When will the rice market emerge from its "cold winter"?

According to China Grain Network, after entering June, temperatures have been rising continuously, and domestic rice sales have slowed down noticeably. What follows is a decline in daily processing volume at factories and an increasing number of facilities shutting down for maintenance. Moreover, most factories say that rice processing profits have long since hit bottom or are in a loss-making state, so how long will this phenomenon last, and what are the main reasons for it?

To protect farmers' enthusiasm for growing grain and promote the development of grain production, the state has implemented a minimum purchase price policy in major rice-producing areas since 2004. Over the 10 years of implementation, China's minimum purchase prices for rice have been raised year after year, with early indica rice cumulatively raised by 0.65 yuan/jin, mid-to-late indica rice cumulatively raised by 0.66 yuan/jin, and japonica rice by 0.80 yuan/jin. Although the raising of the minimum purchase price for rice has guaranteed the interests of farming households, for rice deep-processing enterprises, the continuous rise in rice prices has led to constantly increasing costs for purchasing, storage and processing, while the profit margin for processing has been continuously squeezed, and the phenomenon of an obvious inversion between the actual prices of raw grain and rice has formed.

It is understood that after entering June of this year, the operating rate of domestic rice processing enterprises was less than 20%, and the daily processing volume of some enterprises with an annual processing capacity of more than 100,000 tons was only 1/10 of their daily production capacity.

According to data from the General Administration of Customs, in April 2015 China imported 330,236 tons of rice through official channels, an increase of 2.64% compared with the same period of the previous year, with the monthly import volume reaching its highest level since 2013. The above data are all formal import volumes and do not include smuggled rice.

Since imported rice entered the market, the operating conditions of China's rice processing industry have been deteriorating, especially as the scope of imported rice's impact has continuously spread from sales areas to production areas. Most rice mills say that business is getting harder and harder! One main reason for this phenomenon is that imported rice takes a share of the market with domestic rice at low market prices. As of June, the wholesale price of imported Vietnamese 504 rice in Foshan, Guangdong was 3,500 yuan/ton, with a price gap of 960 yuan/ton compared with ordinary 2014-produced Northeast round-grain rice, showing an obvious price advantage. The relatively large price gap tempts domestic rice to be blended with imported rice to reduce costs and stimulate shipment volume. This phenomenon is relatively common in major rice-producing areas, and blended rice has become mainstream in sales markets.

If the rice price remains unable to come down and the rice price lacks momentum to rise, competition between domestic rice and imported rice will become increasingly fierce in the later period, and it will be difficult for the rice market to emerge from the "cold winter," with the time to welcome spring becoming even longer. The author believes that what the rice industry should do at present is ensure rice quality and strive to make it refined and meticulous. Only by rejecting immediate interests and enhancing brand effect can advantages be preserved in the future reshuffling process of the rice industry, and thus avoid being eliminated.