Temporary Storage Price Cut: Why a Bumper Harvest Becomes a Worry for Farmers
In the Northeast production areas, the temporary storage corn purchase policy has been in effect for more than a month and a half. Data from the State Administration of Grain shows that as of December 10, cumulative temporary storage corn purchases in the Northeast production areas reached 31.9 million tons, including 5.14 million tons in Inner Mongolia, 690,000 tons in Liaoning, 6.86 million tons in Jilin and 19.21 million tons in Heilongjiang. The volume of purchases during the current period was noticeably lower than in the previous period, and the pace of temporary storage purchases has slowed.
Under the influence of the temporary storage policy, although corn prices have seen a recovery rise, influenced by the mentality of selling when prices fall rather than when they rise, farmers are not actively selling their grain. Apart from the Northeast region covered by the national purchase and storage policy, in other provinces very few farmers come to sell corn, and some farmers are even selling at a premium. Along both the national purchase-and-storage line and the market sales line, farmers are reluctant to sell.
Temporary Storage Price Cut Leaves Farmers Worried Despite Bumper Harvest
⟦NL> Starting at 7 a.m., grain trucks were already waiting early outside the purchasing point of the Tongliao Directly Subordinate Depot of China Grain Reserves in Inner Mongolia, yet Gao Jianli, a large-scale grain farmer from Junchang Village, Jianhua Town, Kailu County, was still hesitating outside the purchasing point. He told reporters that this year his family planted more than 200 mu of corn. Because there was so much corn, his home did not have enough space to dry it, so he thought he would sell the corn when the price was reasonable. But after looking around, he found that the current purchase price made him feel it was not worthwhile, and he wanted to wait a little longer.
In Sanlidian Village, Zian Township, Puyang City, Henan Province, reporters met corn grower Li Wei. This year the local area had abundant rain, and Li Wei's 11 mu of corn again had a bumper harvest, with total output reaching more than 10,000 jin. In his courtyard were piled two large bins full of corn cobs, golden and dazzling to the eye. Li Wei told reporters that storing corn this way is somewhat less than ideal: first, it takes up relatively large space, and second, the corn is not easily ventilated and is prone to moisture and mold. Although he knows his storage method has problems, given the current price, he can only accept his bad luck.
Corn Prices Remain Sluggish, Farmers Reluctant to Sell
Henan Province is not an area covered by the national corn purchase and storage policy, so farmers cannot wait for the national purchase and storage price. Facing the persistently sluggish local corn prices, most corn growers still choose to wait and temporarily not sell.
In Xinxi Township, Henan, Wang Junjie, a corn enterprise purchasing boss, told reporters that when the corn had just been harvested this year, the price was still acceptable, and he could purchase 50,000 to 60,000 jin a day, and at the best times more than 100,000 jin. Later, prices remained low, ordinary people stored their corn away, and fewer people sold corn. Recently corn prices rose a little, but purchasing and sales conditions were still not ideal, and they could purchase only 20,000 to 30,000 jin a day.
Wang Junjie: The corn purchased is mainly sold to feed processing enterprises within the county and starch production enterprises outside the county. Everyone is thinking it can rise a bit more, and no one is willing to sell.
Grain farmers across the country are reluctant to sell corn, which is not unrelated to today's sluggish corn prices. In September this year, China cut the corn temporary storage price for the first time in seven years, setting it at 1 yuan per jin, 0.12-0.13 yuan per jin lower than last year's temporary storage price. Market corn prices also fell from more than 1 yuan last year to 0.7-0.8 yuan per jin. But judging from the current domestic and international corn markets, a large amount of corn is stored in the national treasury, and coupled with lower foreign corn prices, a pattern of supply exceeding demand has emerged.
Forecast: Little Possibility of Later Corn Price Increases
Zhou Zhiwen, director of the Tongliao City Grain Bureau in Inner Mongolia: In recent years, affected by the sluggish domestic and international economy, most processing enterprises are in a state of shutdown or limited production, and market demand is sluggish. The contradiction of market supply exceeding demand is very prominent, and coupled with very low foreign corn prices, so at present, there is little possibility of corn price increases.
Farmers Wait and See, Corn Hoarding Leads to Price Declines
During interviews, reporters found that at present, dry grain prices in Shandong, Henan, Hebei, Xinjiang and other places are less than 0.9 yuan per market jin. Local purchaser Wang Junjie analyzed that the main reason is still the sluggish sales of corn this year and various other causes. When corn prices hit a low this year, they were only 1.7 yuan per kg. Farmers sat waiting and watching, reluctant to let go, which in turn led to corn hoarding.
Advice: Do Not Hold Grain Waiting for Higher Prices, Guard Against Later Grain Quality Mold
According to Zhou Zhiwen's analysis, the four northeastern provinces and regions are supported by the national temporary storage policy, otherwise prices would be even lower. After next year's temporary storage purchases end, corn prices may still carry the risk of falling back. Corn prices in Henan, Shandong and other areas, affected by the supply-demand pattern, will not rise by a large margin. This month is the peak period for corn coming onto the market, and the spot market still carries downside risk. Grasp the timing for selling grain, and do not hold grain waiting for higher prices, to guard against later grain quality mold.
Zhou Zhiwen: If there are no storage conditions, sell grain promptly to prevent mold and further losses, or bear the risk of being unable to sell later. If there are grain storage conditions, dry the grain and sell dry grain, which can also increase income somewhat. Calculated at the current moisture level, selling dry grain can bring about 3 fen per market jin more than selling wet grain directly.
National Temporary Storage Policy Provides Support, Otherwise Prices Would Be Even Lower
Industry insiders believe that the state's cut in the corn temporary storage purchase price is also intended to send a signal to change farmers' long-standing reliance on the state's temporary storage and market-support purchases, while guiding large-scale farmers to follow the laws of market development in deciding planting area and varieties. Shen Hongyuan, an analyst at the Zhengzhou Grain Wholesale Market in Henan, analyzed for this reason that in the near term, market corn prices will not change much.