Hybrid corn inventory backlog eases somewhat, hybrid rice remains in surplus
On October 23-24, the National Agricultural Technology Extension Service Center held the 2014 National Autumn Regular Meeting on the Production, Supply and Demand Situation Analysis of Major Crop Seeds in Tianjin. The meeting summarized and analyzed the seed production of major crops including corn, rice, wheat, rapeseed, cotton and soybean in 2014 as well as the seed market demand situation in 2015. Heads of 32 provincial-level seed management departments provided information on the supply of major crop seeds, seed production conditions and next year's seed usage in their respective regions.
Spring and summer sown crop seed production presents two situations
● Total production of hybrid corn and hybrid rice seeds both decreased significantly year on year
● Cotton and soybean seed production remained generally stable
Total production of hybrid corn and hybrid rice seeds both decreased significantly year on year. In 2014, the national hybrid corn seed production harvested area was 2.94 million mu, with about 1.01 billion kg of newly produced seeds nationwide, a total production decrease of 370 million kg compared with last year. In 2014, the hybrid rice seed production area was about 1.4 million mu, with a harvested area of 1.24 million mu. About 230 million kg of newly produced seeds nationwide, a total production decrease of 42 million kg compared with last year.
The reporter learned that there are two reasons for the significant decrease in total seed production of the above two crops. First, the seed production area decreased: corn seed production area decreased by 900,000 mu compared with last year, and rice seed production area decreased by 240,000 mu compared with last year. Second, adverse effects from meteorological disasters. For corn, the main production bases in Gansu and Xinjiang encountered low temperatures during the sowing period, and continuous high temperatures in late July, causing pollination and seed-setting rates of some varieties in the two places to be worse than normal years, with yield reductions ranging from 8% to 10%. In addition, severe drought in Liaoning Chaoyang, Xinjiang Ili and other places led to the total crop failure of about 10,000 mu of corn seed production bases. For rice, Jiangsu Province encountered historically rare low temperatures and continuous rainy weather in August, causing 160,000 mu of two-line rice seed production to be completely discarded due to low-temperature transformation, reducing production by 20 million kg. Affected by typhoon disasters, rice seed production in Fujian Province decreased by more than 3 million kg.
Cotton and soybean seed production remained generally stable. In 2014, the hybrid cotton seed production area was 43,000 mu, with 3.7 million kg of newly produced hybrid cotton seeds. The conventional cotton seed production area was 1.24 million mu, with 130 million kg of newly produced conventional cotton seeds. In 2014, the national soybean seed production area was 3.15 million mu, with 450 million kg of newly produced soybean seeds.
Autumn and winter sowing seed supply and seed production are encouraging
● Winter wheat seed market operates steadily, prices remain flat
● Hybrid winter rapeseed seed market operates steadily, prices rise slightly
Winter wheat seeds fully meet field planting demand. In autumn 2014, about 11 million mu of winter wheat seed propagation area was implemented across the country, and it is expected that 4.5 billion kg of new seeds can be produced. This year's newly produced winter wheat seeds are plump and have high thousand-grain weight. Whether in quantity, quality or varietal structure, they fully meet field planting demand. Therefore, the winter wheat seed market operates steadily, and market terminal prices remain flat compared with last year. But overall, the total winter wheat seed demand may decrease somewhat along with the decline in planting area.
Hybrid winter rapeseed seed production area has increased somewhat. In autumn 2014, the national implemented area for hybrid rapeseed seed production was 128,000 mu, an increase in area, and it is expected that 9.48 million kg of new seeds can be produced. This year's winter rapeseed seed market operates steadily, and market terminal prices rose slightly compared with last year. The main reason is that due to the increase in land transfer area and progress in mechanized rapeseed harvesting, the winter rapeseed planting area in some regions rebounded slightly in 2014, but because total seed supply exceeds demand balance, no abnormal phenomena appeared in the market.
Next year's supply and demand situation for major crop seeds is improving
● Inventory pressure on hybrid corn seeds will ease
● Three-line hybrid rice seeds are seriously in surplus, while supply and demand for two-line hybrid rice seeds have basically balanced
● Cotton and soybean seed supply and demand are balanced
The degree of hybrid corn seed surplus has eased somewhat. At the end of 2014, the effective inventory of hybrid corn seeds dropped to about 1 billion kg, 200 million kg less than expected at the beginning of the year. The total supply of corn seeds for spring and summer sowing in 2015 is 1.99 billion kg. It is expected that the corn seed use area in 2015 will still increase somewhat, with seed usage of 1.16-1.2 billion kg. The expected ending inventory level will drop to about 800 million kg. The situation of consecutive annual increases in corn seed inventory in recent years will be curbed, and the corn seed market will rebound from the bottom.
Hybrid rice seeds remain generally in surplus. Although the hybrid rice seed production area dropped significantly, due to the rebound in the "double-to-single cropping area" in major rice-producing provinces and the rebound in conventional rice area, hybrid rice seed inventory still reached 125 million kg in 2014. The total supply of hybrid rice seeds in 2015 is 355 million kg. It is expected that the combined field seed usage and export demand in 2015 will be about 245 million kg. The expected ending inventory level will drop to about 110 million kg, and market pressure next year will ease somewhat. Structurally, three-line hybrid rice seeds are seriously in surplus, while supply and demand for two-line hybrid rice seeds have basically balanced, and seeds of severely disaster-affected two-line rice lines may even face relatively tight supply.
Cotton and soybean seed supply and demand are balanced. It is expected that the national cotton planting area in 2015 will shrink to 57 million mu. Among this, conventional cotton planting area will be about 43 million mu, requiring about 100 million kg of seeds; hybrid cotton planting area will be about 14 million mu, requiring 7 million kg of seeds. In 2014, 3.7 million kg of newly produced hybrid cotton seeds and 4 million kg of inventory, so the hybrid cotton seed supply in 2015 is 7.7 million kg. In 2014, 130 million kg of newly produced conventional cotton seeds. Therefore, cotton seeds in 2015 can meet field planting demand.
In 2014, 450 million kg of newly produced soybean seeds. It is expected that the national soybean planting area in 2014 will be about 90 million mu, requiring about 240 million kg of commercial seeds, which can meet field planting demand in 2015.
Market Echoes
The current seed market for the two hybrid crops is in the period of the most severe overcapacity and the most severe oversupply since the market-oriented reform in 2000. When can it reverse? Some views hold that it will happen next year or the year after. I have talked with and observed many peers and frontline business personnel, and it is far from that optimistic. First, according to general market laws, transforming from a severe overcapacity and oversupply crisis to supply-demand balance or undersupply, even if demand is basically stable, requires going through a fairly long period of massive destocking and a considerable number of enterprises shutting down, merging or converting, that is, "dumping milk" (converting seeds to commercial use) and "killing dairy cows" (shutting down, merging or converting enterprises). At present, this situation is not obvious. Many enterprises are still holding on, although inventory on financial books and in cold storage remains high. Second, the current competitive situation is complex, not only competition among large enterprises, but more competition between large enterprises and large numbers of localized small enterprises, and competition between standardized operations and non-standardized operations. The seed production area of large enterprises has indeed decreased, but looking only at data from large enterprises is not enough.
Under such circumstances, what should enterprises do? Small enterprises have their own ways of surviving. Large enterprises should see the situation clearly. First, do a good job in the "shrink" lesson. In the market's great wave, those who follow it prosper; acting against the trend will certainly create problems in return on investment. Short-term surface numerical performance cannot withstand wind and waves; the market's storms are still ahead. Second, do a good job in the "open up" lesson, practice internal skills well, strengthen combat effectiveness, and enhance core competitiveness.
——Tian Bingchuan, Deputy General Manager of China National Seed Group Corporation
After policy adjustments, cotton prices fell. The purchase price of seed cotton dropped from about 4 yuan per jin in 2013 to about 3 yuan this year. Cotton farmers' cotton planting returns decreased, even to losses, cotton planting enthusiasm declined, and the area will certainly decrease. Demand for seeds will correspondingly decrease, and enthusiasm for purchasing seeds will also decline, which is already reflected now. Guoxin's response is: 1. Expand into the Xinjiang cotton region, having already invested more than 100 million yuan to build a research and development center, production base and processing center. 2. While holding fast to the cotton industry, actively expand the scope of crop seed operations and enter fields such as corn and wheat.
——Lu Huaiyu, President of Guoxin Rural Technical Service Association
The seed industry differs from general industrial industries. Its production and sales links are discontinuous. Once inventory is held down, it is held for two or three years. After missing the best sales period, it depreciates quickly. The risk of blind production is very large, just like selling fish: if it is not sold while fresh, it becomes worthless. Enterprises are the operating entities of the market. When encountering problems under a market economy, they should first rely on themselves. Enterprises should change their competitive strategy, shifting from relying on cost reduction to research and development innovation, and improve decision-making levels and management capabilities. Last year, King Doctor did no seed production, and this year it also produced only a tiny amount. Next year we can travel light.
——Yan Yongsheng, Chairman of Henan King Doctor Seed Industry Co., Ltd.
Although this year's corn seed production area decreased by about 30% compared with previous years, corn seed inventory cannot be substantially alleviated. This is mainly shown in the following: mainstream market varieties are all produced by companies in a planned manner and occupy a certain market. Last year's inventory was not large. The varieties backlogged in the market were formed either because they lost market recognition or because enterprises lost market operation capability, so inventory backlogs are very difficult to recapture the market. It is expected that competition in the corn seed market next spring will be even more intense and cruel!
——Wang Yadong, Marketing Department of Anhui Longping High-Tech Seed Industry Co., Ltd.
Although seed industry inventory backlogs are currently severe, some competitive seed enterprises are not worried about market conditions. Inventory backlog is a normal phenomenon in the adjustment stage, and is even a good thing. Zhongyan Seed Industry is striving to seize the opportunities brought by industry adjustment and rapidly grow stronger through mergers and acquisitions.
——General Manager of Sichuan Zhongyan Seed Industry Co., Ltd.