After eight consecutive years of minimum purchase price increases for wheat, grain traders bet wrong this year
The National Development and Reform Commission recently announced that the 2015 minimum purchase price for wheat is 118 yuan per 50 kg (1.18 yuan per jin), unchanged from the 2014 level. As soon as the news was announced, grain traders who had stockpiled wheat at high prices in the hope of selling for a good price were stunned. One industry insider
The National Development and Reform Commission recently announced that the 2015 minimum purchase price for wheat is 118 yuan per 50 kg (1.18 yuan per jin), unchanged from the 2014 level.
As soon as the news was announced, grain traders who had stockpiled wheat at high prices in the hope of selling for a good price were stunned. One industry insider told a reporter from First Financial Daily that traders in some places had offered more than 1.3 yuan per jin to buy wheat, betting that wheat prices would rise again in the new year, but this time they bet wrong.
Since 2007, the minimum purchase price for wheat (white wheat, third grade) has risen all the way from 0.72 yuan per jin to 1.18 yuan per jin in 2014. In order to protect farmers' income growth and strengthen farmers' enthusiasm for planting, the state has kept raising the minimum purchase price, and a one-way rise in wheat prices has become almost a consensus in the market.
Industry insiders say that the minimum purchase price for wheat no longer rising next year seems surprising, but is actually reasonable.
The latest research report published by the U.S. Department of Agriculture in October this year said that in the 2014/2015 marketing year, China's wheat output is expected to reach 126 million tonnes, an increase of another 4 million tonnes compared with about 122 million tonnes in the 2013/2014 marketing year. On the inventory side, the U.S. Department of Agriculture estimates that in the 2014/2015 marketing year, China's wheat ending stocks will reach about 63.27 million tonnes, an increase of about 3 million tonnes over the previous year.
A person from a large flour processing enterprise said that domestic grain has had consecutive bumper harvests in recent years, but recently domestic economic growth has slowed, demand for food including grain has weakened, the state has ample grain on hand, and the need to continue raising prices to purchase wheat has diminished.
China had previously achieved ten consecutive years of grain output increases. The state carried out minimum purchase price purchases for wheat and rice, and temporary purchases and storage for corn, soybeans, rapeseed and others. Large quantities of agricultural products entered the granaries of China Grain Reserves Corporation (Sinograin), and Sinograin's warehouse capacity became saturated.
Economic Daily reported that since the beginning of this year, as of September 20, Sinograin Corporation had completed 25.34 million tonnes of market-support wheat purchases; 3.88 million tonnes of early rice had been purchased. At present, new corn in major grain-producing areas such as Northeast China is about to enter the warehouses. In order to free up warehouse capacity, the relevant state departments issued three batches of inter-provincial policy grain transfer plans, arranging the transfer out of 9.5 million tonnes of temporarily stored corn produced in 2013 from Heilongjiang, Jilin and Inner Mongolia, and 500,000 tonnes of minimum purchase price paddy produced in 2013 from Jiangxi and Hunan. As of September 25, 5.3097 million tonnes of inter-provincially transferred grain had been shipped, more than half of the transfer plan was completed, and progress was faster than ever before.
The Operations Bureau of the National Development and Reform Commission recently organized the fifth grain transfer coordination meeting, requiring relevant parties to continue strengthening coordination, overcome difficulties, speed up progress, and strive to complete the transfer task.
Market participants believe that in addition to consecutive bumper harvests and tight warehouse capacity, wheat prices have risen year after year, and together with rising labor costs, grain processing enterprises are finding it harder and harder to cope. A person from Wudeli Group, which has the largest domestic flour processing capacity, told a reporter from First Financial Daily that about 10 years ago, selling one bag of flour brought a profit of 1 to 2 yuan; now only a few enterprises can earn a profit of 1 yuan per bag, many enterprises make only 0.5 yuan per bag of flour, and some even lose money.
Many flour processing enterprises are operating below capacity, generally at only 50% to 60% utilization, with the lowest at only 30%. Industry insiders say that after the National Development and Reform Commission announced that the 2015 minimum purchase price for wheat would not be raised, enterprises such as Jinmailang lowered their purchase prices in some northern regions from 1.3 yuan per jin earlier to 1.28 to 1.29 yuan per jin. Wheat prices not rising is a good thing for processing enterprises. In addition to lowering costs and improving profit performance, the key is that it stabilizes enterprises' expectations. Previously, ten consecutive years of grain output increases and eight consecutive years of price increases left many people puzzled; now that wheat prices have stopped rising, they are closer to market demand.
As soon as the news was announced, grain traders who had stockpiled wheat at high prices in the hope of selling for a good price were stunned. One industry insider told a reporter from First Financial Daily that traders in some places had offered more than 1.3 yuan per jin to buy wheat, betting that wheat prices would rise again in the new year, but this time they bet wrong.
Since 2007, the minimum purchase price for wheat (white wheat, third grade) has risen all the way from 0.72 yuan per jin to 1.18 yuan per jin in 2014. In order to protect farmers' income growth and strengthen farmers' enthusiasm for planting, the state has kept raising the minimum purchase price, and a one-way rise in wheat prices has become almost a consensus in the market.
Industry insiders say that the minimum purchase price for wheat no longer rising next year seems surprising, but is actually reasonable.
The latest research report published by the U.S. Department of Agriculture in October this year said that in the 2014/2015 marketing year, China's wheat output is expected to reach 126 million tonnes, an increase of another 4 million tonnes compared with about 122 million tonnes in the 2013/2014 marketing year. On the inventory side, the U.S. Department of Agriculture estimates that in the 2014/2015 marketing year, China's wheat ending stocks will reach about 63.27 million tonnes, an increase of about 3 million tonnes over the previous year.
A person from a large flour processing enterprise said that domestic grain has had consecutive bumper harvests in recent years, but recently domestic economic growth has slowed, demand for food including grain has weakened, the state has ample grain on hand, and the need to continue raising prices to purchase wheat has diminished.
China had previously achieved ten consecutive years of grain output increases. The state carried out minimum purchase price purchases for wheat and rice, and temporary purchases and storage for corn, soybeans, rapeseed and others. Large quantities of agricultural products entered the granaries of China Grain Reserves Corporation (Sinograin), and Sinograin's warehouse capacity became saturated.
Economic Daily reported that since the beginning of this year, as of September 20, Sinograin Corporation had completed 25.34 million tonnes of market-support wheat purchases; 3.88 million tonnes of early rice had been purchased. At present, new corn in major grain-producing areas such as Northeast China is about to enter the warehouses. In order to free up warehouse capacity, the relevant state departments issued three batches of inter-provincial policy grain transfer plans, arranging the transfer out of 9.5 million tonnes of temporarily stored corn produced in 2013 from Heilongjiang, Jilin and Inner Mongolia, and 500,000 tonnes of minimum purchase price paddy produced in 2013 from Jiangxi and Hunan. As of September 25, 5.3097 million tonnes of inter-provincially transferred grain had been shipped, more than half of the transfer plan was completed, and progress was faster than ever before.
The Operations Bureau of the National Development and Reform Commission recently organized the fifth grain transfer coordination meeting, requiring relevant parties to continue strengthening coordination, overcome difficulties, speed up progress, and strive to complete the transfer task.
Market participants believe that in addition to consecutive bumper harvests and tight warehouse capacity, wheat prices have risen year after year, and together with rising labor costs, grain processing enterprises are finding it harder and harder to cope. A person from Wudeli Group, which has the largest domestic flour processing capacity, told a reporter from First Financial Daily that about 10 years ago, selling one bag of flour brought a profit of 1 to 2 yuan; now only a few enterprises can earn a profit of 1 yuan per bag, many enterprises make only 0.5 yuan per bag of flour, and some even lose money.
Many flour processing enterprises are operating below capacity, generally at only 50% to 60% utilization, with the lowest at only 30%. Industry insiders say that after the National Development and Reform Commission announced that the 2015 minimum purchase price for wheat would not be raised, enterprises such as Jinmailang lowered their purchase prices in some northern regions from 1.3 yuan per jin earlier to 1.28 to 1.29 yuan per jin. Wheat prices not rising is a good thing for processing enterprises. In addition to lowering costs and improving profit performance, the key is that it stabilizes enterprises' expectations. Previously, ten consecutive years of grain output increases and eight consecutive years of price increases left many people puzzled; now that wheat prices have stopped rising, they are closer to market demand.