With grain prices fluctuating sharply, what should farmers plant next year?

A bumper harvest, falling prices bring worry

"This is yellow corn, this is sweet corn... very fragrant and tender." At the factory area of the Huaihe Seed Industry Grain Industry Consortium in Yongqiao District, Suzhou City, three or five farmers were sorting harvested corn into bags.

"This year's yield is good, but it won't fetch a price." In the eyes of farmers, it was another year of bumper harvest, but the income situation was clearly worse than in previous years.

"These are dried corn, with 11% moisture content, very plump kernels, first-grade quality, but if I sell now, I can only get 0.77 yuan per jin." Opening the consortium's storage warehouse, Li Yong, head of the Huaihe Seed Industry Grain Industry Consortium, said.

The consortium is composed of Huaihe Seed Industry Company and 13 farmers' professional cooperatives including Dejie and Huikang, 27 family farms and some large grain growers. Li Yong explained, "Judging from the situation within the consortium, most farmers or farm owners are waiting for the right moment. Selling at this price means losing money, so they have no choice but to store it for now and see how the market goes."

Zhang Qingwei, director of the Yongqiao District Agriculture Committee, explained that this year the district's total summer corn sown area was 1,541,200 mu, with an average yield of 573.08 kg per mu, and all production indicators hit record highs. "But this year's corn price situation is too severe. The current market price is less than 0.8 yuan/jin, down nearly 30% from last year's 1.1 yuan/jin," Zhang Qingwei said. "Sales are also difficult. At this time last year, companies were competing to buy, but now everyone is waiting and watching."

As for the reasons for the corn price decline, Zhao Xiaochun, deputy director of the Suzhou City Agriculture Committee, believes it is mainly the result of market regulation. "International grain prices are generally 20%-30% lower than ours, which will inevitably have an impact on the domestic market. At the same time, years of bumper harvests have led to accumulated grain storage inventories, and market absorption capacity is saturated, all of which have created an overall situation of oversupply in corn sales."

"Not just corn, but crops like wheat are also affected, though fortunately there is the national market-support purchase policy as a 'backstop'." Zhao Ying, deputy director of the Yongqiao District Grain Bureau, explained that national market-support purchases are a regulatory measure by the state to protect farmers' interests and prevent "cheap grain hurting farmers." When the market price falls below the support price, the Sinograin Management Corporation purchases farmers' qualifying surplus grain at the state-set support price, thereby supporting the market price.

"Because Anhui Province is a major wheat-producing area, the state sets a minimum purchase price for wheat every year. This year's standard is 1.18 yuan per jin." Zhao Ying said.

Doing the math, business is tough this year

From over 1 yuan to over 0.7 yuan, how big is the impact on farmers?

Large grain grower He Yong has transferred and contracted about 800 mu of land in Qinwei Village, Huigu Town. He has a clear account in his mind: on average, each mu of land requires 1,100 yuan per year in land transfer fees to farmers, nearly 400 yuan for purchasing fertilizer and fertilizing, about 120 yuan for plowing and leveling the land, about 120 yuan for buying seeds, about 100 yuan for labor, over 100 yuan for drought resistance and pesticide spraying, plus other transportation and drying fees, bringing the total annual input cost per mu to nearly 2,000 yuan.

"Calculating at 1,000 jin each of wheat and corn per mu per year, with wheat selling at about 1.2 yuan per jin, if corn is still over 0.7 yuan, then this year I'll barely break even." He Yong said. "Now the corn is still piled up unsold, and I don't know if the market situation will improve. But if it's like this every year, I'll have to consider withdrawing from land transfer."

Besides He Yong, Dai Hongcheng, a grain broker in Huigu Town, Yongqiao District, also has plenty of worries. "On the surface, price declines don't affect brokers much - just buy directly, add a markup and resell. But in reality, that's not how it works." Dai Hongcheng said. "Now corn prices are about 0.75-0.8 yuan per jin. For example, if I buy at 0.78 yuan per jin today, under normal circumstances I'd resell at a markup of 2 fen per jin. But if tomorrow the corn price drops to 0.75 yuan per jin, then the corn I bought yesterday would have to be sold at a loss."

"It seems like just a few fen of fluctuation, but I purchase about 50,000 to 60,000 jin of corn per day on average. If the price drops significantly, the impact on me is not small," Dai Hongcheng said. "Now I can't see through the market situation, so we don't dare to purchase easily. If the price situation were good, I wouldn't have time to give you an interview right now - I'd already be out purchasing."

How to view it? The price decline is no small matter

"The most direct manifestation is lower farmer income, and this may also produce a chain effect." Zhao Ying said. "Some land transfer contractors may not be able to pay farmers their transfer fees on time. Even if they pay the current year's transfer fees, the contractors' enthusiasm for growing grain will be greatly affected."

"Contractors are generally considered to be in relatively good economic condition locally, but when contracting several hundred mu of land, because of low grain prices, they may need to lose tens of thousands or even over a hundred thousand in savings, and this pressure is hard for them to bear." Li Yong said. Currently, quite a few land transfer contractors within the consortium have expressed a desire to withdraw. If a large number of contractors withdraw, this is very unfavorable for the development of agricultural industrialization and large-scale operations.

In addition, the "crowding out" effect of falling corn prices on other grain crops should not be ignored. Li Guanghui, general manager of the Huigu Branch of Suzhou City Huigu Grain and Oil Purchase and Sales Co., Ltd., explained, "Our company is mainly responsible for the storage and entrusted management of wheat. Storage information for wheat in the warehouse is regularly listed at the Anhui Province Grain Wholesale Trading Center, and interested enterprises can choose to purchase. But if enterprises can find low-priced corn as a substitute when production conditions allow, the stored wheat cannot be sold, and prices will correspondingly be affected."

The corn price decline is no small matter, but is there room for corn prices to rebound in the short term?

Li Yong is not optimistic about this. "This corn price decline is not accidental. The contraction of market absorption capacity is a long-term factor, and the oversupply situation in the market is also difficult to change in a short time. For example, affected by the economic situation, products made by deep-processing enterprises in the market cannot be sold or have poor sales performance, so demand for raw materials like corn will naturally decrease."

What to do? Industrial transformation for the long term

Relevant heads of the Yongqiao District Grain Bureau and District Agriculture Committee both said they would provide as much help as possible within their capacity, including helping to contact relevant feed mills, alcohol processing plants and other enterprises to expand farmers' grain sales channels.

"Can the state provide some subsidies to large grain growers and land transfer contractors, or also implement national market-support purchases for corn?" He Yong eagerly hopes for a corn price rebound.

In response, Zhao Ying suggested, "Market-support purchases have a certain positive effect on protecting farmers' interests. If national finances allow, farmers' interests can be protected as much as possible and grain production subsidies increased. In the long run, adjusting the planting structure and transforming and upgrading the grain industry are of great significance."

From the perspective of market inventory, grain crops such as corn are already relatively saturated. The next step requires good guidance and trying to plant some cash crops. On the other hand, further research into expanding grain uses can be considered. Zhao Ying suggested, "For example, it now appears that corn deep processing is mainly used for producing feed, processing alcohol, etc. Next, can we consider expanding into making fuel, etc., while also researching new uses?"

"We are also planning adjustments to the planting structure, and the next step is to consider guiding farmers to plant some vegetables and other cash crops." Zhao Xiaochun said. "At the same time, we are also trying to promote green yield-increasing technologies, reducing inputs such as pesticides and fertilizers, to save costs and increase efficiency."

This year, Suzhou City has undertaken 8 green research demonstration plots, with a total area of 71,900 mu, and 8 green research demonstration villages, with a total area of 50,500 mu. Zhao Xiaochun explained that at the technical level, formula fertilizer or controlled-release fertilizer can be selected, and integrated soil-fertilizer regulation technology can also be promoted, changing single watering to applying "nutrient solution," thereby improving the efficiency of fertilizer and water use. "Next, we will also expand the demonstration scale so that green yield-increasing technologies can be widely applied." Zhao Xiaochun said.