Sinograin Proposes Three Red Lines for Grain Reserves for the First Time, Mulls Overseas Grain Purchasing and Storage

Mulling Overseas Grain Purchasing and Storage: Sinograin Proposes Three Red Lines for Grain Reserves for the First Time

By our reporter Zhang Xu, Beijing Report

Sinograin is undergoing transformation.

In early September, China Grain Reserves Corporation issued an official statement saying that the grain security reserve system should establish three reserve guarantee lines - total grain reserves, grain reserves, and oil and oilseed reserves - to ensure national food security.

Sinograin officially suggested that by 2020, the national grain reserve stock-to-consumption ratio should reach 20%, the reserves of the three major grain varieties - wheat, rice, and corn - should account for about 85% of reserve stocks, and the oil and oilseed stock-to-consumption ratio should reach about 25%.

This is the first time Sinograin has proposed a figure for the national grain and oil reserve stock-to-consumption ratio, whereas previously China mostly used the total social grain and oil stock-to-consumption ratio to assess domestic food security. Ma Wenfeng, an analyst at Oriental Agribusiness, told the 21st Century Business Herald that the current domestic grain and oil stock-to-consumption ratio is around 40%, and even in the lowest years it was 30%.

On September 4, Shen Leihai, director of the Sinograin Policy Research Office, told the 21st Century Business Herald: proposing a national grain reserve stock-to-consumption ratio only represents the company's opinion. Now the state has a farmland red line and a water resources red line; how to determine the national grain reserve red line - Sinograin raised this suggestion in the hope of stimulating social discussion.

In addition, as domestic companies go global one after another to expand overseas grain sources, Sinograin has also decided to “establish purchasing and storage bases in suitable major grain-exporting countries through leasing, joint ventures, and wholly owned operations” to safeguard domestic food security.

However, Shen Leihai said the “going global” plan is currently only a Sinograin concept, and the state has not yet issued specific policies.

First Proposal of a Grain Reserve Red Line

Sinograin officially stated that the state has a farmland red line and a water resources red line but has not proposed a grain reserve red line; the “reserve red line” is an inherent part of food security and, together with the other two, constitutes an important component of national food security.

Following the principles of “giving priority to central reserves while mobilizing the enthusiasm of local reserves, giving priority to grains while also taking oil and oilseeds into account, and giving priority to domestically produced grain while importing appropriately,” Sinograin proposed gradually establishing three guarantee lines for grain and oil reserve security and defining a grain reserve red line.

Sinograin suggested: on the total grain reserve guarantee line, by 2020 the reserve stock-to-consumption ratio should reach 20%. Within the reserve scale, considering the echelons, efficiency, and division of responsibilities for deploying reserved grain and oil, central reserves should predominate and local reserves should play a supplementary role.

On the grain reserve guarantee, Sinograin proposed that the reserves of the three major grain varieties - wheat, rice, and corn - should account for about 85% of reserve stocks, with grains predominating and wheat and rice making up the bulk of grain reserves. On the oil and oilseed reserve guarantee, because the oil market is highly dependent on foreign sources and market fluctuations are frequent, relying on international oil and oilseed resources to balance domestic demand will become the new normal, and the oil and oilseed stock-to-consumption ratio should reach about 25%, slightly higher than the grain stock-to-consumption ratio.

The so-called stock-to-consumption ratio refers to the ratio of a country's or region's year-end grain stocks to its annual grain consumption. This is an indicator proposed by the United Nations Food and Agriculture Organization to measure the level of food security. According to that evaluation standard, grain stocks roughly equal to 17%-18% of a country's annual consumption are considered fairly normal.