Grain Banks in a "Three-Nos" Predicament, with Risks of Absconding and Reckless Expansion Becoming Prominent
Deposit grain just like depositing money, earn interest on stored grain, and make deposits and withdrawals at any outlet... A recent investigation by reporters in Anhui, Heilongjiang, Hunan, Jiangxi and other places found that a new type of grain circulation business called the "grain bank" is emerging in various places, in which enterprises store grain on behalf of farming households, and farmers can withdraw goods or cash out according to agreement, which not only solves the difficulties farmers face in storing and selling grain, but also eases the pressure on operating entities in terms of capital and raw grain supply.
However, in-depth investigation by reporters found that since last year, affected by falling prices of some grain varieties and the lack of national standards, multiple risks have been exposed in the operation of "grain banks." Among them, some carry the risk of "absconding" or "reckless expansion," and some may even lead to "systemic" risks, threatening the interests of grain-storing farmers.
Interest on Stored Grain, Deposits and Withdrawals at Any Outlet
"Store grain at the grain bank at my doorstep, and with the passbook you can exchange for things or withdraw money. My family even withdrew a bag of flour a few days ago." Liu Dongquan, a villager from Liulou Village, Yuanqiang Town, Taihe County, Anhui Province, pointed to the "grain bank" not far from his home and said his family farms more than 7 mu of land and harvested more than 6,000 jin of wheat this year. After drying it at home for two days, he hauled it to the grain bank. He has been storing grain this way for three or four years.
Liu Dongquan is one of more than 10,000 grain-storing farmers of the Anhui Santai Grain Bank, and these farmers all received "grain bank" passbooks after storing their grain. Several farmers showed their "grain bank" passbooks. Reporters saw that they look the same as bank deposit passbooks, printed with the words "Store grain just like depositing money, earn interest on stored grain, make deposits and withdrawals at any outlet, reduce grain loss, benefit the country and the people." Opening the passbook, inside there is information such as account number, account name, address, and account-opening outlet, and on the blank pages there are date, business, product name, unit price and specifications, quantity, converted raw grain, and balance quantity.
"The ways of storing grain include demand-deposit type, time-deposit type and dividend type." Zhu Yuehua, chairman of Anhui Santai Flour Co., Ltd., the operating entity of the Anhui Santai Grain Bank, said the company has set up multiple business offices across the county to carry out grain storage and redemption work. Under the demand-deposit type for grain storage, it is stipulated that after wheat is deposited, each jin can earn interest of 5 li per month, and one jin of wheat can earn an additional 6 fen in a year. When exchanging for goods or converting deposits to sales, it is calculated according to the deposit price plus interest.
Not only in Anhui, but many "grain banks" have also emerged in Heilongjiang, Hunan, Jiangxi and other places. Reporters learned from interviews that the "grain bank" is a new type of grain circulation business in which enterprises (mostly grain enterprises) draw on the business model of banks, use their own warehousing and operating conditions to store grain on behalf of farming households, and while safeguarding farmers' ownership of grain through contractual means, transfer the right to operate the grain to the enterprise in the form of a "time deposit" or "demand deposit." Farmers can withdraw goods (finished grain, edible oil, agricultural inputs, etc.) or cash out according to agreement.
"After farmers hand over the rice to the company, one option is the demand-deposit type, which increases by one fen per jin each month compared with the market price at the time. For example, if it is now 1.5 yuan per jin, next month it rises to 1.51 yuan." Li Jiyin, general manager of Songhuajiang Fine Rice Co., Ltd., the operating entity of the Xing'an Grain Bank in Zhaoyuan County, Heilongjiang Province, said, "If it is a time deposit, for example, if you take the money after one year, it rises by 1 mao and 5 fen in a year. If you urgently need money, it is still handled as a demand deposit and can be settled at any time."
Deposits and withdrawals at any outlet is one of the main functions played by the "grain bank." In November 2014, in order to innovate a new model of serving agriculture and improve the capacity and level of serving agriculture, Jiangxi Jishui Zhongbo Agricultural Means Company established Jiangxi Province's first "grain bank" - the Zhongbo Grain Deposit and Exchange Office. Yu Duanlian, head of the office, told reporters that farmers can deposit rice at the "grain bank" nearby and receive a grain-storage passbook similar to a bank "all-in-one card." When farmers need it, they can at any time take the passbook to any service outlet of the "grain bank," swipe the passbook to withdraw grain, and enjoy the agreed interest, and can also exchange it for agricultural inputs, rice, edible oil and other goods.
In addition, farmers can also enjoy diversified services. Hunan Weihong Rice Industry Co., Ltd. founded the province's first "grain bank" in July 2013. General manager Zhou Zhengchun introduced that this "grain bank" implements the "215" model. The 2 refers to Weihong Rice Industry and specialized cooperatives establishing a subsidiary (Weihong Rice Industry holds 51 percent of the shares). The 1 refers to one grain bank mainly serving the surrounding 10,000 mu of farmland. The 5 refers to service contents involving agricultural input supply and marketing, technical information services, agricultural machinery services, drying services, and storage and redemption services.
"No Need to Worry About Difficulties in Selling Grain"
Many grain-storing farmers told reporters that when there was no grain bank, after the new grain was harvested, the home had to free up space to store it, and rats gnawing on it would cause waste. Sometimes when the new grain came onto the market it was hard to sell, and out of helplessness it was sold to grain traders at a low price. After the grain bank appeared, these problems were all solved. "Store the grain in the grain bank, save yourself the trouble of storing grain, and no need to worry about difficulties in selling grain," Liu Dongquan said.
Having just finished harvesting more than 600 mu of soybeans planted this year, Sun Xunbao, a farmer from Liuhe Village, Xilian Township, Keshan County, Heilongjiang Province, sent the soybeans to the grain bank - the Keshan County Kunfeng Soybean Cooperative - as in previous years. "Leaving it there saves worry." Sun Xunbao told reporters that this year he planted more than 800 mu of land, including more than 600 mu of soybeans and 200 mu of corn. If so much grain were not sent to the "grain bank," there would simply be nowhere to store it.
"Send the soybeans to the grain bank, have them weighed, sieved and weighed again, then take the receipt and that's settled. Any later losses caused by moisture evaporation, rats eating them, and so on, have nothing to do with us at all." Sun Xunbao said that because of reasons such as moisture evaporation, after the Spring Festival it is very normal for 100 jin of soybeans to be short by three or four jin.
Yu Duanlian said that by depositing grain in the grain bank, farmers can not only get interest of 120 yuan per ton per year, but also enjoy the preferential treatment of a guaranteed floor if the price falls and following the market if the price rises, according to agreement. Moreover, farmers only need to make one phone call to store grain, and the grain-collection vehicle will drive to the farmer's doorstep, which both lowers farmers' transportation costs and reduces losses.
The grain bank solves the difficulties farmers face in storing and selling grain, and also eases the capital pressure on operating entities. "The grain bank eases at least 40 percent of my capital pressure." Zhou Zhengchun told the Economic Information Daily reporter that originally, according to the company's purchasing and processing capacity, about 40 million yuan of funds were needed each year, but only more than 20 million yuan could be borrowed from banks. "I collect the rice, wait until it is processed into rice and sold, and then pay. In essence, this is a kind of deferred payment. The interest I give farmers is actually lower than the interest I would need to pay to borrow from a bank."
With more raw grain supply, the grain source is also more stable for enterprises. According to Zhu Yuehua, after the company had a stable grain source, it could directly contact agricultural input manufacturers, save intermediate links, and help farmers obtain lower-cost agricultural inputs. In practice, the cost of seeds and chemical fertilizers per mu of land is saved by about 100 yuan on average. "It can also guide farmers to plant high-quality wheat and help the company produce high-end products and improve core competitiveness," he said.
Lack of Standards Leaves It in a "Three-Nos" Predicament
"The more I learn over these two years, the more afraid I become!" a person in charge of a grain bank said with concern that the grain bank is in an awkward "three-nos" predicament: first, no legal status - a "grain bank" cannot be registered with the industry and commerce department, and like an "underground organization," it may be shut down at any time; second, no threshold - with more publicity, everyone comes to do it, and now even non-grain-processing enterprises come to do it; third, no supervision - when risks appear, no one provides a fallback.
The Economic Information Daily reporter found in interviews that in the past few years, when the grain market was bullish, grain banks in various places developed relatively steadily and their operating results began to show. However, since last year, market prices of some grain varieties have fallen, and coupled with factors such as the lack of national standards, grain banks in various places have exposed multiple risks in operation.
A relevant person in charge of the Jiangxi Provincial Grain Bureau believes that the grain bank is a new type of agricultural industrialization model between finance and the real economy. Like a commercial bank, farmers who deposit grain receive interest, and profits can also be made through barter exchange. This new model, based on the mutual relationship between farmers and operators, carries certain risks when farmers deposit grain, because the state has not yet issued relevant laws and regulations, and grain market prices fluctuate.