Affected by the COVID-19 pandemic, China’s agricultural economy has experienced some impact. However, grain production remains robust, hog production is steadily recovering, and the operational order of agricultural enterprises has largely been restored. As a result, the agricultural economy has withstood the shock of the pandemic.

As the production and business operations of agricultural enterprises fully resume, agricultural production is expected to run smoothly; farmers’ employment and farming activities will proceed in an orderly manner, and farmers’ incomes will resume growing; market demand is picking up, and agricultural product prices are likely to remain stable; investment in agriculture and fiscal spending will continue to increase. However, affected by the global pandemic, international trade in agricultural products may continue to face significant pressure. Overall, in the coming period, the agricultural sector is expected to rebound and then maintain a steady growth trajectory.

According to the monitoring and early-warning results of the China Economic Research Institute’s agricultural economic prosperity index, in the first quarter of 2020, the China Economic Research Institute’s Agricultural Economic Prosperity Index (hereinafter referred to as the “Agricultural Economic Prosperity Index”) stood at 95.2, down 6.8 points from the fourth quarter of last year—a relatively substantial decline. The China Economic Research Institute’s Agricultural Economic Early-Warning Index (hereinafter referred to as the “Agricultural Economic Early-Warning Index”) came in at 76.7, a drop of 16.6 points from the fourth quarter of last year, bringing it into the “light-blue warning zone.”

The business sentiment index has dropped sharply.

All six indicators that make up the agricultural economic prosperity index—after removing seasonal factors but retaining random factors—show a downward trend. Among them, agricultural production has declined significantly; farm income growth has turned from positive to negative; labor productivity has slightly decreased; the decline in agricultural product exports has widened; fixed-asset investment has dropped sharply; and the growth rate of fiscal expenditures on agriculture, forestry, and water resources has shifted from positive to negative.

The agricultural economic prosperity index is 1.4 points lower than the index adjusted for random factors (the blue curve in the chart), indicating that, recently, external factors such as the COVID-19 pandemic have dealt a certain blow to agricultural production development, causing the agricultural prosperity index to decline sharply. As a result, the agricultural early-warning index has dropped from “green light” to “light blue light.”

Among the 10 indicators that make up the agricultural economic early-warning index, two indicators are in the “red-light zone”—the agricultural product production price index and the pig-to-feed ratio—and two indicators are in the “green-light zone”—the import value of grains and grain products and the agricultural production materials price index (reversed). One indicator—retail sales of grain, oil, and food—is in the “light-blue zone,” while five indicators—the value-added of the primary sector, per capita net operating income of rural residents, completed fixed-asset investment in agriculture, forestry, animal husbandry, and fishery, agricultural product exports, and fiscal expenditures on agriculture, forestry, and water resources—are in the “blue-light zone.” Compared with the fourth quarter of last year, four indicators changed their light signals in the first quarter: the import value of grains and grain products rebounded from the “light-blue zone” to the “green-light zone”; the value-added of the primary sector, per capita net operating income of rural residents, and fiscal expenditures on agriculture, forestry, and water resources all dropped from the “green-light zone” to the “blue-light zone”; the remaining six indicators maintained their original light signals.

Grain production remains stable.

Affected by the COVID-19 pandemic, in the first quarter of 2020, the value added of the primary sector reached 1,018.62 billion yuan, a year-on-year decrease of 3.2%. Overall, the early rice crop is developing well. In terms of sown area, this year's early rice sowing area has significantly expanded, reversing the downward trend that had persisted for seven consecutive years. This development is largely attributable to the nationwide optimization of planting structures, increased support for rice production, and the active implementation of various reward and subsidy measures at local levels aimed at encouraging and supporting early rice cultivation. As for the growth of winter wheat—the main summer harvest grain crop—climate conditions in major winter wheat-producing regions such as Hebei, Jiangsu, Anhui, Shandong, and Henan have been generally favorable, resulting in robust seedling conditions. The growth of winter wheat this year is better than both last year's and the long-term average, laying a solid foundation for a bumper summer grain harvest.

The livestock industry has been significantly affected by the pandemic, yet pig production capacity is steadily recovering. Affected by the ongoing African swine fever epidemic and compounded by the COVID-19 pandemic, livestock production declined markedly in the first quarter. In the first quarter, the national output of pork, beef, mutton, and poultry meat totaled 18.13 million tons, a year-on-year decrease of 19.5%. Among these, pork production fell by 42.6 million tons, making it the primary factor driving the decline in livestock production indicators. Meanwhile, the output of poultry, poultry eggs, and milk—key substitutes for pork—increased somewhat.

Pig slaughter volume declined, while the pig inventory has resumed growth for two consecutive quarters. In the first quarter, the national pig slaughter volume totaled 131.29 million head, down 30.3% year-on-year; pork production reached 10.38 million tons, a decrease of 29.1% over the same period last year. At the end of the first quarter, the national pig inventory stood at 321.2 million head, down 14.4% year-on-year. Since the pig inventory stopped declining and began to rebound month-on-month in the fourth quarter of last year, it has shown month-on-month growth for two consecutive quarters. The inventory of breeding sows—the key indicator of pig production capacity—reached 33.81 million head, up 9.8% month-on-month. Slaughter volume of cattle and sheep declined, while their inventories increased. In the first quarter, the national beef cattle slaughter volume was 10.47 million head, down 5.8% year-on-year; beef production totaled 1.56 million tons, down 6.4%; and milk production reached 6.54 million tons, up 4.6% year-on-year. At the end of the first quarter, the national cattle inventory stood at 92.02 million head, up 1.5% year-on-year. In the first quarter, the national sheep slaughter volume was 65.73 million animals, down 8.3% year-on-year; mutton production totaled 960,000 tons, down 7.7%. At the end of the first quarter, the national sheep inventory exceeded 300 million animals, up 2.3% year-on-year.

In addition, poultry production continued to grow. In the first quarter, the nation’s total poultry output reached 3.48 billion birds, up 0.8% year-on-year; poultry meat production totaled 5.23 million tons, an increase of 1.1% over the same period last year; and egg production reached 8.28 million tons, up 4.3% year-on-year. At the end of the first quarter, the national poultry inventory stood at 5.73 billion birds, representing a year-on-year increase of 4.3%. As the positive trend in epidemic prevention and control continues to consolidate and live poultry trading markets reopen in an orderly manner, poultry production is expected to accelerate further in the coming period.

Trade is sluggish, and exports are declining.

In the first quarter, China's agricultural product exports totaled 16.23 billion U.S. dollars, down 5.6% year-on-year. The decline widened by 4.7 percentage points compared to 2019. Among them, seafood exports—which account for a relatively large share—amounted to 3.83 billion U.S. dollars, marking the lowest level for the same period since 2012 and dropping 17.0% year-on-year. Exports of other advantageous agricultural products, such as vegetables and tea, also declined to varying degrees. The sharp downturn in agricultural product exports is largely attributable to disruptions in logistics and trade flows caused by the global spread of the COVID-19 pandemic.

The year-on-year decline in grain imports continued to narrow. In the first quarter, China's imports of grains and their products totaled 1.52 billion U.S. dollars, down 5.8% from the same period last year. The decline narrowed by 2.9 percentage points compared to 2019. Among these, wheat imports amounted to 360 million U.S. dollars, up 17.9% year-on-year, with the growth rate increasing by 1.0 percentage point; barley imports reached 250 million U.S. dollars, down 54.4% year-on-year, with the decline widening by 46.8 percentage points; corn imports totaled 270 million U.S. dollars, up 24.7% year-on-year, but the growth rate slowed down by 10.1 percentage points; rice and paddy imports reached 290 million U.S. dollars, down 10.5% year-on-year, with the decline narrowing by 10.4 percentage points; soybean imports totaled 7.18 billion U.S. dollars, down 1.1% year-on-year, with the decline narrowing by 6.1 percentage points.

Producer prices continue to rise.

In the first quarter, agricultural product producer prices rose by 39.0% year-on-year, an increase that expanded by 10.5 percentage points compared to the fourth quarter of last year, marking a substantial rise for four consecutive quarters. Consistent with previous quarters, the sharp increase in agricultural product producer prices was primarily driven by livestock products, especially the prices of live pigs.

By category, agricultural product prices showed a pattern of “two rises and two falls.” Among them, livestock products experienced the largest price increase, rising by 88.6%, an expansion of 18.9 percentage points compared to the previous quarter. Crop products saw a year-on-year price increase of 1.9%, whereas they had fallen by 1.5% in the previous quarter. Forestry products posted a year-on-year price decline of 3.8%, reversing the 1.8% increase seen in the previous quarter. Fishery products fell by 0.1% year-on-year, with the decline narrowing by 0.2 percentage points compared to the previous quarter. Looking at specific major products, livestock products—especially live pigs—continued their sharp upward trend, driving up prices for live cattle and live sheep. Specifically, the production price of pigs (in gross weight) rose by 133.2% year-on-year, an expansion of 23.7 percentage points compared to the previous quarter, marking four consecutive quarters of expanding growth. The price of cattle increased by 17.5% year-on-year, with the rate of increase falling by 5.1 percentage points; the price of sheep rose by 10.7%, with the rate of increase declining by 4.8 percentage points. Poultry prices fell by 2.3% year-on-year, reversing the 13.3% year-on-year increase seen in the previous quarter.

Looking at the three major staple grains, wheat and rice stocks were abundant in the first quarter, ensuring ample market supply. Producer prices fell by 5.2% and 3.6%, respectively, while corn prices rose slightly by 0.3%. In the first quarter, prices of agricultural production materials rose by 8.6% year-on-year, an increase of 4.0 percentage points compared to 2019, primarily driven by the continued sharp rise in prices of piglets, young poultry, and livestock products. Affected simultaneously by African swine fever and the COVID-19 pandemic, hog prices remained high, and hog farming profitability stayed at historically elevated levels. As a result, farmers’ enthusiasm for restocking continued to grow, leading to a substantial increase in the prices of piglets, young poultry, and livestock products. In the first quarter, prices of piglets, young poultry, and livestock products surged by 98.9% year-on-year, an increase of 53.1 percentage points compared to 2019. Apart from this, prices of other agricultural production materials remained generally stable.

As an important production base for chemical fertilizers in China, the suspension of operations at Hubei’s phosphate mines and fertilizer enterprises during the pandemic could lead to a tighter supply of agricultural inputs such as fertilizers in the next phase, thereby driving up prices. It is imperative to promptly and fully restore the normal production order for agricultural inputs—especially by helping relevant Hubei enterprises resume work and production and ensuring smooth transportation channels for both raw materials and finished products. The pig-to-feed ratio continues to rise, while live hog prices remain high but are stabilizing. In the first quarter, the pig-to-feed ratio stood at 14.6:1, compared to 13.8:1 in the fourth quarter of last year, maintaining its upward trend. This sustained increase in the pig-to-feed ratio is closely linked to the ongoing rise in live hog prices.

Looking at prices in the wholesale market, due to the combined impact of the African swine fever outbreak and the pork cycle, live pig prices have risen significantly over the past two years. In March 2020, live pig prices reached 35.9 yuan per kilogram, representing a year-on-year increase of 151%. However, with the introduction of a series of national measures aimed at restoring pig production, the rapid recovery of pig production capacity, and the increased release of frozen pork reserves by the state, market supply has expanded, causing live pig prices to ease somewhat from their recent high levels. According to weekly data, live pig prices in the wholesale market rose from 34.5 yuan per kilogram in the first week of 2020 to 37.7 yuan per kilogram by the third week of February 2020, after which they began to decline. By the fourth week of April, prices had fallen to 33.7 yuan per kilogram, down 1.3% from the previous week. Compared to the third week of February, cumulative declines exceeded 10%. It is expected that live pig prices will continue to show a slight downward trend in the short term.

Demand for end-use food products continued to grow relatively rapidly. In the first quarter, retail sales of grains, oils, and food—reflecting final consumption—totaled 385.78 billion yuan, representing a year-on-year increase of 12.6%, or 2.4 percentage points faster than the growth rate in 2019. Affected by the pandemic, total retail sales of consumer goods fell by 19.0% year-on-year in the first quarter; however, sales of grains, oils, and food products still maintained relatively rapid growth, largely due to the increased demand for these items as residents spent more time at home preparing meals during the pandemic.

The growth rate of income has turned from positive to negative.

In the first quarter, the per capita net operating income of rural residents was 1,518 yuan, down 1.1% year-on-year in nominal terms, compared to a 7.5% increase for the entire year of 2019. The per capita disposable income of rural residents reached 4,641 yuan, representing a growth of 0.9%. However, after adjusting for price factors, real income declined by 4.7%, a decline that was 0.8 percentage points wider than that of urban residents. This trend is largely attributable to disruptions in migrant workers’ ability to enter cities for employment in some regions due to the COVID-19 pandemic. As the epidemic has been effectively brought under control, migrant workers are returning to cities in an orderly manner, and farmers’ incomes are expected to resume stable growth.

Fixed-asset investment in the agriculture, forestry, animal husbandry, and fishery sectors reached 307.1 billion yuan, down 12.1% year-on-year, compared to a 0.7% increase in 2019. Affected by the pandemic, fixed-asset investment across the entire society declined by 16.1% in the first quarter, and accordingly, agricultural investment also saw a certain degree of decline. Fiscal expenditures on agriculture, forestry, and water conservancy shifted from growth to decline: in the first quarter, fiscal expenditures in these areas totaled 403.1 billion yuan, down 3.6% year-on-year, whereas in 2019 they had increased by 6.3% year-on-year.

The growth rate of agricultural labor productivity has shifted from positive to negative. In the first quarter, affected by a decline in the value added of the primary sector, the labor productivity of the primary sector was 4,309 yuan per capita (at comparable prices), down 1.3% year-on-year, compared with an increase of 11.7% for the entire previous year.

Adopt multiple measures to ensure stable development.

In the first quarter, affected by a marked increase in risks and challenges—including the COVID-19 pandemic and severe pest and disease outbreaks—the agricultural prosperity index declined significantly. However, grain production remained robust, hog production continued to recover steadily, and the production and business order of agriculture-related enterprises has largely been restored. As a result, the agricultural economy withstood the impact of the pandemic and effectively played its role as a “stabilizer.”

Looking ahead, as the COVID-19 pandemic is effectively brought under control domestically and agricultural enterprises fully resume normal production and operations, agricultural production is expected to remain stable. Farmers will continue to engage in both wage employment and farming activities in an orderly manner, and their incomes are set to rebound and grow again. The supply of key agricultural products will remain stable, market demand will pick up, and agricultural product prices are likely to stay steady. Investment in agriculture and fiscal spending on agricultural sectors will further increase. However, due to the ongoing impact of the pandemic abroad, international trade in agricultural products may continue to face significant pressure. Overall, in the coming period, the agricultural sector is expected to rebound and then maintain a stable growth trajectory.

According to model calculations, the agricultural economic prosperity index for the second and third quarters of 2020 was 98.6 and 99.8 respectively, while the agricultural economic early-warning index stood at 83.3 and 86.7 respectively, signaling a return to normal operation within the “green light zone.”

The fundamental trend of long-term, stable development of China’s agricultural economy will not change, but its phased impacts still cannot be overlooked. To ensure the long-term, stable, and healthy development of agriculture, we must step up our efforts to ensure that all policies and measures aimed at stabilizing “agriculture, rural areas, and farmers” are effectively implemented.

First, we must focus on production. On the one hand, we need to do everything possible to ensure stable grain yields. Given the current global challenges in food distribution, we must prioritize restoring early-rice production, stabilizing summer-sown acreage, and strengthening measures for pest and disease control as well as management of meteorological disasters, thereby ensuring that annual grain output remains steady. On the other hand, we must pay close attention to the production and supply of “vegetable basket” products. We should accelerate the recovery of hog production, intensify efforts to prevent and control major animal diseases such as African swine fever, and ensure that hog production quickly returns to its usual levels. At the same time, we must continue to bolster the production of poultry, aquatic products, vegetables, and fruits, and increase the supply of green, high-quality secondary food products.

Second, we must promote farmers’ income growth. Affected by the pandemic, both farmers’ agricultural and non-agricultural incomes have been impacted to some extent—especially in experience-based economies such as rural leisure tourism, which have been hit hardest. Going forward, we need to strengthen the linkage between agricultural production and sales, step up efforts to build cold-chain logistics facilities for storage, preservation, and fresh-keeping of agricultural products, and organize leading enterprises, wholesale markets, and e-commerce platforms to carry out targeted matchmaking activities. We should continue to vigorously develop advantageous and specialty industries, boost consumer confidence, innovate service models, and accelerate the recovery of the rural leisure tourism sector. Moreover, we must intensify policy support measures such as entrepreneurship subsidies and interest-rate subsidies on loans, guiding and supporting farmers who return to or remain in their hometowns to engage in innovation and entrepreneurship. We should also enhance vocational skills training for professional farmers and broaden channels for farmers to increase their incomes.

Third, we must promptly address our shortcomings and step up investment in agriculture-related sectors. We should draw on the lessons learned from epidemic prevention and control efforts to make up for gaps in agricultural development and enhance public health and epidemic prevention conditions in rural areas. At the same time, we should make good use of special government bonds for epidemic response and special local government bonds to strengthen the construction of major, modern, and driving projects such as high-standard farmland, agricultural product storage and preservation facilities, and cold-chain logistics infrastructure. In addition, we should further broaden channels for investment and financing, improve the efficiency of government special funds, and guide and leverage financial and social capital to increase investment in agriculture and rural areas.