Purchase prices for China's three major staple grains fall across the board, farmers' income could suffer losses in the hundreds of billions

A bumper grain harvest, a sharp drop in grain prices, and a plunge in farmers' income. Since the start of autumn this year, the value of corn and wheat in major grain-producing areas has fallen to varying degrees. The drop in corn prices is particularly pronounced, with farm-gate prices falling by an average of more than 20%, and the largest decline reaching 30% compared with last year, while wheat also went through a cliff-edge plunge before National Day. At present, rice purchase prices are generally stable, but some areas have also seen small declines compared with previous years.

A simultaneous decline across all three major staple grains is rarely seen in previous years. Low international grain prices and accumulated domestic inventories are both regarded as the main causes of this round of grain price declines.

Ma Wenfeng, an analyst at Agri-Ecol, said in an interview with a reporter from China Times that this year special attention must be paid to the impact of the sharp drop in grain prices on the income of hundreds of millions of farmers. A negative income growth in the hundreds of billions will affect the consumer market and is expected to affect GDP growth by 1%.

All three major staple grains decline across the board

After National Day, corn in various places was successively harvested and entered the purchasing stage, but farmers in many places found that this year's corn purchase price was 20%-30% lower than in previous years.

A reporter from China Times conducted a random sample survey of several major grain-producing areas. Among them, the price of wet corn harvested in the Changchun area of Jilin was 6 mao per jin, nearly 3 mao lower than in previous years; in Changgou Town, Jining, Shandong, last year the price of sun-dried corn (meeting purchase standards) was just over 1 yuan, while this year it was only 8 mao, a drop of more than 2 mao. A farmer in Handan, Hebei, told the reporter that the local corn purchase price had remained at around 8 mao, down more than 20% compared with previous years.

This year in the Beidahuang area, grain achieved a bumper harvest, but grain prices likewise dealt a heavy blow to farmers' enthusiasm. According to an official notice from Qitaihe City, most corn was sold directly after harvesting, with 30% moisture corn cobs purchased at 0.35 yuan/jin and corn kernels at 0.65 yuan/jin, 0.1 yuan/jin lower than the 0.75 yuan/jin in the same period of 2014, a decline of 13.3%.

Zhang Aiqin, a farmer from Sunji Village, Zhouzhai Town, Dangshan County, Anhui Province, told a reporter from China Times that the price of sun-dried corn in the same period last year was 1.07 yuan/jin, and this year it was 0.78 yuan/jin, and there were especially few buyers, mainly sold to dealers. “My family's 7 mu of land sold for 5,243 yuan last year. This year the corn was hit by insect pests, output fell and the price was lower. Total income this year was 3,588 yuan, 1,655 yuan less. I won't plant next year and will contract out all the land.”

Besides corn, wheat prices also fell sharply. During this year's National Day holiday, wheat prices experienced a cliff-edge decline rarely seen in many years. According to the China Grain Information Network, the purchase price of second-grade wheat by flour milling enterprises in most areas quickly fell from between 1.15-1.20 yuan/jin before the holiday to between 1.05-1.10 yuan/jin, a decline of about 0.1 yuan/jin. This left most people involved in the wheat trade at a loss, and the market fell into a severe state of panic.

Generally speaking, after the nationwide state reserve market-support purchase ends on September 30, wheat prices will undergo a wave of decline, so that flour milling enterprises have a process of taking over, but this year's decline in wheat prices is rarely seen in past years.

A person in the wheat industry said that this sharp decline was caused by Shandong. Local market-support purchases ended, but grain depots in various places still had large convoys of wheat unable to be stored this year, especially in the two cities of Liaocheng and Dezhou, where the wheat could only be sent to flour mills, and the flour mills could not absorb it and directly pushed prices down.

“After flour milling giants in Hebei and other places learned that wheat purchase prices in Liaocheng and Dezhou were falling rapidly, they all reacted quickly and began to lower wheat purchase prices. The prices of these flour enterprises are often the market's weather vane, and ultimately this transmitted to the whole country.” the person said.

Not only wheat and corn, but rice also did not fare well this year. Data from many places show that rice prices were stable with some declines. Yang Zhicai, a farmer in Dangtu County, Anhui, told the reporter that this year's rice price fell by about 1 mao compared with previous years, and the several hundred mu of land he planted brought in tens of thousands of yuan less. The reporter's sample survey of the Heilongjiang area found that rice prices are currently basically consistent with previous years.

Ma Wenfeng said that the largest price declines this year were in corn and wheat, among which corn is mainly used for feed, while rice bran used as feed is also affected, mainly transmitting to prices through the feed link, and inventory accumulation also has an impact. “But corn alone has a very large impact.”