Early indica rice prices trend low; farmers advised to postpone selling
According to analysis, China will continue to implement the protective price purchase policy for early indica paddy in 2015, with the protective price set at 1.35 yuan/jin. After early indica rice hits the market in large quantities at the end of July, as the state's protective purchase of early indica rice begins, prices will quickly move close to the protective price of 1.35 yuan/jin.
According to a report by China National Radio's "Sannong China," as the season approaches, the harvest of early indica rice in China's main southern production areas is about to begin. At the same time, auctions of rice reserves at all levels will also begin one after another, and reserved early indica rice will flow into the market through auctions.
According to reporters, in the current southern indica rice market, prices have shown a relatively sluggish trend, which has inevitably made many grain farmers somewhat worried. Will lower prices affect this year's new grain purchases? This year, the state will continue to implement the minimum protective price purchase policy for early indica rice. How should grain farmers use the policy to respond to the market?
In the early rice fields of Chenzhou City, Hunan Province, major grain grower Ma Guangwen is driving his own harvester to harvest rice. The process is already more than halfway complete. He told reporters that judging from the current situation, a bumper harvest of early indica rice can be expected, with yields reaching 383 kg per mu. But what puzzles old Ma is that since the beginning of this year, market demand for indica rice has remained weak. Indica rice with a storage period of less than 1 year and with a storage period of 1 year or more has fluctuated at 1.30 yuan and 1.18 yuan per jin respectively, far below the state minimum purchase price. This lukewarm trend has lasted for 5 months, with still no sign of recovery.
Ma Guangwen: The purchase price for paddy with 30% moisture is 9 mao per jin, which converts to a standard price of about 1.20 yuan per jin. The current market price is on the low side. Grain purchase was launched last year, but this year it is a bit later, and the launch price is also flat at this level. I estimate I can only earn 400-500 yuan per mu of this land.
The situation reported by old Ma is not an isolated case. In the four provinces of Hubei, Anhui, Jiangxi and Hunan in China, in the early rice markets that have already opened, the opening prices are all slightly lower than in previous years. Tang Qingxia of Jiangxi Rich Futures Brokerage Co., Ltd. analyzed the reasons.
Tang Qingxia: This level should be considered a low opening compared with previous years. The reason is that temperatures in the southern region are very low, with rainy weather, so the quality of the paddy is not very good and the moisture content is very high. When purchasers buy it, the moisture is too high, and they also have to process the paddy, so the risk is quite high. According to our understanding, this year's early rice area has been reduced. Taking Jiangxi as an example, the area of early indica rice in Jiangxi has decreased by more than 900,000 mu, roughly close to 5%.
Although there has been a certain degree of production reduction, Wang Shutong, a market analyst at Zhuochuang Information, analyzed that in 2013 and 2014, the state began large-scale protective purchases of early indica rice, middle and late indica rice, and japonica rice, causing state grain depots and local reserve depots to be full. As a result, at present, when early indica rice comes to market, the state grain depots are still very full, and supply exceeds demand.
Wang Shutong: At present, in southern regions such as Jiangxi, Hunan, Fujian and Zhejiang, the new-season early indica paddy has begun to be harvested one after another, but the new rice has generally not yet been traded on the market. We consider factors such as loose rice supply this year and lower quality of early rice due to earlier rainfall, and this year the opening price for ordinary early indica rice is around 1.18 yuan/jin.
What does 1.18 yuan per jin mean? It means it is 0.17 yuan lower than the minimum purchase price of 1.35 yuan per jin for early indica rice that China will continue to implement in 2015. For rice with profits measured in tiny margins, this is also no small difference. So, given the current market level, when farmers face the early indica rice already in their hands, should they sell or keep it? Tang Qingxia of Jiangxi Rich Futures Brokerage Co., Ltd. gave the answer.
Tang Qingxia: As for selling grain, the suggestion for farmers is, first, to do a good job themselves in purchasing and drying, because lowering the moisture content also reduces a certain amount of risk for purchasers. Second, as for the timing of selling, delay it as much as possible. If their own storage capacity and financial strength can be extended later, it is worth waiting a while. Because as purchasing progresses and weather conditions develop, if the weather continues at this level, it will affect not only early indica rice, but possibly also the yield of late indica rice. By that time, the market may react to prices.
In view of the current market trend of indica rice prices, grain farmers, seeing the low opening of new grain purchase prices, especially hope for the state's protective purchase. So when will rice prices move toward the protective price level? Wang Shutong, a market analyst at Zhuochuang Information, said.
Wang Shutong: At present, China will continue to implement the protective price purchase policy for early indica paddy in 2015, with the protective price at 1.35 yuan/jin. Moreover, early indica rice is mainly used as reserve grain and not as a grain source for rice mills to process rice. Therefore, it is expected that the main purchasers later will be the state and reserve grain depots in various places. It is expected that after early indica rice hits the market in large quantities at the end of July, as the state's protective purchase of early indica rice begins, prices will quickly move close to the protective price of 1.35 yuan/jin.
Early indica rice is the earliest rice crop to come to market each year, and its price is even more directly related to the income of most farmers in the south. Tang Qingxia analyzed that in terms of timing, farmers can set their target for after late July.
Tang Qingxia: The state may start purchasing at the purchase price beginning on July 16. Based on the level of previous years and what the Minister of Finance said this year about lowering costs, the specific purchase time may be in late July.