Price standoff emerges in summer grain purchasing; farmers hold back sales as grain prices rise
As the wheat harvest gradually draws to a close, summer grain purchasing is slowly heating up, and a standoff among farmers, grain traders and processing enterprises is quietly unfolding.
A reporter recently learned from Qihe, a major grain-producing county in Shandong, that although the current wheat purchase price is level with the same period last year, some local wheat fields were slightly affected by disease and saw reduced yields, and in recent years wheat prices have tended to rise gradually after coming to market, so farmers are holding back their grain from sale quite noticeably.
“Compared with last year, purchasing is a bit harder.” On the 12th, Mi Fengqun, general manager of Jinan Huajie Flour Co., Ltd., said that the company's current purchase price is 1.17 yuan/jin, while farmers expect the price to rise above 1.20 yuan/jin, and some farmers even overestimate it at around 1.30 yuan/jin. Considering that the company has ample inventory and that grain purchased now must sit for several months before it can be used for processing, the company has not raised its purchase price either. “Everyone is waiting to see.”
At the same time, several local industry insiders said during interviews that this year's summer grain purchasing has not yet fully begun, large quantities of grain have still not come to market, and it is very hard to predict prices later on. “If the minimum purchase price policy is not activated, then a rise to 1.24 yuan is about it, but if it is activated, the price could rise even higher.” A person in charge of a processing enterprise said of this that under the influence of various factors, neither farmers nor enterprises are currently willing to put in all their effort, and this grain purchasing standoff will continue for some time.
Holding back sales emerges
On the 12th, under a deep blue sky, one harvester after another looked exceptionally busy in the golden wheat fields. Driving along the Yellow River Avenue in Qihe County, one could see farmers drying freshly harvested wheat from time to time, and the golden color all along the way also made this major grain-producing county adjacent to the Yellow River a veritable golden city.
“The harvest this year is generally not bad, but there was a bit more rain in the previous months, and some wheat got powdery mildew, so each mu yielded more than 100 jin less than last year.” Zhang Zhenguo, a villager from Zhu'a Town, said, pointing to a patch of wheat fields by the roadside. Having just finished lunch, he and several companions continued their harvesting work under the scorching sun. Because his family had contracted more than 20 mu of land all at once, his labor intensity was much greater than in previous years. “It will take another week or so before I can rest.”
Just as villagers were busy with the summer harvest, some grain purchasers had already started their work. “The purchase price is 1.13 yuan per jin, the same as last year.” Li Haifeng said to the reporter while shoveling wheat into his small truck. Because wheat harvest times vary from village to village in Qihe County and the summer harvest work in some villages is basically finished, he had already started work early. “I buy from individuals and then resell it to large purchasing points or grain-using enterprises. Generally I can make a margin of four or five fen per jin. We just earn a bit of hard labor money.”
However, Li Haifeng admitted to the reporter that compared with last year, wheat is not easy to buy this year. “Before, if I was diligent, I could haul two or three truckloads a day.” Li Haifeng said, pointing to his truck. By then it was already 3 p.m., but there was only a shallow layer in his truck. “This is today's second load. I probably won't be able to fill it up.”
Flour production enterprises felt the same as purchasers. Since wheat is their important production raw material, the annual grain purchasing season is also the busiest time for enterprises, but when the reporter visited several enterprises on the afternoon of the 12th, very few grain transport trucks were coming and going. Mi Fengqun told the reporter that on the one hand, unsatisfactory harvests for some farmers strengthened their idea of keeping grain for their own use; on the other hand, in the past two years wheat prices have risen to a certain extent after the summer harvest, and some farmers and intermediaries intend to wait for a better price.
“I want to sell part and keep part.” Zhang Zhenguo told the reporter that because fertilizer and labor costs have kept rising, the cost of growing grain has risen year after year. Against this background, farmers all want to sell the grain in their hands for a good price. It is understood that the current local wheat yield per mu in Qihe can reach more than 1,100 jin, and even some affected by disease can remain at a thousand jin. Zhang Zhenguo's summer grain harvest from more than 20 mu adds up to more than 20,000 jin, and a difference of one mao is 2,000 yuan. “By autumn it may rise to 1.3 yuan. We'll see then.”
Whether minimum purchase price purchasing is activated becomes the key to the market
It is worth noting that as the sentiment of holding back sales spreads, some enterprises have already seen tight supply and have even chosen to raise purchase prices. “Some enterprises have offered 1.2 yuan per jin.” Li Haifeng said that this price is even higher than the opening price of the state grain depot.
Nie Mengpo, office director of the Shandong Qihe State Grain Reserve Depot, said that the grain depot has not yet officially started purchasing work, but the opening price has been set at 1.19 yuan/jin, level with last year. “This price is higher than the purchase price of most enterprises.” Nie Mengpo said. However, because Qihe's grain quality is relatively good, in recent years enterprises from other places have also come to buy grain locally through various channels, increasing the purchasing pressure on the grain depot itself, and it is still hard to say how the market will develop later.
A grain intermediary interviewed told the reporter that according to the usual pattern of wheat purchasing, farmers sell right after the new wheat harvest, and purchases from June to July account for about 80 percent, so the early period after new wheat comes to market is the peak purchasing period. But this year, unless inventory is especially tight, enterprises will not undertake large-scale purchasing.
“Even if new grain is bought, it must sit for four or five months before use, so most enterprises are not in a hurry.” Mi Fengqun told the reporter that his company currently has ample inventory, and even if daily purchases have declined somewhat from earlier, it is fully enough for its own use. “A unit price rise to 1.2 yuan is still acceptable. If it continues to rise, the cost pressure on enterprises will be great.” A person in charge of a flour processing enterprise in Jinan told the reporter that if wheat purchase prices rise rapidly later, enterprises will either raise product prices or cut production in response.
Several industry insiders interviewed said that the higher purchase price for new grain is due to farmers' reluctance to sell, but with the large quantities of new grain coming to market later, the market will not rise as farmers hope. “Unless the local grain depot activates minimum purchase price purchasing.” Mi Fengqun said that after the minimum purchase price policy is activated, wheat prices will have support, and later may reach the high level of 1.3 yuan/jin as farmers expect; otherwise, at most they will rise to around 1.23 yuan/jin.
However, a grain intermediary told the reporter that because of broad sales channels and a large customer base, demand for Qihe wheat is relatively strong, and the possibility of activating minimum purchase price purchasing is low. Last year, the area under the county's administration did not activate minimum purchase price purchasing.
At the same time, a person from a flour processing enterprise said that even if minimum purchase price purchasing is activated, according to cases in other counties and cities, prices will mostly stabilize and will be hard to push higher. It is understood that at a summer grain purchasing work meeting held in Qingdao recently, local media said that the city is relatively likely to activate minimum purchase price purchasing. It is expected that in the early period after purchasing begins, various purchasing and sales enterprises, especially reserve enterprises, will be relatively active in entering the market in a concentrated way to grasp grain sources, and purchase prices will remain stable or rise slightly; as reserve wheat stockpiling is completed, affected by insufficient warehouse capacity of state-owned enterprises and sluggish market prices, wheat purchase prices may fall back somewhat, making it hard to see the highs of previous years.