Northeast Rice Purchases Recover, Market Shows Clear "High Quality, High Price" Trend
Supported by the approaching demand peak for New Year's Day and the Spring Festival, the purchase and sales atmosphere in the Northeast rice market recovered this week. Driven by group enterprises actively entering the market, Heilongjiang long-grain fragrant rice, Liaoning Liaoxing rice, and Jilin super rice showed upward price trends.
However, due to strict deductions for moisture and impurities at purchase, round-grain rice prices remained stable. In addition, Jiangsu rice and southern late indica rice running at low levels also limited the pace of Northeast round-grain rice sales.
New rice in the south came to market more than 1 month late, and it is still in a period of concentrated new rice market arrivals. Combined with another decline in Thai and Vietnamese rice that has hit sales-area markets, this will to a certain extent offset the bullish impact brought by the approaching peak demand season, and "strong for high-quality" and "weak for ordinary" will remain the main theme of recent rice market movements.
Group Enterprises Actively Enter the Market
Supported both by group enterprises such as COFCO, Yihai, and China Resources and by farmers' reluctance to sell, high-quality varieties such as Northeast Daohuaxiang, Changlixiang, and Liaoxing rice have risen by about 60-80 yuan/tonne compared with the beginning of the month. Among them, the grassroots purchase price of Changlixiang rice produced in Heilongjiang has risen from 3,200 yuan/tonne in mid-month to the 3,300-3,400 yuan/tonne level. Rice enterprises, optimistic about the pre-festival market, have raised quotations for high-quality rice one after another, and rice prices have strengthened in tandem.
According to statistics from relevant institutions, as of December 21. In Wuchang County, Harbin, polished Changlixiang rice ex-factory was 5,100-5,200 yuan/tonne, cumulatively up 100 yuan/tonne. In Shangzhi, color-sorted but unpolished Changlixiang rough rice ex-factory was 4,780 yuan/tonne, up 160 yuan/tonne week-on-week. In Fangzheng County, polished Changlixiang rice ex-factory quotation was 5,000 yuan/tonne, up 40-60 yuan/tonne week-on-week. In Anshan Township, Yanshou County, the village purchase price of Changlixiang rice with a 67% milling yield was 3,400 yuan/tonne. In Hailun County, Suihua, Changlixiang rice ex-factory was 4,900 yuan/tonne, both up 100 yuan/tonne week-on-week. In Taobei District, Baicheng, Jilin Province, the delivered-to-factory price of new long-grain rice with a milling yield of 66-67% and moisture content within 14.5% was 3,400 yuan/tonne, and the ex-factory price of polished and color-sorted medium-to-long-grain rice was 4,800-4,820 yuan/tonne, both up 100 yuan/tonne week-on-week. In Shenyang, Liaoning Province, the ex-factory price of 2015 pure Liaoxing rice was 4,480-4,500 yuan/tonne, color-sorted but unpolished rough rice ex-factory was 4,420 yuan/tonne, and the purchase price of Liaoxing rice with a milling yield of about 69% was 3,180-3,200 yuan/tonne, up 40-60 yuan/tonne week-on-week.
Beware of Post-Festival Correction Risk
Because long-grain varieties such as Suijing 4 and Kendao 12 have low milling yields and high seed prices, their planting costs are higher than those of ordinary rice.
However, because the latter has policy support and especially against the background of better rice quality last year and fewer deductions for moisture and impurities when selling to grain depots, the difference in planting returns between the two was not obvious.
Therefore, in 2015, the phenomenon of switching from long-grain rice to ordinary rice was fairly prominent in places such as Jiansanjiang, Mishan, Hulin, and Fuyuan. In addition, frequent low temperatures and rainy weather during this year's key growth period left rice milling yields in some areas 2-3% lower, and the supply of high-milling-yield, high-quality rice may be less than last year.
Considering that the period before the Spring Festival is the traditional peak season for rice sales, the pull on demand for high-quality rice will be more obvious. It is expected that before the festival the price of high-milling-yield long-grain rice may be seen as high as the 3,500 yuan/tonne level.
But it should be noted that this year's grain sales progress in Northeast production areas is slower than last year, with the proportion of remaining grain at the grassroots level >40%. In particular, in Heilongjiang, a major grain-producing province, rice moisture is mostly around 17%, and before the festival there will be a peak period of "selling grain to celebrate the New Year" and repaying loans.
In particular, affected by restrictions on welfare distribution by public institutions in sales areas such as Beijing and Shanghai, long-grain rice is unlikely to achieve the same increase before the Spring Festival as in the same period last year. Because most raw grain is hoarded in the hands of traders and has not been fully consumed by the end-market, high-quality rice is bound to decline after the Spring Festival.
Policy Grain Purchases Dominate
⟧ Round-grain rice transactions are still dominated by policy-based purchases. According to statistics from Sinograin, during December 11 to 15, storage depots in major producing provinces such as Heilongjiang, Jilin, and Jiangsu purchased a total of 1.0361 million tonnes of 2015-market-year minimum-purchase-price japonica rice, an increase of 225,000 tonnes or 27.74% from the previous period (the 6th to the 10th). From the launch of the minimum purchase price policy until December 15, cumulative purchases reached 14.8344 million tonnes, higher than the same period last year.
Among them, Heilongjiang accounted for the largest share of national policy-based purchases. As of December 31 alone, the province's 426 purchase and storage depots had already purchased 12.862 million tonnes of 2015-market-year minimum-purchase-price japonica rice, an increase of 4.384 million tonnes or 51.71% year-on-year, accounting for more than 85% of the national policy-based japonica rice purchases in the period. Because Heilongjiang Province launched policy-based grain purchases earlier this year, the purchase peak also arrived earlier. With remaining grain in production areas falling sharply, it is expected that future purchase progress will gradually slow. Moreover, grain depots strictly enforce deduction standards for moisture and impurities, and the phenomenon in previous years in which a small number of traders bought high-moisture rice at depressed prices in villages and then sent it to grain depots according to third-grade grain standards no longer exists. The narrowing of trading profit margins has left traders lacking the incentive to raise purchase prices.
Round-Grain Rice Prices Weaken and Stabilize
At this time, round-grain rice sales remain difficult. Currently, in major production areas such as Jiansanjiang, Jiamusi, Jixi, and Shuangyashan, the price of polished round-grain rice is concentrated between 4,180-4,300 yuan/tonne, and the village purchase price of round-grain paddy with moisture content of about 17% is 2,880-2,900 yuan/tonne, both flat compared with the beginning of the month.
Due to the lack of processing profit, most enterprises in production areas have stopped production and adopted a wait-and-see stance. Only some large rice enterprises barely operate relying on fiscal subsidies, and the shutdown rate in some areas is still as high as more than 90%. Taking the Jixi Hulin area as an example, a local medium-sized processing enterprise's ex-factory quotation for polished and color-sorted round-grain rice is 4,180 yuan/tonne, and the delivered-to-factory price of round-grain rice is 3,020 yuan/tonne (average milling yield 68%). Calculated on the basis of color-sorted grains ex-factory at 2,800 yuan/tonne, rice husks at 220 yuan/tonne, broken rice at 2,500 yuan/tonne, and oil bran at 1,200 yuan/tonne, by-product revenue is about 244.2 yuan/tonne. Processing fees, packaging fees, and loan interest are about 131.25 yuan/tonne, giving a theoretical processing profit of about -33 yuan/tonne, still in a loss-making state. At the same time, Northeast round-grain rice prices are mostly concentrated at 4,160-4,300 yuan/tonne, while white-selected japonica rice quoted in places such as Nantong, Taizhou, and Yangzhou is only 3,840-3,900 yuan/tonne. The price gap between the two is larger than the reasonable range and still restricts market sales. It is expected that before the festival, round-grain paddy and rice will lack upward momentum and will mainly follow a stable trend.