Early indica rice government-support purchases may decline this year
Due to consecutive bumper harvests, combined with the impact of imported rice, the domestic early indica rice market has been weak in recent years; and because the market itself has a relatively small capacity, trends are even weaker during the period in the first half of the year when reserve grain is rotated out in a concentrated manner.
This year's new early rice opening price was lower than the minimum purchase price. At the end of July, Anhui, Jiangxi, Hunan and Hubei provinces successively launched government-support purchases, about a week later than the previous year. This is also the third consecutive year that China has launched the minimum purchase price plan for early indica rice.
Domestic market trends are stable
⟦NL> With the launch of the minimum purchase price plan, the domestic early indica rice purchasing market has gradually warmed up and has now basically stabilized, with purchase prices fluctuating slightly around the minimum purchase price. In mid-August, the average purchase price of state-owned grain enterprises in Jiangxi Province was 135.1 yuan per 100 jin, basically flat with the previous week and slightly up from the same period last year; the average purchase price of individual grain traders was 128.8 yuan per 100 jin, up 0.7 yuan per 100 jin from the previous week and up 0.1 yuan per 100 jin year-on-year. The early indica rice purchase price in Changsha, Hunan Province, was 135 yuan per 100 jin, remaining stable. The minimum purchase price for early indica rice in Wuhu, Anhui Province, was 135 yuan per 100 jin, with a market purchase price of 131-132 yuan per 100 jin, a slight increase from earlier.
At present, China's economic trend is still at the bottom, commodity prices are sluggish, and the increase in prices is also relatively small. Coupled with the continued impact of imported rice, confidence in the early indica rice market is not yet solid. Apart from state-owned enterprises replenishing inventories and government-support purchases, processing enterprises and traders are currently not highly motivated to purchase, and many enterprises purchase early indica rice as commissioned purchases for state-owned enterprises to replenish inventories. Although the state is strongly supporting the market, in the short term there is insufficient upward momentum for early indica rice, and it is expected to remain mainly stable.
Overall purchase progress slightly slow
Due to weather conditions, this year's early indica rice harvest was somewhat delayed and came to market slightly later than the previous year. Combined with low enterprise purchasing enthusiasm, this led to a slightly slower purchase progress. According to statistics, as of August 10, various grain enterprises in 8 main producing areas including Jiangxi and Hunan had purchased 2.34 million tons of newly produced early indica rice, a decrease of 350,000 tons from the same period last year. Among this, the share of state-owned enterprises in total purchases was higher than the same period last year, showing that purchases by state-owned enterprises remained the mainstream.
Government-support purchases of early rice declined compared with the same period last year, and their share of total purchases was also lower than the same period last year. As of August 16, grain enterprises above designated size in Anqing, Anhui Province, had purchased a cumulative total of 2,915 tons of early indica rice produced in 2015, a decrease of 5,810 tons from the same period last year, down 67%. According to statistics from the Hunan Provincial Grain Bureau, as of August 14, the province had purchased a cumulative total of 690,000 tons of this year's early indica paddy, of which 505,000 tons were purchased at the minimum price.
Government-support purchase volume may be lower than the previous year
The government-support purchase volume of early indica rice in 2014 was 4.19 million tons, lower than 5.67 million tons in 2013. Although the launch time of government-support purchases for early indica rice this year was basically consistent with the previous year (slightly later in Hubei), affected by multiple factors, it is expected that the government-support purchase volume of early indica rice this year may still continue to decrease.
Early indica rice output in main producing areas has declined somewhat. Because the comparative benefit of planting early indica rice is relatively low, it is difficult to further raise farmers' production enthusiasm, and increasing planting area is quite difficult. Affected by continuous rainy weather in the later period, some main producing areas were hit relatively hard, and early indica rice yields per unit area were affected to a certain extent. The China National Grain and Oils Information Center estimates that in 2015 China's early indica rice sown area was 5.79 million hectares and output was 34.08 million tons, both basically flat with the previous year. Among the major producing areas, Jiangxi, because the main crop growth period encountered unfavorable weather, is expected to have early rice output of 7.91 million tons, a decrease of about 300,000 tons from last year.
The quality of early indica rice has declined somewhat. Early indica rice purchased and stored under government-support purchases is required to reach quality standards of Grade 3 or above under the national standard. That is, impurities within 1%, moisture within 13.5%, brown rice recovery rate 75%-77% (including 75%, excluding 77%), and head rice rate 44%-47% (including 44%, excluding 47%). However, in some main producing areas such as Jiangxi, there was more low-temperature rainy weather during the early rice growth period, resulting in more muddy grains, germinated grains and unfilled grains than in previous years. Therefore, some early indica rice will not be purchased because its quality does not meet the requirements for government-support purchases.
Local reserve demand has increased. This year is the first year that the state proposed the provincial governor responsibility system for food security. To implement this new grain work guideline, while doing a good job in grain production, provinces and municipalities have successively proposed plans to increase the scale of local reserves. Because of the good storage performance of early indica rice, it is still favored by purchasing and storage enterprises. It is expected that reserve volume will increase over the previous year's level, and therefore the amount rotated in this year will also increase. Because the overall scale of early indica rice is relatively small, an increase in the quantity of local reserve replenishment will inevitably lead to a reduction in government-support purchase volume.
The proportion of high-quality early indica rice has increased. The Chinese government has been vigorously promoting the production of high-quality rice. With the continuation of high-quality rice promotion work and advances in science and technology, plus the relatively better planting returns of high-quality rice itself, the output of high-quality rice has increased year by year.
A major factor in the high government-support purchase volume of early indica rice in 2013 was that farmers were bearish on the market and sold even high-quality early indica rice to the state at the government-support price. As market confidence recovered, the value of high-quality rice was once again recognized by the market, purchase prices were generally higher than ordinary rice, and the prices of many high-quality early indica rice varieties were also higher than the government-support price. Therefore, in 2014, high-quality early indica rice varieties were basically sold at market prices, causing the government-support purchase volume of early indica rice that year to be substantially less than in 2013. It is expected that this year farmers of high-quality early indica rice will still mainly sell on the market, and therefore this year's government-support purchase volume of early indica rice will also be difficult to increase.
There are fewer government-support purchase outlets for early indica rice than the previous year. This year's government-support purchases of early indica rice, like the earlier government-support purchases of wheat, implemented "one entity, four together." According to the principles of "conducive to protecting farmers' interests, conducive to safe grain storage, conducive to supervision, and conducive to sales," initially in the 4 provinces of Anhui, Jiangxi, Hunan and Hubei that launched government-support purchases of early indica rice, 1,011 entrusted purchase and storage sites for early indica rice government-support purchases were arranged, whereas in the same period last year there were 1,471. The relatively large decrease in entrusted purchase and storage sites compared with the same period last year will bring some inconvenience to farmers selling government-support grain and will also affect the purchase volume of government-support early indica rice to a certain extent.