Grain price growth has slowed over the past two years. What is the reason behind it?
Comparing the growth rate of China's agricultural input and planting costs with the growth rate of grain prices in recent years, the growth rate of grain prices does indeed appear too sluggish. Taking corn as an example, since China's grain purchase and storage reform in 2015, the increase so far has been only 30 to 40 percent, while some agricultural inputs have risen by 70 to 80 percent or even doubled. And compared with the current level of price growth, it also appears considerably sluggish. Corn has seen the largest price increase among these grain crops, while China's soybeans have even seen their prices decline.
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As for the reasons why China's grain prices have grown slowly or even declined, Science Xingnong believes there are mainly two aspects: 1. China's grain prices are too high; 2. China's grain supply exceeds demand.
China's grain prices
Many people think China's grain prices are low, but in fact China's grain prices are really not low. Many people also say that a jin of grain cannot even buy a bottle of mineral water. If you went to the United States, three or four jin of grain might not necessarily buy a bottle of mineral water. Relatively speaking, China's grain prices are really already quite high. This is very clearly reflected in soybeans and corn.
For example, US soybeans convert to about 1.1 to 1.2 yuan per jin, while China's soybean prices reach 1.7 to 1.8 yuan per jin. Even when US soybeans are shipped to China, the price is only 1.5 to 1.6 yuan per jin. This price level makes them far more competitive than China's soybeans, and US soybeans also have a relatively high oil extraction rate. In other words, China's grain is still being sold at high prices despite not being of high quality. From this point of view, it is indeed difficult for China's grain prices to quickly keep up with the pace of market price increases. After all, in today's era of economic globalization, import trade is also gradually expanding, and the impact on China's grain prices is growing. How could grain prices possibly rise quickly?
Grain supply
Friends who understand China's grain supply situation surely know fairly well that China long ago put forward the concept of supply-side reform in grain. At present, a major problem for China's grain is not insufficient grain supply but a structural shortage of grain. For example, for wheat, corn, rice and other grains, China's supply is very sufficient; it could even be said that grain depots have reached the point where they cannot store any more, and inventories must be vigorously reduced. However, for grains like soybeans, China's supply has a serious shortfall. In 2017, China's soybean supply gap was 95.53 million tons, a quantity close to 100 million tons.
Because grain reserves have continuously held auctions to reduce inventories, this has also made the market's grain supply relatively abundant...
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However, judging from the current state of China's grain market, the biggest problem suppressing China's grain prices is still that China's grain prices are too low. At present, imported grain on the market is constantly hitting the domestic market. This can be clearly seen from the prices of China's soybeans. Even with a soybean gap of 100 million tons, China has still not achieved a price increase; prices are even moving lower. This fully shows that grain supply can only affect China's grain prices in the short term and locally, and cannot interfere with the overall trend of grain prices.
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