Grain output may slump due to difficulties in selling grain and losses in growing it
From the start of the summer grain purchase season to the concentrated marketing of autumn grain, reporters conducting sustained follow-up interviews along several major producing provinces including Henan and Hubei found that, because of consecutive years of bumper grain harvests and the continuous one-way rise in the floor purchase price, the current grain circulation and procurement-storage links show many new trends: inventories are high in some areas, and policy-based purchasing faces greater pressure; market buying and selling is weak, and the traditional peak season has reversed into an off season; the trend of weakening prices is spreading from a single variety to multiple varieties. In some places, after queuing to sell grain became “normalized,” some purchasing points even saw people “pulling strings” in order to sell grain.
Industry insiders and experts call for the following: as policy-based grain procurement and storage enters a window period of adjustment, all localities should pay close attention to the chain reactions triggered by price cuts and guard against difficulties in selling grain in some areas turning into large-scale, systemic difficulties in selling grain. It is necessary to protect farmers' enthusiasm for growing grain and prevent a decline in grain-growing returns from slowing the process of agricultural scale-up, or even triggering a slump in grain production.
Giving a 500 yuan kickback to sell grain once
⟦NL> In the courtyard of the Huangchuan Directly Subordinate Depot of Sinograin in Henan, all kinds of grain-selling vehicles lined up in a queue extending forward. Farmer Guo Ruimin from Sanpi Town, Huangchuan County, told reporters that after this year's mid- and late-season rice harvest, on his first trip to sell grain, “the whole family has 12 mu of land, with an average yield of nearly 1,000 jin per mu. The grain broker's purchase price is 1.18 yuan, and hauling it here can fetch more than 1.3 yuan.”
Zhang Ming, deputy director of the Huangchuan Directly Subordinate Depot, introduced that the Huangchuan Directly Subordinate Depot and entrusted depots in its jurisdiction store a total of 2.64 million tons of grain and oil. Although located in a rice area and not participating in the summer grain floor price purchase, after inventory checks only more than 400,000 tons of empty warehouse capacity remained. “Since the launch of the autumn grain floor price purchase on October 1, more than 100,000 tons of paddy rice have been purchased so far. Based on the floor price purchase volume in previous years, the warehouse capacity gap is expected to possibly reach 500,000 tons.”
Statistics show that this year Henan's summer grain achieved another bumper harvest, realizing thirteen consecutive increases, with total output crossing the 70 billion jin mark for the first time; on the autumn grain side, sample analysis by relevant departments of 81 surveyed households in 9 counties also showed that crops such as corn, soybeans, and middle-season indica rice across the province all saw obvious per-unit yield increases and some improvement in quality. With output increasing on one side and warehouse capacity tight on the other, under this double squeeze, queuing to sell grain thus became “normalized.”
In Hunan Province, one of the main rice-producing areas, as some depots filled up, some farmers had to travel long distances across regions to sell grain, and in some places there even appeared the phenomenon of giving the quality inspector a 500 yuan kickback each time to “pull strings” and cut in line to sell grain.
The largest drop in grain-growing returns exceeded 30 percent
In addition to the obvious local difficulties in selling grain caused by tight warehouse capacity, further investigation by reporters found that, under the strong dominance of the policy market, the current grain circulation and purchasing and selling links also show complex hidden characteristics of difficulty in selling. Three major trends deserve attention: the floor price purchase process is noticeably prolonged; market-oriented entities are weak in buying and selling, and the traditional peak season is not booming; and the trend of weakening prices is spreading from a single variety to multiple varieties.
Data from the Henan Provincial Grain Bureau show that as of September 30, the province's wheat floor price purchase had already concluded. The province purchased a cumulative total of 40.1 billion jin of wheat, of which 17.9 billion jin was purchased at the minimum purchase price and 22.2 billion jin at market price. If calculated based on total summer grain output of 70 billion jin, farmers still held as much as nearly 30 billion jin of wheat in their hands.
Li Ming, director of the Purchase and Sale Planning Division of Sinograin's Henan Branch, told reporters that, apart from the year-on-year decline in purchase volume, the obvious prolonging of the floor price purchase process was the biggest feature this year. “Based on past experience, the summer grain floor price purchase starts at the end of May, and after entering July the purchase volume generally drops noticeably, basically entering the final stage. But this year, through September, the average daily purchase volume still reached 20,000 tons, whereas in the same period last year there was basically no progress. The main reason is insufficient market buying and selling momentum, with most grain sources entering the floor price purchase scope.”
From the perspective of varieties, among the three major staple grains, the trend of weakening prices spreading from a single variety to other varieties is also becoming prominent.
Shen Hongyuan, an analyst at the Zhengzhou Grain Wholesale Market, believes that from the periodic surplus of corn in Northeast China in recent years to the current sluggish buying and selling of paddy rice and wheat, the spreading trend of market weakness among several major staple grain varieties deserves attention.
The sluggish market has already had a negative impact on grain-growing returns. A recent input-output survey on autumn grain by the Henan Provincial Price Cost Investigation and Supervision Bureau showed that although output increased somewhat, overall autumn grain planting returns generally showed a downward trend.
Corn fell from 1.12 yuan/jin in July and August 2015 to the current 0.71-0.81 yuan/jin, a maximum drop of 36.61%; soybeans also fell from 2.41 yuan/jin to the current 1.92 yuan/jin, an average drop of 20.33%; middle-season indica rice fell from last year's 1.35 yuan/jin to the current 1.18 yuan/jin, a drop of 12.59%. On the other hand, their production costs rose year on year by 3.31%, 2.75%, and 2.19%, respectively. Under the double squeeze of rising costs and falling prices, planting returns inevitably declined. Taking corn, which had the largest drop, as an example, the average cash return per mu in 2015 was 484.35 yuan, a decrease of 230.09 yuan from 714.44 yuan the previous year, a drop of more than 30 percent.