Medium and late indica rice prices remain low, rice purchasing and sales brisk during the Double Festival

Entering mid-September, the new-season medium and late indica rice in the main rice-producing areas of southern China has begun to be harvested and is gradually coming onto the market in bulk. It is understood that during the growth period of the medium and late indica rice this year (2015), weather conditions were suitable and rainfall was abundant, and the overall quality of the new rice is trending positive. At present (mid-September), the purchase of medium and late indica rice is proceeding slowly, with purchasing entities mainly consisting of grain processing enterprises and grain brokers. Grain processing enterprises are purchasing mainly to process new rice and rush fresh supplies to the market, while grain brokers are seeking to secure a certain amount of low-priced grain sources and wait for a better price.

As the Mid-Autumn Festival and National Day "Double Festival" approaches, rice market purchasing and sales are tending to become more brisk, and processing enterprises have begun purchasing the new-season medium and late rice one after another. However, due to thin processing profits and the impact of low-priced imported rice, processing enterprises remain relatively cautious in purchasing new rice, causing medium and late indica rice prices to make a low-key debut. According to monitoring, the current purchase price of 2015-produced medium and late indica rice by enterprises in the Wuwei area of Anhui is 130-135 yuan per 100 jin, with moisture and impurity standards required to meet national standards, fluctuating up or down by no more than 0.5 percentage points; the purchase price of medium and late indica rice (third grade) in the Chuzhou area is 135 yuan per 100 jin; the purchase price of third-grade medium and late indica rice in the Hefei area is 131-132 yuan per 100 jin. Due to differences in purchasing entities, the purchase price gap for new-season high-quality medium indica rice is about 5-8 yuan per 100 jin.

At present, the new-season medium and late indica rice is about to come onto the market in large quantities, and the policy-market characteristics of the rice market are gradually becoming apparent, with the transaction prices of policy-based rice auctions becoming the market's weather vane. Statistical data show that from February 12 to September 1, 2015, the state held a total of 28 policy-based rice auctions, with an average volume offered of 1.3184 million tons, an average transaction volume of 41,900 tons, and an average transaction rate of 2.92%, among which on June 30 the actual transaction volume of medium and late indica rice was 170,500 tons, with a transaction rate of 12.58%, setting the highest value of the year. Since June 16, when 2014-produced medium and late indica rice was put onto the market, the rice quality was superior to old rice, its uses were more extensive, and it filled the shortage of new rice on the market, briefly becoming an object that enterprises competed to bid for. Since the market release of medium and late indica rice under the minimum purchase price policy, the transaction rate of 2014-produced medium and late indica rice has been far higher than that of 2013-produced medium and late indica rice auctioned during the same period. As 2014-produced medium and late indica rice continued to be released, enterprise purchasing pace gradually slowed, prompting a significant decline in auction transaction rates in recent months (through September).

According to monitoring, after medium and late indica rice created the second-highest point of the year in January, boosted by factors such as the 2014 minimum purchase price policy, the "No. 1 Document," and the peak stock-up season for the Spring Festival, prices began to decline gradually in February due to the subsequent Spring Festival holiday and the end of the minimum purchase price policy, with low operating rates and sluggish purchasing and sales. During March-June, on the one hand, the sharp reduction in imported rice at the beginning of the year eased the impact of low-priced imported rice on the domestic market; on the other hand, because the minimum purchase price policy had purchased a large amount of 2014-produced rice, the amount of rice circulating on the market decreased, and in particular the tightening supply of high-quality rice pushed up rice prices. In addition, stock-up for the Dragon Boat Festival also stimulated rice consumption to a certain extent, causing medium and late indica rice prices to reach their highest value of the first half of the year in June. Based on past experience, June-August is the period of shortage between old and new crops for medium and late indica rice, and rice prices tend to form a bottoming-out rebound during this stage. However, looking at this year's trend, domestic medium and late indica rice prices showed a continuous downward trend during June-August. The reasons are: first, large quantities of old rice were put onto the market, intensifying the oversupply situation and depressing rice prices; second, during the off-season for consumption, terminal demand remained persistently sluggish, with no favorable factors in the market; third, large inflows of imported rice, with an obvious price advantage, made rice blending widespread, leaving processing enterprises with thin profits and continuously declining operating rates.

Although policy-based rice auctions are currently suspended, the continuous auctions in the earlier period and the low transaction rates showed an imbalance between market supply and demand. With the large-scale market release of new-season medium indica rice, pressure on rice supply is expected to continue increasing later. On the demand side, although there is favorable stimulation from the "Double Festival," under the overall background of oversupply, it is expected that after late indica rice comes onto the market in large quantities, medium and late indica rice market prices will maintain a steady-to-weak trend. On the purchasing side, insufficient warehouse capacity will limit the ability of grain depots to purchase grain, causing farmers to sell their harvested grain at prices set by grain brokers in line with the market, and the minimum purchase price policy set by the state will be difficult to implement and honor for some farmers.