Rapeseed prices plunge sharply, farmers look to policy to save the market
Anhui rapeseed procurement market quiet
Policy unclear, farmers and enterprises still waiting to see
The annual rapeseed procurement has already begun. However, the rapeseed procurement market in Anhui is full of uncertainties, and many production and business entities are currently taking a wait-and-see attitude.
Marketisation “abrupt”, farmers and oil enterprises feel great pressure
“This year's market situation is unfavourable to rapeseed growers, and the traditional procurement entities have basically not started purchasing.” Tian Li, a large grain grower in Wangjiang County, analysed that the reasons come from many aspects: first, the state may stop purchasing and storing, relying only on market regulation, which is high-risk, and enterprises dare not buy; second, sales prices have fallen, with rapeseed oil prices dropping from 6-7 yuan/jin last year to below 5 yuan/jin, and the meal cake after extraction dropping from 1.3 yuan/jin last year to 7 mao; third, the meal cake mainly used as fish feed is gradually being replaced by bran meal and wheat feed because it easily pollutes water bodies; fourth, with reports of genetically modified rapeseed entering the market, consumers are gradually shifting to other oil varieties; fifth, a large amount of state reserve oil has failed to sell at auction and cannot be circulated out, with some reserve oil failing to sell at auction for 3 years and only usable as industrial oil.
“This round of change should be a price regression. The procurement entities used to walk on two legs - state reserves plus oil enterprises - but now only one leg remains.” Zhang Hao, an enterprise owner in Wangjiang County engaged in oil processing, said that in recent years oil enterprises have had poor returns and lack the ability to resist risk, and the sudden market regression has put enormous pressure on farmers and enterprises. At present, the market rapeseed price has dropped from 2.5 yuan/jin last year to 1.62-1.9 yuan/jin.
“We have also noticed that the rapeseed market has been quiet this year.” Li Donghong, director of the Shitai County Agricultural Technology Extension Centre, said that all 30,000 mu of rapeseed in the county has now been harvested, but many growers report that it is “hard to sell”. The enthusiasm of oil dealers going door to door to buy, as in previous years, is gone, and many growers have still not sold their rapeseed this year.
“I planted 200 mu of rapeseed this year, and each mu can produce 300 jin of rapeseed. The purchase price is now below 2.5 yuan per jin, the market is not ideal, and I have not sold yet.” Liu Man, owner of Meiman Family Farm in Shitai County, said that this year's market purchase price is lower than last year's purchase-and-storage price, and combined with rising labour costs, the profit from rapeseed cultivation is getting lower and lower. If temporary purchase and storage can be launched, the later purchase price may rise.
“Growing rapeseed is not very profitable now. We used to plant more than ten mu in contiguous fields, but now we plant only as much as we eat at home, and most rapeseed growers are large grain growers. But this year's market is not very good, which may affect the enthusiasm for planting next year.” Zhang Siqing, an enterprise owner in Shitai County engaged in rapeseed oil processing, said that there is almost no profit in the processing stage, and less production means less loss, so they would rather not start work.
“Our factory has not yet started procurement, let's wait and see.” Wei Limin, owner of the Dawei rapeseed processing factory in Baohe District, Hefei, said that in recent years rapeseed processing enterprises have closed one after another, and their factory is still barely surviving. However, because the local rapeseed planting area is getting smaller and smaller, they all buy rapeseed from other places. Although the volume of rapeseed coming to market has been decreasing year by year in recent years, citizens have a wide choice of cooking oil, and the rapeseed market has always been lukewarm, making it difficult to raise the purchase price of new rapeseed.
Lack of clear market expectations, future prices not favoured
“We specifically conducted research, and as long as the purchase price of rapeseed exceeds 1.8 yuan/jin, processing enterprises will lose money.” Shi Shaoning, a division chief at the Agricultural Development Bank of Anhui Province, introduced that this year, because the temporary storage policy has not been launched for a long time, the current market listed price of processing enterprises is 1.5-1.6 yuan/jin, and farmers are unwilling to sell at prices below 1.6 yuan/jin. Whether the relevant departments will launch the temporary rapeseed storage policy is currently unclear, but the Agricultural Development Bank's credit work for market-based purchasing enterprises is proceeding as usual, and loans for 5 enterprises have been put in place.
Information from the 2015 National Summer Grain and Oil Procurement Work Conference shows that this season's rapeseed procurement policy has been preliminarily clarified, with the central government providing subsidies for rapeseed procurement to 5 provinces - Anhui, Jiangsu, Henan, Hubei and Hunan - and the specific purchase price and whether to purchase and store rapeseed oil to be determined by provincial governments. At present, the main focus is still on soliciting opinions, requiring the above 5 provinces to use provincial fiscal risk funds to subsidise the shortfall in procurement funds. Relevant personnel analysed that the rapeseed purchase price will be determined by each province itself, no longer uniformly priced by Sinograin, and the final purchase price is expected to drop significantly from 2.55 yuan/jin in the previous two years. Even with government subsidies, the purchase price is very likely to be below 2.1 yuan/jin.
“In recent years, the state has continuously implemented temporary rapeseed purchase and storage, and the rapeseed oil produced since 2010 has basically all been converted into inventory, with almost nothing released from storage, and domestic tank capacity is severely insufficient; the price inversion between domestic rapeseed and imported rapeseed is becoming more and more intense, and the market price mechanism has been distorted. At the beginning of this year, we were also convened by relevant state parties to attend a symposium, and relevant experts predicted that the state might cancel the temporary rapeseed (oil) purchase and storage policy this year.” Han Yi, deputy governor of the Agricultural Development Bank of Anhui, said that whether the temporary rapeseed storage policy implemented for many consecutive years will be cancelled this year is still a question mark, and he hopes relevant departments will clarify the policy as soon as possible so that financial departments, agricultural production entities, processing enterprises and other parties can prepare their responses.
Hubei rapeseed prices “plunge”
Market calls for a policy adjustment “soft landing”
In early June, the rapeseed harvest in Hubei basically ended, which is precisely the season when oil processing enterprises purchased in large quantities in previous years. However, a reporter's survey in some main rapeseed-producing areas of Hubei found that the opening price had “plunged”, with the listed rapeseed price at around 1.6 yuan/jin, nearly 1 yuan lower than last year's state temporary storage price of 2.55 yuan/jin. Farmers are unwilling to sell, enterprises dare not buy, planting returns have been seriously affected, and there is an urgent hope that the government will introduce policies to save the market.
Holding back from selling and waiting to see becomes the market mainstream
It is understood that in 2015, Hubei's summer-harvest rapeseed production continued its good momentum of increasing output, with a total area of 18.77 million mu, and the province's total rapeseed output is expected to remain first in the country for 20 consecutive years.
“The phone has been ringing constantly recently, with farmers from all over reporting rapeseed sales problems, putting grassroots agricultural departments in the most awkward position - if it is planted but nobody wants it, how can farmers be called on to plant it in the future.” In recent days, Duan Zhihong, deputy director of the Rapeseed Office of the Hubei Provincial Department of Agriculture and an extension researcher, has felt as anxious as the farmers growing rapeseed: “In non-main-producing areas, self-use oil consumption is relatively large and prices are still fairly firm. In areas with a higher rapeseed commercialisation rate, farmers use less oil themselves and have to sell, so the procurement pressure is greater, and farmers are more sensitive to price changes.”
“Not counting one's own labour, only when output reaches 300 jin/mu and the price is above 2.4 yuan/jin do farmers' returns break even with their input.” Duan Zhihong told the reporter that a large grain grower in Huanggang calculated a cost account, including land transfer, mechanical ploughing, agricultural input costs, etc., with total costs of 700 yuan/mu, “even without transferring land, using less farm machinery, and not hiring labour, the input per mu is still around 400-500 yuan. If there is a loss, the phenomenon of farmers abandoning planting or switching crops will gradually become prominent.”
Zhu Ancheng, a farmer in Group 15 of Liuji Village, Wuli Town, Shayang County, planted 8 mu of rapeseed. Last year the rapeseed sold for 2.35 yuan/jin. He said: “This year I hope the price will be at least above 2 yuan/jin, and I won't sell below that price.”
“At this time last year, the factory had already bought several hundred tonnes of rapeseed, but now it has only bought about 10 tonnes, mainly from regular customers exchanging for self-use oil.” On 2 June, Chen Degang, deputy general manager of Songzi Hengsheng Oil Company, said: “An enterprise opens its doors because it wants to do business, but now the situation is unclear, and several large oil factories in surrounding counties and cities are all waiting for state policy and dare not make much movement.”
Based on a 36% oil yield, a 60% meal yield, a processing cost of 200 yuan/tonne and the current market price of rapeseed oil at 6,300 yuan/tonne, the break-even rapeseed purchase price that oil processing enterprises can generally bear this year is 1.65 yuan/jin. According to a survey by the Hubei Provincial Rapeseed Office of leading rapeseed processing enterprises, at present the operating rate of pressing enterprises is less than 30%.