Rapeseed profits drop sharply: how should autumn-sown rapeseed be planted?
“This year's price is even lower than last year's. Planting one mu of rapeseed does not make money, so I do not want to plant it next year.” Recently, reporters received reports from several farmers in Jianyang City about problems such as this year's rapeseed market price not being high, the market being sluggish, planting benefits being worse than in previous years, and planting enthusiasm being damaged, and they hope to know whether the state has the latest purchase and storage policy.
The rapeseed harvest has already passed for more than two months. Why have people frequently reported recently that the price is not high and the market is sluggish? In this regard, how will this year's state purchase and storage policy be implemented? With these questions, the reporter launched an investigation.
Policy shift: rapeseed purchase gradually becoming market-oriented
“Jianyang City's rapeseed purchase and storage policy was launched on August 6, but this year's policy is different from previous years, mainly shown in the change of implementing entity, lower purchase price, and limited purchase quantity.” On August 19, Zhou Xingsheng, deputy director of the Jianyang City Development and Reform Bureau, told reporters that this year the main body for rapeseed purchase changed from the state to the local level, and the purchase price also dropped from last year's 2.55 yuan/jin to 2.3 yuan/jin.
The reporter learned from the Provincial Grain Bureau that Sichuan Province's 2015 rapeseed purchase policy was issued in early August. Unlike previous years, when Sinograin was responsible for the purchase, this year local governments will be responsible for providing appropriate subsidies for rapeseed and encouraging local oil processing enterprises to actively purchase. This year the province's expected total purchase volume is 500,000 tons, about 22% of the 2.3 million tons of output, with government subsidies of 250 million yuan. At present, the purchase targets have all been allocated to local areas and issued to rapeseed crushing enterprises.
“In this round of policy purchasing, Jianyang City's task is 36,000 tons. As of August 6, more than 1,000 tons of the purchase task had been completed.” Zhou Xingsheng told reporters that this year, for enterprises in our province that list rapeseed purchase prices at 2.3 yuan/jin or above (national standard third-class quality standard, with the price difference between adjacent grades set at 0.02 yuan/jin), a one-time fixed subsidy of 0.25 yuan/jin is given to purchasing enterprises. The purchased rapeseed is processed and sold by the enterprises themselves, with profits and losses borne by themselves. The purchase period is August 1, 2015 to September 30, 2015. At present, Jianyang City has 3 oil enterprises, including Mianfeng Oil Press, responsible for purchasing at the government-guided price.
Zhou Xingsheng believes that compared with previous years, the biggest change in this year's policy is the state's liberalisation of the rapeseed market, launching rapeseed purchases by subsidising oil enterprises, and setting a total purchase limit. In this way, on the one hand, the rapeseed market has been liberalised, fully giving play to the role of the market in allocating agricultural product resources; on the other hand, through direct subsidies to enterprises, it has promoted the development of local oil enterprises and laid the market foundation for supporting the rapeseed market.
Overcapacity: rapeseed prices encounter an upward “ceiling”
Over the past five years, Sichuan Province's rapeseed purchase and storage prices were 1.85 yuan per jin, 1.95 yuan, 2.3 yuan, 2.5 yuan, and 2.55 yuan, showing a trend of continuous increases year after year, but this year they fell.
“The rapeseed purchase price is low, and planting benefits are hard to guarantee. Farmers having such feelings is a microcosm of the current sluggish oil market.” Zhou Xingsheng told reporters that in early June, when rapeseed was harvested, the purchase price in the Jianyang market was 2.35 yuan/jin, then slowly fell to 2.1 yuan/jin. On August 6, after the new policy was implemented, the rapeseed purchase price in the market was pulled up.
“On the one hand, in recent years the state has continuously implemented temporary rapeseed purchase and storage, but rapeseed oil has not been released from storage in time, and current tank capacity is seriously insufficient; on the other hand, the price inversion between domestic rapeseed oil and imported rapeseed oil is becoming more and more intense, and the market price mechanism has been distorted.” Wang Yukui, head of Jianyang City Mianfeng Oil Press, told reporters that at present, bulk rapeseed oil on the market is wholesale at 8,000 yuan/ton, a very large drop from the previous 10,000 yuan/ton. The profits of oil enterprises have decreased, the entire industry has overcapacity, and combined with the impact of foreign markets, this has led to the current downturn in the oil market, and rapeseed purchase prices have therefore encountered a “ceiling”.
Mianfeng Oil Press in previous years undertook the state policy-based rapeseed purchase and rapeseed oil processing and storage tasks. “As of now, our company still has some policy-based rapeseed oil not yet released from storage.” Wang Yukui frankly told reporters that the government-designated 2.3 yuan/jin is already close to the current rapeseed price “ceiling”. Once this round of policy-based purchasing ends, rapeseed prices may fall.
“In order to protect farmers' income, in recent years the state has set purchase and storage prices far higher than the international market in its purchase and storage actions, accumulating a large amount of inventory. At the same time, foreign rapeseed oil prices have become cheaper and cheaper, flowing into China in large quantities. At present, the state's regulation of the domestic rapeseed market is in a dilemma: if it relies solely on temporary storage measures for domestic rapeseed to protect farmers' planting enthusiasm, then its price will be substantially higher than imported rapeseed, leaving it with no advantage at all in market competition.” Li Guoxiang, a researcher in the Macroeconomic Office of the Chinese Academy of Social Sciences, also said in a media interview that China's rapeseed market is currently encountering a downward crisis.
How to plant next year? Follow market rules and take the path of scaling up
“The purchase price is not high, and the market is not good either. Apart from for our own consumption, the remaining rapeseed cannot fetch a good price. So next year, should we plant or not?” On August 24, Zhuang Wanxun, a farmer in Pingwu Town, Jianyang City, expressed his confusion to reporters. His family has 3 mu of land, all used for planting rapeseed in previous years. He believes that if the market remains sluggish, it would be better not to plant.
“Agriculture only makes money with scale. Smallholder operations are low in efficiency and high in cost, and simply cannot make money.” Ye Zhixiang, a large grain grower in Ganquan Village, Baitou Town, Chongzhou City, told reporters that whether planting rapeseed or other cash crops, one should take the path of scaling up and industrialisation, so as to effectively withstand market risks. Last year Ye Zhixiang planted 900 mu of rapeseed, and at the end of May this year it reached harvest. At that time the oil press's purchase price was 2.7 yuan/jin. Even so, he only just broke even. Entering June, the local rapeseed purchase price began to decline, falling to as low as 2.1 yuan/jin. “Even with scaled-up operations I barely broke even, let alone those smallholders, who must have lost heavily.” Ye Zhixiang told reporters that next year he will learn from the lesson, adopt improved varieties and fertilisers, strive to increase rapeseed yield, reduce planting costs, and recover this year's defeat.
“Sichuan is a major rapeseed-producing province in the country, with an area accounting for about 14% of the national total, ranking third in the country, and total output accounting for about 16% of the domestic total, ranking second in the country. However, most of our province's rapeseed is cultivated in small and scattered plots and urgently needs transformation and upgrading.” An expert from the Oil and Grain Crop Division of the Provincial Department of Agriculture told reporters that on August 19, the General Office of the State Council issued the “Opinions on Accelerating the Transformation of Agricultural Development Methods”, which proposed developing various forms of scale operations, promoting the transformation and upgrading of traditional agriculture, and withstanding market risks. For Sichuan Province's grain and oil crops, including rapeseed, only by taking the path of scaling up can they have greater market competitiveness.
“On July 10 this year, the Ministry of Agriculture published the ‘Summary of Replies to Recommendation No. 1480 of the Third Session of the Twelfth National People's Congress’, proposing that China will liberalise the prices of major agricultural products. For the two staple grain varieties, rice and wheat, the minimum purchase price will continue to be maintained. For varieties such as rapeseed, attention should be paid to giving play to the decisive role of the market in price formation, guiding production through market price signals, regulating supply and demand, and promoting the sustained and healthy development of the industry.” An industry insider in the oil sector analysed that current oil policies and the market are changing, and farmers should act in accordance with market rules. In view of the current market situation, farmers have no more than two choices to protect their income and break even: first, upgrade traditional planting methods and take the path of scaled planting; second, according to their own circumstances, optimise crop varieties and maximise agricultural benefits.