Northeast japonica rice market remains stable, with the "strong paddy, weak rice" trend prominent
Recently, the Northeast japonica rice market has been operating steadily, with the "strong paddy, weak rice" feature prominent. Unlike the sharp rise in long-grain paddy, against the backdrop of strict moisture and impurity deductions at state reserve warehouses, round-grain paddy has performed relatively steadily, with only low-moisture paddy seeing an increase of about 2-3 fen compared with last month.
Looking at Heilongjiang, a major grain-producing province, the purchase price of round-grain paddy with a moisture content within 16% in Jiamusi, Jixi, Jiansanjiang and other places is currently concentrated at 2900-2940 yuan/tonne, while the purchase price at about 18% moisture is near 2840 yuan/jin. Considering that rice supply in sales areas is abundant, and the price gap between Northeast rice and Jiangsu rice still exceeds the reasonable range, ordinary japonica rice prices still lack upward momentum in the longer term.
Purchasing intensity weakens, processing profits sluggish
Because the 2015 paddy support price was not raised, the listed purchase price at grain depots remains 1.55 yuan/jin for national standard third grade and 1.57 yuan/jin for second grade. However, the moisture content of paddy produced in 2015 was generally high, and the actual warehousing price after moisture and impurity deductions was slightly lower than the previous year. In particular, grain depots have strict requirements for warehousing quality, and the phenomenon in previous years in which a small number of traders bought high-moisture raw grain from farmers at low prices and then sent it to grain depots according to third-grade grain standards no longer exists. Reduced profits leave traders lacking the incentive to raise purchase prices.
The "strong paddy, weak rice" situation also limits processing enterprises' willingness to enter the market. At present, the ex-factory price of low-moisture round-grain rice in Heilongjiang is concentrated at 4340-4440 yuan/tonne, while the price for slightly higher moisture is 4180-4200 yuan/tonne, but the price of polished white rice in Taizhou, Nantong, Xinyi and other places in Jiangsu is only 3840-3900 yuan/tonne. In the field of ordinary japonica rice, Jiangsu rice still dominates shipments in southern sales areas. Against the backdrop of sluggish processing profits and market transactions mainly dominated by policy grain purchases, ordinary paddy varieties are expected to lack upward momentum.
No. 1 Document to be issued, focus on supply-side reform
It is reported that the proposed title of the 2016 Central No. 1 Document is "Several Opinions of the Central Committee of the Communist Party of China and the State Council on Implementing the New Development Concept, Accelerating Agricultural Modernization and Achieving the Goal of Building a Moderately Prosperous Society in All Respects," and according to convention it may be promulgated at the end of January or the beginning of February.
Against the backdrop of high grain inventories, inverted domestic and international agricultural product prices, and farmers increasing production yet struggling to increase income, the focus of the new year's work will tend toward advancing structural reform on the agricultural supply side.
At present, the reform thinking of relevant departments on the three aspects of “de-stocking, reducing costs, and shoring up weaknesses” has basically become clear. Simply put, de-stocking means accelerating the consumption of huge state inventories and accelerating grain processing and conversion; reducing costs means lowering production costs and improving agricultural efficiency and competitiveness by developing appropriately scaled operations and reducing unreasonable use of chemical fertilizers and pesticides; shoring up weaknesses means strengthening weak links in agricultural supply such as agricultural infrastructure and increasing the production of agricultural products in short supply on the market.
2016 rice protective price may be flat with the previous year
As a staple food grain, rice is a key variety for maintaining national food security, and in 2016 rice will continue to implement the protective price purchase policy.
However, since 2008 the support price has been raised year after year, leaving both rice prices and state reserve inventories at high levels. In 2015, the protective prices for early indica rice, mid-late indica rice and japonica rice were 1.36 yuan/jin, 1.38 yuan/jin and 1.55 yuan/jin respectively.
Compared with 2007, the protective price of early indica rice rose by 0.58 yuan/jin, an increase of 82.86%. Mid-late indica rice rose by 0.59 yuan/jin, an increase of 81.94%. Japonica rice cumulatively rose by 0.73 yuan/jin, an increase of 97.33%, nearly doubling. The protective price directly pushed up the purchase cost of paddy, and domestic rice prices naturally rose accordingly.
On the other hand, because global grain supply is loose, exporting countries such as Thailand, Vietnam, Pakistan and India face fierce competition, which has kept international rice prices in a downward channel and created a huge price gap between domestic and international rice. Against the backdrop of national policy turning toward supply-side reform, the continuous raising of rice prices may have become history.
Considering that the 2016 wheat protective price was already issued in October, and the minimum purchase price for national standard third-grade wheat remains 1.18 yuan/jin. Referring to the policy correlation between rice and wheat, the author believes it is highly likely that the new year's rice price will be consistent with the previous year, and expects the minimum purchase prices for early indica rice, mid-late indica rice and japonica rice may still be 1.35 yuan/jin, 1.38 yuan/jin and 1.55 yuan/jin, flat with the previous year's standards.