtle link between Chairmen Xi and Mao, "agricultural diplomacy" has a major objective of re-establishing China as a leader in "south-south" cooperation, as a leader of the developing world. The article recites China's contributions to FAO "south-south" development programs, 3 million tonnes of food aid to Africa, and thousands of trainings and scholarships for agricultural technicians and scholars.

Technical assistance in agriculture is cited as a diplomatic tool for boosting China's reputation and responsibility abroad. "Agricultural experts have become true practitioners of the philosophy of sincere and true diplomacy," telling the "beautiful China story," Farmers Daily said. Examples of China's beneficial impact on African agriculture are "too numerous to mention."

China is bringing in technology and purportedly sharing it. Farmers Daily cites the establishment of the Asia-Pacific international potato research center in Beijing's Yanqing County as a significant milestone showing China's leading role in the international scientific community (This explains why China declared potatoes a staple food several years ago). The potato center is described as a model platform for international cooperation in agricultural research with advanced equipment and personnel. Farmers Daily also cites a China-Germany agricultural research center and 62 laboratories established with the United States and Canada. By hosting scientists and meetings, bringing in equipment and plant resources, China is shrinking the gap between China and developed countries in agricultural science.

One problem: China doesn't have very many diplomats to carry out "agricultural diplomacy." To address this problem, there are inter-departmental working groups on agricultural cooperation, training for staff to work in agribusiness and as diplomats specializing in agriculture, "foreign agricultural cooperation demonstration districts," and "agricultural external opening cooperation pilot districts" to help companies begin doing business overseas.

In the background of all this is China's ambitions to elevate its model of what might be called "centrally planned free trade" as an alternative to the post-WWII Anglo-American dominance of trade institutions. Can a country that has been characterized by insularity for at least two centuries become a world leader? Can a country where rules are customarily flouted and skirted in everyday life seriously become an international rule- and standard-maker? Can a country where leaders collect advanced degrees based on ghost-written doctoral theses and a country where slogans pass as "theories" become a leader in agricultural science?

It appears that we have the beginning of a grand social experiment that may answer these questions later in this century.

Thursday, January 11, 2018

China Cuts Prices for Wheat Auctions

Chinese authorities announced that they will hold sales of old wheat from reserves beginning January 18, 2018 at reduced starting bids.

Wheat purchased through the price support program during 2014-16 will be offered at a minimum bid of 2410 yuan/metric ton, 50 yuan lower than previously. Sales will also be held for wheat purchased in the Xinjiang Autonomous Region (which is not part of the formal minimum price program, but has its wheat price supported by "temporary reserve" purchases). Wheat with excessive mycotoxin levels will be designated for sale to ethanol producers at discounted prices starting at 800 yuan/mt. Sprouted 7-year-old wheat from Xinjiang will also be sold at a discount starting at 1200 yuan/mt. In addition, authorities will offer imported wheat from 2013 stored in 16 different provinces at prices varying from 2160 to 2490 yuan/mt.

Wheat from 2012 shifted among provinces will be offered at prices from 2030 to 2330 yuan/mt. The first auction of 411,937 metric tons of interprovincial-transferred wheat reserves was held today (January 11), but none sold.

Wheat from Chinese reserves to be offered for auction
Description
Starting price
Yuan/mt
$/mt
Wheat procured at minimum price, 2014-2016 2410 371
Excessive levels of mycotoxins (Henan Province)* 800 123
2010 temporary reserve wheat (Xinjiang, sprouted) 1200 185
2011 temporary reserve wheat (Xinjiang) 2000 308
2012 temporary reserve wheat (Xinjiang) 2100 323
*designated for sale to ethanol plants. 

According to an analyst with the Xi'an national grain trade center, the reduced opening prices for grain auctions has several motivations. Officials want to tamp down price expectations in the market to sync up with the reduction in minimum wheat prices announced for the 2018 procurement season (which begins in June). Officials want to make more wheat available during the peak flour-milling period ahead of the upcoming Spring Festival. They also want to clear out old stocks of wheat to make room for 2018 grain purchases beginning this summer.

Another analyst says the wheat sales are being held to relieve cost pressure on flour mills. Reports say that the supply of high quality wheat is tight, but there is abundant supply of common and low-quality wheat.

An analysis on the flour information network earlier this month agreed that there are abundant supplies of common wheat. Flour prices are not rising because demand is relatively weak, and sales during the current "peak" demand season are not that vigorous. Prices for wheat bran--the by-product of flour-milling--are also weak, contributing to downward pressure on flour mill profits.

Saturday, January 6, 2018

School Soccer to Promote Cheese

A school soccer competition will promote cheese consumption in Beijing, bringing together President Xi Jinping's passions for sports and upgrading Chinese industries, according to a December 2017 announcement by the Ministry of Agriculture's press office.

The "Dream Cup" is an open competition for teams from Beijing schools sponsored by a Beijing dairy company that will promote cheese consumption by students. But it is also much more than that. The cheese soccer activity illustrates the growing personality cult of Xi Jinping and ambitions to bring together disparate elements of society to achieve lofty national goals, with communist party coordination in the background.
"D20" dairy industry leaders pose with school children July 2017. Source: Ministry of Agriculture.

According to the announcement, the cheese-centered soccer competition is an implementation of the "spirit" of the 19th communist party congress held in October and a "measure to implement Xi Jinping's specific instructions." The competition was organized by the Ministry of Agriculture in conjunction with the China Dairy Association and Beijing Municipal Soccer Association, and with sponsorship by Beijing's Sanyuan Food Co. and the Beijing Peoples Broadcasting Association. The competition is part of a "China moderately well-off milk action plan" launched in February 2017 which distributed free dairy products to schools in poor regions as one of its efforts to revive the Chinese dairy industry.

According to the Ministry of Agriculture, the soccer competition will integrate youth sports with upgrades of the Chinese dairy industry by encouraging consumption of cheese by young people, promoting development of soccer and other sports, adopting habits of hard work and improving physical fitness. The Ministry's announcement explains that the Chinese dairy industry has made progress in boosting milk consumption and improving quality and safety, but it still faces challenges that include an imbalanced product structure. Promoting cheese consumption is a hoped-for "breakthrough" for the dairy industry's development. (note: cheese was nearly nonexistent in China until about 10 years ago and is still seldom consumed). This will bring about a hoped-for "historic transformation" from a "big dairy country to a strong dairy country," the Ministry's announcement said. 

Thursday, January 4, 2018

China Wants to Shed Rice Stockpiles

Chinese authorities are considering another reduction in support prices for rice in 2018 to move toward market pricing, dissipate their huge stockpile, and stem a surge of imports, market analysts say.

With a record crop of 208.56 million metric tons (about 146 mmt after milling) in 2017, China's rice supply is more than adequate. As of December 25, 62.5 mmt (presumably rough rice; 43.75 mmt after milling) of the fall rice crop had been purchased (34.7 mmt medium grain and 27.8 mmt long grain), 2.3 mmt more than a year earlier. Procurement of the summer-harvested early indica rice crop totaled 9.16 mmt (6.4 mmt milled basis), up 570,000 mt from the year before.

An August rice market analysis estimated that the government's rice stockpile could be a record-high 100 million metric tons (apparently on a rough basis; 70 mmt milled basis), or about 80 percent of a year's consumption. The analyst's estimates were based on authorities' annual procurement of about 30 mmt of rice (21 mmt milled basis) through the support program since 2013 less sales of reserves.

Despite plentiful domestic supplies, rice imports also continue to rise. According to a Ministry of Agriculture report of customs statistics, China imported 3.6 mmt of (milled) rice in the first 11 months of 2017. That was up 15% from a year earlier.

A December report from China's central broadcasting network said that good quality rice is fetching good prices, but the price support program is propping up prices for generic rice.

A November report from China Grain Network said that quality of the 2017 rice crop varied by region. Rice has sprouting and other serious quality problems in parts of China were there was heavy rain at harvest time--mainly in Henan, Hubei, and Anhui Provinces. In southern regions like Jiangxi and Hunan Provinces quality of the crop is good. In most other areas, the quality was more or less the same as the previous year.

According to the China Grain Network report, the surge of rice imports is prompted by the spread between Chinese and international rice prices. In late November, the price for Thai 5% broken was $410/mt fob, and 3880-3980 yuan/mt on arrival in China. Pakistan 5% broken was $385/mt fob, and 3900-3920 yuan/mt on arrival in China's Guangdong Province.

On December 26, prices for domestic late-season long grain milled rice ranged from 3800 yuan/mt in Hunan (China's largest rice-producing province) to 4000 yuan/mt in Shanghai and 4040 yuan/mt in Chengdu, Sichuan Province. Early season long-grain rice was 3910 yuan/mt in Shanghai, comparable to the price of imports. Medium grain japonica rice was more expensive: 4800 yuan/mt in Guangzhou, 4900 yuan/mt in Fujian, 4300 yuan/mt in Shanghai, and 4200 yuan/mt at the train depot in Heilongjiang (the largest production region for japonica rice).

China also managed to double its exports of rice to over 1.1 mmt in the first 11 months of 2017. China Grain Network explains that the exports reflect a strategy of accelerating the disposal of excess rice stockpiles and describes the exports as "structural adjustment." In other words, China is dumping surplus rice on the world market. According to China Grain Net, the average unit value of exports through October was $482/metric ton (45 percent lower than last year). The average export price equals 3133 yuan/mt at the current exchange rate--about 20 percent less than prevailing domestic prices in China. Major markets are South Korea, Philippines, Mongolia, and African countries such as Guinea-Bissau, Côte d'Ivoire, and Mozambique. The China Grain Net analysis expects exports of rice to accelerate as de-stocking and reform of the rice market picks up.

The China Grain Network says market participants anticipate declining rice prices in 2018 as the government is expected to cut minimum prices again. They expect the minimum price for japonica rice to be cut by 200-400 yuan/mt, the middle/late indica price to be cut by 200 yuan/mt, and they think the minimum price for early rice could be eliminated altogether. The announcement could come in February, the month when minimum rice prices for the coming season are typically announced.

The State Council's December 12 announcement that imports of broken rice will be permitted at a tariff of 10 percent beginning July 1, 2017 has not been explained, but it is consistent with rhetoric about a new emphasis on quality products in agricultural policy. Authorities may remove the price support for the low-quality early indica rice crop and allow imports of broken rice at a 10 percent tariff to liberalize the low end of the market. Both are relatively low-quality types of rice used for making liquor and other industrial processing.

Wednesday, December 27, 2017

China's "Rural Revitalization" Set for 2018

An ambitious rural revitalization initiative was one of 8 priorities set for Chinese officials at the 2018 "economic work conference" held in Beijing December 18-20. The strategy was one of the directives issued in Xi Jinping's October speech to the 19th communist party congress where he proclaimed that agricultural and rural problems are foundational issues that must receive the utmost attention from communist party leaders.

Over the past decade, China's statisticians consistently reported numbers showing that the gap between countryside and city was improving, but now the official Xinhua news service reports a dismal situation to explain why rural revitalization is so critical: development in the countryside still lags far behind cities, inadequate development in the countryside is a glaring weakness, and the rural-urban imbalance is the most prominent imbalance in China's development.
The rural strategy was described only briefly in Xi's speech (434 characters of the 32,000-character speech) and in reports on the economic work conference, but the Minister of Agriculture instructed rural cadres to study Xi's speech and implement the strategy to achieve a transformational upgrade. The strategy is mainly a comprehensive restatement of various initiatives that have already been underway for several years.

Ambitious institutional reform is at the heart of the rural strategy: officials are measuring plots of rural land and verifying who has the rights, nurturing a new core of "appropriate scale" agricultural businesses, rectifying ownership of other collective property and profit-distribution mechanisms, and they hope to improve support policies for farmers. Family farms, cooperatives, and agribusinesses are expected to pull small agricultural households into "the orbit of modern agriculture" by sharing profits, imparting technical knowledge and linking small farmers with processing and service businesses. National food security will be maintained by investing in farmland that no one really owns, making scientific achievements that are brought to fields by an army of new service providers, and further mechanizing agriculture. All this will be accomplished while fully embracing the concepts of an open economy and "green" development.

The centerpiece of rural reforms is a giant project to clarify rural land rights which has been underway since 2014 and is expected to be complete next year, except for a few minority and border areas, according to a news conference held by Ministry of Agriculture officials last month. Officials have verified plots and issued certificates for 74 million hectares so far, 82% of collective cropland on the books (officials have discovered that there is actually more contracted land than previously thought). Xi Jinping also declared that villagers' contracting rights to rural collective land would be extended to 30 years. Defining boundaries and verifying contracting rights to land will give villagers confidence in their rights that will put them at ease when transferring the use rights of their land to others, facilitate distribution of land-based farm subsidies, and it will be the foundation for giving migrants compensation for giving up land rights, making mortgage loans, and promoting investment in land, officials say.

Another 3-year program is clarifying rights to a broader scope of collective assets in 129 pilot counties. Nationally, village collective assets are estimated to be worth 2.86 trillion yuan ($435 million, excluding Tibet), an average of nearly 5 million yuan ($762,000) per village. Officials say some of the pilot villages have set up dividend payment schemes for villagers, but the size of the payments is relatively small. The collective asset pilots will be expanded in 2018.

With greater assurance of land rights--where the boundaries are and with certificates that give them better prospects of getting the land back--it will be easier to transfer land use rights to "new farmers." One farmer in Heilongjiang Province reportedly took six months to assemble a farm of 800 mu (53 hectares) six years ago, but it only took him two weeks to acquire another 700 mu this year, according to state media. Officials are setting up provincial mortgage guarantee companies to facilitate agricultural lending, and they plan to set up similar companies at the municipal and county levels. Other plans are to mortgage farm equipment and other assets, and to promote leasing of farm machinery to speed up mechanization.

Officials see the traditional small-scale rural household as an inherent feature of rural China, and they hope new farm businesses will help the masses of rural households by linking them with processing and service businesses, giving out loans and training, and establishing profit-sharing mechanisms with small farmers.

More structural adjustment is on the horizon for Chinese agriculture. Corn was the focus of structural adjustment over the past year, but hogs are also in structural adjustment and state media say ruminant animals are next on the agenda. The focus is to protect resources (reduce soil erosion in the case of corn, reduce water pollution by pigs, and reduce over-grazing by ruminants), to increase quality and raise net income.

Rural and agricultural tourism, e-commerce, and other new industries will be promoted. The economic work report mentioned an initiative to align purchase prices for grain reserves more closely with market prices. Officials promise to explore establishment of "functional areas" for grain production and "protected areas" for other key crops.

The strategy is perplexing to outsiders because it is both capitalist and socialist, both forward-looking and conservative. The strategy aims to use capitalist tools like markets and entrepreneurship to enliven moribund socialist institutions governing the countryside: collective land ownership, state farms, and bureaucracies. These institutions were jury-rigged in the 1950s by officials trying to balance their utopian vision of collective farming with the realities of giving peasants incentives to produce efficiently. Xi envisions a 21st century "new era" for China of affluence, efficiency, and interconnectedness. Yet his vision also calls for preserving the past: promoting pride in rural "civilization" and maintaining a countryside laid out to accommodate medieval subsistence agriculture.