Limited boost from favorable factors for japonica rice, little room for price movement up or down

In 2014, China's japonica rice output hit a new record high, estimated at more than 70 million tons, further increasing supply pressure, especially in major producing areas such as Heilongjiang, where the pressure was even greater, and market prices once weakened continuously. As various regions successively launched their japonica rice market-support purchase plans, the volume of temporary state reserve purchases increased rapidly, farmers' stored grain continued to decline, and market confidence was gradually boosted. Japonica rice prices began to stabilize and rebound, continued to rise slightly after the Spring Festival, and even hit record highs in some areas. After that, japonica rice markets in various regions entered a phase of high-level fluctuation.

At the end of May, the factory-gate price of round-grain paddy rice in Jiansanjiang, Heilongjiang, was 1.52-1.60 yuan/jin, and the factory-gate price of rice was 2.16-2.22 yuan/jin; in the Jiamusi area, the factory-gate price of round-grain paddy rice was around 1.62 yuan/jin, and the factory-gate price of rice was 2.20 yuan/jin. Japonica rice purchase prices in Anhui were mostly concentrated at around 1.55 yuan/jin, while those in Jiangsu were mostly 1.53-1.58 yuan/jin, both unchanged from earlier levels. In the Shanghai market, high-quality Jiangsu japonica rice was 2.25-2.26 yuan/jin, and Northeast rice was 2.42-2.5 yuan/jin; in the Hangzhou area, round-grain rice produced in Heilongjiang was around 2.5 yuan/jin; in the Guangzhou market, Northeast rice was around 4640 yuan/ton, with prices basically remaining stable.

Although japonica rice prices were at a high level, warm policy signals kept coming, providing strong support for the japonica rice market.

Minimum purchase price implementation plan for paddy rice released ahead of schedule

⟦NL> In order to do a good job in 2015 paddy rice purchasing, stabilize market prices, and effectively protect the interests of grain-growing farmers, on May 18, the National Development and Reform Commission, together with the National Grain Administration, the Ministry of Finance, the Ministry of Agriculture, the Agricultural Development Bank of China, and Sinograin, jointly released the 2015 minimum purchase price implementation plan for paddy rice. This was the first time the plan notice appeared in a “three-in-one” format, and it was released together with the wheat plan notice. The most noteworthy point was that the purchase implementation period for mid-to-late rice in the three provinces of Liaoning, Jilin, and Heilongjiang was adjusted to October 10, 2015 to February 29, 2016, while last year's implementation period was November 1, 2014 to March 31, 2015. The start time was 20 days earlier than the previous year, and the end time was 1 month earlier than the previous year. The overall purchase period was 8 days shorter than the previous year. The earlier start date for minimum purchase price purchases of Northeast japonica rice in 2015 would make japonica rice harvesting and purchasing more synchronized, bring the grain-selling prices in farmers' villages and settlements closer to the minimum purchase price, and effectively avoid the phenomenon of purchase prices opening low and moving lower because of a bumper japonica rice harvest. This would not only help increase farmers' income from selling grain, reduce grain loss and mildew, and improve the quality of grain entering warehouses. Moreover, the early stabilization of the new rice market would also help stabilize the overall japonica rice market. At the same time, this year's paddy rice minimum purchase price implementation enterprises added enterprises affiliated with the Chinatex Corporation entrusted by Sinograin. The expansion of purchasing entities was also good news for the japonica rice purchasing market.

Subsidy policy introduced again

One month before the release of the 2015 minimum purchase price implementation plan for paddy rice, in order to accelerate the digestion of local stored paddy rice and stimulate enterprises' enthusiasm for purchasing grain, the Heilongjiang Provincial Grain Administration announced that from April 15 to October 30, 2015, for enterprises included in the subsidy scope that participated in policy-oriented rice auction sales activities organized by relevant national and Heilongjiang provincial departments, competitively purchased in Heilongjiang, and completed transport back to the enterprise for self-use processing and sales before the end of December 2015, the provincial finance department would provide a subsidy at the standard of 100 yuan/ton of paddy rice. Subsidizing Northeast temporary-stored japonica rice was by no means a new thing. As early as 2009, the state had a precedent of subsidizing the outbound transport of Northeast japonica rice, and it had a positive effect on paddy rice market trends. Because after the subsidy was implemented, the actual cost of japonica rice purchased by enterprises would decline to a certain extent. Therefore, the introduction of this policy would also have a certain boosting effect on the trend of the Heilongjiang japonica rice market.

Farmers' stored japonica rice nearing depletion

Because farmers sold grain relatively quickly after the launch of market-support purchases, remaining grain also fell sharply compared with the same period of the previous year. According to statistics from the National Grain Administration, as of April 30, various grain enterprises in 7 major japonica rice producing areas including Heilongjiang and Jiangsu had cumulatively purchased 39.84 million tons of newly produced japonica rice, an increase of 6.82 million tons compared with the same period of the previous year. According to relevant analysis data, it was estimated that 2014 japonica rice output would increase by less than 2 million tons compared with the previous year. Based on this, it was calculated that the amount of japonica rice retained in farmers' homes was about more than 4.8 million tons less than the same period of the previous year. Obviously, purchasing 2014-produced japonica rice later would be more difficult, and as time passed, farmers' stored japonica rice would continue to decline, which provided relatively strong support for new rice.

Although warm policy signals kept coming, because japonica rice output had been abundant for consecutive years, supply pressure was very great, and downward adjustment pressure was also considerable.