Grain procurement and storage caught in a dilemma, Sinograin frees up 30 million tonnes of warehouse capacity in emergency
Although state granaries are overflowing, China's corn, rice and wheat are expected to see another bumper harvest in 2014, while market demand for grain is unlikely to pick up. A new round of state grain procurement and storage is imperative, and this will push China's grain inventories to a new record. China
Although state granaries are overflowing, China's corn, rice and wheat are expected to see another bumper harvest in 2014, while market demand for grain is unlikely to pick up. A new round of state grain procurement and storage is imperative, and this will push China's grain inventories to a new record.
China Grain Reserves Corporation (hereinafter referred to as “Sinograin”) recently announced that before the autumn grain comes onto the market in November this year, it expects to free up about 30 million tonnes of warehouse capacity through the sale of policy grain, warehouse transfers, variety swaps, allocations and newly built warehouse capacity, in order to ease the conflict over procurement warehouse capacity.
The wheat and early rice procurement and storage in the first half of this year has already tied up a considerable amount of warehouse capacity. At present, the minimum purchase price procurement of wheat has basically ended. As of August 25, Sinograin had cumulatively purchased 25.34 million tonnes of wheat under the minimum purchase price scheme, three times the figure for the same period last year, and Sinograin had also purchased 2.71 million tonnes of early rice under the minimum purchase price scheme.
The United States Department of Agriculture expects China's rice and corn output to hit new highs, while the market's absorption capacity is limited, putting enormous pressure on Sinograin's warehouse capacity.
A research report released by the United States Department of Agriculture in August this year pointed out that, for rice, in the 2014/2015 marketing year, China's rice milling volume is expected to be 144 million tonnes, a new high for the most recent 5 years, with ending stocks of rice at 46.049 million tonnes, a level surpassed in the most recent five years only by the 46.826 million tonnes of the 2012/2013 marketing year. For corn, in the 2014/2015 marketing year, China's corn output is expected to be 222 million tonnes, also the highest output of the most recent 5 years, with ending stocks reaching 80.36 million tonnes, likewise a 5-year high.
Ma Wenfeng, an analyst at Orient Agrifood, told a China Business News reporter that the grain consumption market has not been doing well this year, sales of products from grain deep-processing enterprises are unsatisfactory, and catering consumption has been greatly affected by the strict control of “three public” expenses. Even if there is growth, it cannot compare with previous years, while this year's grain output is quite likely to achieve a bumper harvest, so grain sales mainly rely on the state to provide a floor.
Another analyst who declined to be named told this newspaper that the greater warehouse capacity pressure this year comes from corn and rice. Corn has the characteristics of large and concentrated market arrivals, while rice, apart from its huge output, includes both early rice and late rice, with new grain available in all four seasons, and coupled with the impact of low-priced imported rice, the procurement and storage pressure is also very great.
In order to free up warehouses, since mid-May Sinograin has stepped up auctions of policy grain. As of mid-August, a total of 29.98 million tonnes of policy grain had been sold over three months. Sinograin said the target of selling 32 million tonnes before the end of October is expected to be completed ahead of schedule.
In terms of grain outbound shipments, Sinograin has arranged outbound shipments at maximum capacity, having organised 12.47 million tonnes of outbound shipments. The three batches of inter-provincial warehouse transfer plans issued by the relevant state departments are also being carried out efficiently. The first batch of a 2 million tonne transfer plan has been completed ahead of schedule, 840,000 tonnes of the second batch of a 2 million tonne plan has been shipped, and the third batch of a 6 million tonne plan will be shipped successively, ensuring that the transfer task is fully completed before the end of the year. Sinograin said that the task of swapping varieties of 5.05 million tonnes of central reserve grain and rotating temporary reserve grain has now been more than 70% completed, and can be completed on schedule before the end of September, which will free up more warehouse capacity for key production areas.
In order to make way for new grain, Sinograin has spared no expense. Despite the inversion of production and sales prices and the widening price gap between new and old grain, from January to July this year Sinograin vigorously pushed forward the rotation of central reserve grain, losing 560 million yuan. As of the end of July, 61% of the rotation of old grain out had been completed, and 43% of the rotation of new grain in had been completed, faster than in previous years.
Some analysts told this newspaper that warehouse capacity is actually not a particularly big problem. The Chinese government has previously built many grain warehouses, and there is also a great deal of private warehouse capacity. As long as arrangements are reasonable and management keeps up, state and private warehouse capacity can guarantee the normal handling of grain. However, the necessity of adjusting the grain procurement and storage policy is becoming more and more urgent. Grain procurement and storage has pushed up China's grain prices, large quantities of foreign grain have entered the country, and grain in the state treasury is difficult to ship out. This year the state carried out reform of soybean and cotton procurement and storage, no longer purchasing and storing them, and instead adopting target price subsidies. If the results are good in practice, it may be implemented for staple grain varieties such as rice, corn and wheat. More importantly, by raising the retirement income of rural residents, farmers' livelihood security will no longer need to rely on land, so that land can be transferred, forming large-scale planting, and only then is it possible to restore the competitiveness of China's agricultural products on the international market.
China Grain Reserves Corporation (hereinafter referred to as “Sinograin”) recently announced that before the autumn grain comes onto the market in November this year, it expects to free up about 30 million tonnes of warehouse capacity through the sale of policy grain, warehouse transfers, variety swaps, allocations and newly built warehouse capacity, in order to ease the conflict over procurement warehouse capacity.
The wheat and early rice procurement and storage in the first half of this year has already tied up a considerable amount of warehouse capacity. At present, the minimum purchase price procurement of wheat has basically ended. As of August 25, Sinograin had cumulatively purchased 25.34 million tonnes of wheat under the minimum purchase price scheme, three times the figure for the same period last year, and Sinograin had also purchased 2.71 million tonnes of early rice under the minimum purchase price scheme.
The United States Department of Agriculture expects China's rice and corn output to hit new highs, while the market's absorption capacity is limited, putting enormous pressure on Sinograin's warehouse capacity.
A research report released by the United States Department of Agriculture in August this year pointed out that, for rice, in the 2014/2015 marketing year, China's rice milling volume is expected to be 144 million tonnes, a new high for the most recent 5 years, with ending stocks of rice at 46.049 million tonnes, a level surpassed in the most recent five years only by the 46.826 million tonnes of the 2012/2013 marketing year. For corn, in the 2014/2015 marketing year, China's corn output is expected to be 222 million tonnes, also the highest output of the most recent 5 years, with ending stocks reaching 80.36 million tonnes, likewise a 5-year high.
Ma Wenfeng, an analyst at Orient Agrifood, told a China Business News reporter that the grain consumption market has not been doing well this year, sales of products from grain deep-processing enterprises are unsatisfactory, and catering consumption has been greatly affected by the strict control of “three public” expenses. Even if there is growth, it cannot compare with previous years, while this year's grain output is quite likely to achieve a bumper harvest, so grain sales mainly rely on the state to provide a floor.
Another analyst who declined to be named told this newspaper that the greater warehouse capacity pressure this year comes from corn and rice. Corn has the characteristics of large and concentrated market arrivals, while rice, apart from its huge output, includes both early rice and late rice, with new grain available in all four seasons, and coupled with the impact of low-priced imported rice, the procurement and storage pressure is also very great.
In order to free up warehouses, since mid-May Sinograin has stepped up auctions of policy grain. As of mid-August, a total of 29.98 million tonnes of policy grain had been sold over three months. Sinograin said the target of selling 32 million tonnes before the end of October is expected to be completed ahead of schedule.
In terms of grain outbound shipments, Sinograin has arranged outbound shipments at maximum capacity, having organised 12.47 million tonnes of outbound shipments. The three batches of inter-provincial warehouse transfer plans issued by the relevant state departments are also being carried out efficiently. The first batch of a 2 million tonne transfer plan has been completed ahead of schedule, 840,000 tonnes of the second batch of a 2 million tonne plan has been shipped, and the third batch of a 6 million tonne plan will be shipped successively, ensuring that the transfer task is fully completed before the end of the year. Sinograin said that the task of swapping varieties of 5.05 million tonnes of central reserve grain and rotating temporary reserve grain has now been more than 70% completed, and can be completed on schedule before the end of September, which will free up more warehouse capacity for key production areas.
In order to make way for new grain, Sinograin has spared no expense. Despite the inversion of production and sales prices and the widening price gap between new and old grain, from January to July this year Sinograin vigorously pushed forward the rotation of central reserve grain, losing 560 million yuan. As of the end of July, 61% of the rotation of old grain out had been completed, and 43% of the rotation of new grain in had been completed, faster than in previous years.
Some analysts told this newspaper that warehouse capacity is actually not a particularly big problem. The Chinese government has previously built many grain warehouses, and there is also a great deal of private warehouse capacity. As long as arrangements are reasonable and management keeps up, state and private warehouse capacity can guarantee the normal handling of grain. However, the necessity of adjusting the grain procurement and storage policy is becoming more and more urgent. Grain procurement and storage has pushed up China's grain prices, large quantities of foreign grain have entered the country, and grain in the state treasury is difficult to ship out. This year the state carried out reform of soybean and cotton procurement and storage, no longer purchasing and storing them, and instead adopting target price subsidies. If the results are good in practice, it may be implemented for staple grain varieties such as rice, corn and wheat. More importantly, by raising the retirement income of rural residents, farmers' livelihood security will no longer need to rely on land, so that land can be transferred, forming large-scale planting, and only then is it possible to restore the competitiveness of China's agricultural products on the international market.