Sinograin accused of passing off old grain as new; local officials say they have no authority to inspect warehouses

“Recycling grain” keeps appearing, and the root cause points directly at Sinograin

As long as the supervision of reserve grain has not escaped the problem of Sinograin “acting as both player and referee,” incidents of “recycling grain” involving “passing off old grain as new” will not stop

“‘The problem of Sinograin acting as both player and referee remains unresolved.’” Recently, during a survey of the grain storage system in Northeast China, grassroots grain officials told a reporter from Outlook Weekly that incidents of “recycling grain” involving “passing off old grain as new” appear frequently in major grain-producing areas, showing that the current grain purchase and storage management mechanism is hard-pressed to effectively govern the punishment, accountability, supervision and inspection needed to address the “recycling grain” problem, and that loopholes in the grain management links centered on the Sinograin system are prominent.

⟦NL> After the series of Sinograin cases in Henan in 2013, the Sinograin system has once again seen “recycling grain” involving “passing off old grain as new” in China’s major grain-producing areas in the Northeast, seriously harming the dual interests of the state and farmers. Some local officials and experts believe that it is now advisable to introduce a reasonable competition mechanism, give local grain authorities more supervisory authority, make “mutual inspections” between local grain authorities and Sinograin, as well as central enterprises, routine, and gradually improve the reserve grain management system.

Frequent “recycling grain” aggravates three major predicaments

Recently, individual grain depots in Liaoning and Jilin provinces were exposed for passing off old grain as new during policy-related grain purchase, storage and sales out of storage, in order to fraudulently obtain price-difference subsidies. Temporary reserve grain meant to protect farmers’ interests and ensure national food security has unexpectedly become a means for some lawbreakers to extract benefits, and the matter caused an uproar in public opinion once it emerged.

In fact, problems in the grain storage link occur very frequently in major grain-producing areas. This kind of “recycling grain” is no longer anything new. As early as 2013, Henan province carried out a special preventive investigation into “recycling grain” and uncovered 2.8 billion jin of “recycling grain,” involving more than 700 million yuan in grain funds. In 2014, Heilongjiang alone verified and handled 249 grain-related cases in a special rectification campaign against “recycling grain” during the autumn grain purchase.

In interviews with a reporter from Outlook Weekly, regarding the harm of “recycling grain” involving “passing off old grain as new,” experts such as Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, believed:

First, it damages the reputation of Sinograin and state grain depots, disrupts the order of the grain purchase and sales market, and increases the difficulty for farmers to sell grain. Much of the temporary reserve grain in state reserve depots has to flow to the market through auctions, and if problems appear in some of that grain, grain-processing enterprises participating in auctions will have doubts: could there also be problems with what is not exposed? Therefore, they are unwilling to bid on domestic grain. “Many grain-processing enterprises are unwilling to auction temporary reserve grain, and one reason is that the quality of some temporary reserve grain does not meet standards,” Li Guoxiang said.

When reporters from this magazine interviewed some grain-processing enterprises in major grain-producing areas such as Heilongjiang, they had also heard complaints that “the quality of some temporary reserve grain put up for auction is ordinary.” “At a time when domestic grain inventories are high and international grain prices are generally lower than domestic grain prices, ‘recycling grain’ directly affects the digestion of state-owned grain inventories and aggravates the shortage of warehouse capacity in state grain depots,” Li Guoxiang said. Difficulties in digesting inventories will also indirectly affect the purchase of new grain.

Second, it increases the fiscal burden. Li Guoxiang said that if the reputation of state grain depots is damaged and grain cannot be smoothly shipped out of storage, new grain will not be able to be taken in because of tight warehouse capacity, so warehouse capacity will have to be expanded, increasing government investment. In recent years, the grain market has frequently seen tight warehouse capacity and difficulties in purchase and storage, which even drew great attention from State Council leaders, and this is one of the main reasons. It is understood that in 2014 Sinograin Corporation started construction on 102 new warehouse projects for the whole year, with a total construction scale of 4.55 million tons.

Third, “recycling grain” may accelerate grain aging. Experts believe that when good grain is “swapped out,” old grain is still stored according to the methods for storing new grain, which will aggravate grain quality problems, and when the grain is shipped out of storage it may also be wasted because it fails to meet quality standards. “When the time really comes to use this batch of grain, what will be affected is not only grain quality and market order, but national food security.”