Temporary Corn Storage Price Cut: Should Corn Be Planted Next Year?

This year, the temporary corn storage price was cut for the first time, and grain farmers face the worry of a bumper harvest. A reporter went to Dunhua, Jilin to investigate -

Should corn still be planted next year?

■ With domestic and international prices inverted and inventories piling up, adjusting the temporary corn purchase and storage policy is imperative

■ Policy adjustments should balance the interests of all parties and let corn prices gradually return to the market

In the boundless cornfields, harvesters roar. Right now, the harvest scene in Dunhua City, Yanbian Korean Autonomous Prefecture, Jilin, looks the same as in previous years. What is different is that since the state introduced the temporary corn storage policy in 2008, the temporary storage price has fallen for the first time.

This year, the state-set purchase price for temporary storage corn was set at 1 yuan per jin for "national standard Grade 3," a drop of 0.12 yuan per jin. How much impact will this have on farming households, and what do farmers hope for? Behind the busy autumn harvest, there is a bit more unease than in previous years.

Farmers: With a price cut of 0.12 yuan per jin, there is no profit after costs. The policy "slammed on the brakes," and farmers find it hard to bear

"Look, the corn is all still standing on the stalks. Let it dry naturally first; the moisture content is too high." Large grain grower Kan Baofu led the reporter to the edge of the field and said.

Kan Baofu, a farmer from Xinli Village, Dunhua City, runs Baofu Family Farm. This year, all 60 hectares of the farm were planted with corn, and the harvest is expected to be more than 700 tons.

"Worrisome! This year the corn price is low, and you cannot even see small grain traders. The corn is hard to sell. If I bring it home, it is too wet, there is nowhere to store it, and I am afraid it will heat up and rot; if it snows heavily in a few days, it will be even more troublesome." Kan Baofu said.

Last year, Kan Baofu planted more than 50 hectares of corn and made a net income of around 300,000 yuan. This year's corn market makes Kan Baofu nostalgic for last year's grain-selling scene: "I just sat at home, 0.98 yuan per jin, sold directly to the broker who came to the door to buy grain. It was worry-free, and I did not have to worry about transport costs at all."

This year, Kan Baofu first left the grain drying in the field, waiting for the state grain reserve warehouse to open, then planned to deliver the grain directly there. He calculated that the state purchase and storage price would still be somewhat higher, and selling grain would also be convenient, with transport costing only 2 fen per jin of corn. To deliver grain to a processing enterprise farther away, transport would cost 5 fen per jin of corn.

"Now, at the gate of the grain-buying enterprises, the vehicles selling grain line up in a 'long dragon.' Basically, you have to wait in line for 3 days before you can sell. For each extra day of waiting, you pay the transport truck 20 yuan per ton of grain. For 80 tons of grain, that is more than 1,600 yuan in expenses." Kan Baofu said.

No matter how busy the autumn harvest is, old Kan still has to keep an eye on corn prices at all times. "Open WeChat, and you can see the corn purchase prices of grain processing enterprises. The enterprises publish them promptly every day."

"The price at which enterprises buy wet corn has already fallen to 0.64 yuan per jin. At this market rate, after farming costs there is no profit." Kan Baofu opened his phone and checked the day's grain price. "At present, the purchase price offered by enterprises is too low. Farmers who are anxious to repay loans have to sell no matter the price; they urgently need money."

Kan Baofu did the math: leaving aside the actual transaction price of farmers' corn, based on the decline in the state temporary storage price, each jin of corn brings 0.12 yuan less income. One hectare can produce 12 tons of corn, so that means a reduction in income of 2,880 yuan.

The temporary corn storage policy, continued for many years, protected farmers' interests and stabilized agricultural production, and its significance cannot be ignored. However, with domestic and international prices inverted and inventory levels rising, this contradiction has also become increasingly prominent.

"We understand the adjustment to the temporary storage policy, but could it be adjusted before planting? Now it is autumn harvest, and slamming on the brakes like this is a bit hard for farmers to bear." Kan Baofu's view represents the sentiments of many grain farmers.

Even so, there was still some news that could slightly ease Kan Baofu's mood. To ensure farmers can sell grain smoothly and conveniently, Jilin Province will launch the temporary corn storage policy on November 1 this year, 1 month earlier than last year.

Government: Increase grain proxy storage points, step up technical and equipment support, and minimize grain-selling costs

"This year, Jilin Province has changed the past practice of opening warehouses in stages and batches. Purchase warehouses have been set up in place all at once and fully launched. All parts of the province will make it as convenient as possible for farmers to sell grain nearby and reduce transport expenses." said Wang Tao, director of the Regulation Division of the Jilin Provincial Grain Bureau.

Facing the complex situation of grain purchase policy adjustments and inventory backlogs, the Dunhua city government coordinated with 4 local private grain depots to help Sinograin increase proxy storage points, ensure smooth grain purchasing, and make sure farmers can sell grain in time. At present, the 4 private grain depots can store 100,000 tons of corn.

Right now, the grain price falls day by day, and helping farmers sell at a good price smoothly is not easy. Dunhua Hongfa Modern Ecological Farm operates 703 hectares of land, planted more than 370 hectares of corn, and with an output of around 4,000 tons, faces considerable pressure in selling grain.

Fortunately, with the assistance of the Dunhua City Agriculture Bureau, Hongfa Modern Ecological Farm rushed the harvest at the right time and smoothly sold 2,000 tons of corn to the Jilin City ethanol fuel company.

"On September 28, the city ethanol fuel company began buying wet grain. On the 29th, the farm began harvesting. In 4 days it harvested 2,000 tons of corn and sold it to the enterprise as quickly as possible. At that time it was 0.83 yuan per jin, and now it has fallen to more than 0.60 yuan." said Zhuang Wenjun, manager of Hongfa Modern Ecological Farm.

The reporter came to Hongfa Modern Ecological Farm, where large harvesters were roaring in the fields in the distance. Zhuang Wenjun pointed into the distance: "The corn is threshed directly, and everything else is crushed and returned to the field. One cart is harvested in 40 minutes, and that is 40 tons of corn."

Last year, Hongfa Modern Ecological Farm mainly relied on 7 small machines to harvest corn, harvesting in the field, unloading at the yard, using machinery to thresh, and then loading and transporting, which consumed manpower and had high costs. "With last year's method, there was not enough time whether to harvest or sell. This year, the city agriculture bureau coordinated imported large machinery to help us rush the harvest and selling. After threshing, it is loaded directly onto trucks and sent to the enterprise, which saves 8 fen per jin in costs." Zhuang Wenjun said.

"At this time, relevant government departments need even more to provide information services, help farmers expand sales channels, and give technical and equipment support to reduce farmers' costs of selling and storing grain." Wang Tao said.

This year, according to regulations, the state no longer purchases corn with a moldy kernel content exceeding 2%. For this reason, agricultural technical officials at all levels in Jilin Province have gone into villages to guide farmers in scientific grain storage, building racks and putting grain up on platforms, eliminating "grain lying on the ground," ensuring safe grain storage, and increasing production without reducing income as much as possible.

Expectations: Introduce corresponding supporting measures, promote structural adjustment, and let corn prices gradually return to the market

This year, Dunhua City's corn planting area increased by 24,000 hectares, breaking through 95,000 hectares, becoming the local number one crop. "Based on earlier yield measurements, the city's grain output will exceed 1 million tons." said Guo Changzhen, deputy director of the Dunhua City Agriculture Bureau. In Zhuang Wenjun's view, the most direct feeling is that one hectare of corn yielded more than 400 jin more than last year.

Dunhua has ushered in its largest year for corn planting area. Yet as a major soybean-producing area in Jilin Province, Dunhua's soybean planting area has been continuously shrinking. In 2014, the city's soybean planting area was about 150,000 hectares, accounting for about half of the province's total; in 2015 it was only more than 90,000 hectares.

Dunhua soybeans are famous for being non-GMO and high in protein, and their export volume accounts for 60% of the country's total. As a soybean distribution center in Northeast China, Dunhua has 16 leading processing enterprises at or above the municipal level, so local processing is not a problem.

In contrast, corn's local conversion capacity is very weak, and the area belongs to a raw grain export region. "Hit by falling prices, Dunhua faces enormous pressure in selling corn." Guo Changzhen said.

The temporary storage policy has been implemented for 7 years, and corn prices have risen for 7 consecutive years, which has also widened the profit gap between corn and soybeans. Zhuang Wenjun introduced: "One hectare of land can produce more than 10 tons of corn, while soybeans at most 3 tons, a difference in income of at least 3,000 yuan."

"On one side, domestic soybean output has fallen to the warning line; on the other, domestic and international corn prices are inverted." In Guo Changzhen's view, this change in the temporary corn storage policy has also made Dunhua feel that structural adjustment is urgent. "We should promote grain-soybean rotation and return to the main soybean industry."

Should corn still be planted next year?

"This year's corn market is bad, so next year let's do a bit of diversified operation. Mainly corn, and also plant some white melon seeds or something. They are harvested in the summer of the following year, save soil fertility, and can make money." Kan Baofu said, though the profitability of soybeans still made him hesitate.

Having planted corn for so many years, Kan Baofu feels that relying solely on policy for corn prices certainly will not work, but if the policy is cut off directly and pricing is left entirely to the market, that also will not work for the time being.

Industry insiders said that policy adjustments should balance the interests of all parties, introduce some supporting measures to protect farmers' interests, and let corn prices gradually return to the market.

Guo Changzhen believes that promoting the development of the soybean industry requires precise subsidies for grain farmers, and he hopes the state will introduce policies to support agricultural industrial structural adjustment.

"Policies and funds should be integrated and delivered in a concentrated way by region. Otherwise it becomes like sprinkling pepper, scattered here and there, with no flavor." Guo Changzhen said. At present, the state has many agricultural subsidies, and together the amounts are not small. The state's support for agriculture is very strong, but because various subsidies are distributed separately, they cannot solve much for farmers.