Why does difficulty in buying grain appear in a major grain-producing province?
As the country's most important main wheat-producing area, Henan Province's total wheat output in 2016 reached 69.32 billion jin, achieving another bumper harvest. Previously, Henan's wheat had increased production for 13 consecutive years. However, during interviews, reporters learned that although wheat had bumper harvests year after year, difficulty in selling grain appeared in some places, while many processing enterprises said it was difficult to buy wheat that met requirements.
On one side, wheat has had bumper harvests year after year and farmers face difficulty selling; on the other side, processing enterprises face "difficulty in buying grain." As a major grain-producing province, how should Henan resolve this awkward situation in which both "difficulties" coexist?
"Not worried about growing grain, but worried about selling grain" - major grain-producing areas once again see difficulty in selling grain
The autumn grain has already been harvested, yet in the home of Wang Shoujun, a villager in Sunzhuang Village, Linying County, Luohe City, Henan Province, the wheat from more than 4 mu of land is still packed in woven bags and has not been sold. "In previous years, it was sold while it was being harvested, but this year the wheat quality is poor and the price is low. In previous years it could sell for more than 1.1 yuan per jin, but this year no one will buy it even at just over 1 yuan per jin," Wang Shoujun said.
Not worried about growing grain, but worried about selling grain. For large grain growers who have contracted thousands of mu of land, the pressure is even greater. Tang Daoli, a large grain grower in Sheqi County, Nanyang City, contracted nearly 3,000 mu of land. Last year, because the wheat quality was poor and the proportion of imperfect grains exceeded the standard, she lost more than 100,000 yuan. Unexpectedly, this year she once again encountered difficulty in selling grain. During the reporter's interview, Tang Daoli had sold less than one-third of her wheat. More than a million jin of wheat was piled up in the granary, sprouting and molding every day, and Tang Daoli was extremely anxious. "Bumper harvests year after year, but difficulty selling year after year. If things continue like this, large grain growers will not be able to keep going," Tang Daoli said.
The reporter learned from Sinograin Henan Branch that, in order to ease farmers' difficulty in selling grain, Henan Province set up 1,676 purchasing depot points this year, 242 more than last year. By the end of September, when the minimum purchase price policy procurement ended, a total of 12.14 billion kg of wheat had been purchased under the minimum purchase price policy, the largest purchase volume since 2010.
Shen Hongyuan, an analyst at the Zhengzhou Grain Wholesale Market, believes that the difficulty in selling wheat in some areas of Henan this year appears on the surface to be because wheat quality this year was relatively low, but the fundamental reason is still that the wheat planting structure does not match market demand. "The wheat grown is not what flour processing enterprises need, so wheat sales can only rely overwhelmingly on the state's minimum purchase price procurement. Once quality does not meet the standard, large-scale difficulty in selling naturally appears," Shen Hongyuan said.
"Guarding a granary yet lacking wheat" - demand for imported wheat continues to climb
In the warehouse compound of Henan Luohe Shimofang Flour Industry Co., Ltd., large trucks delivering wheat formed a long line. This was wheat the company had just bought from Shandong. "This year the shortage of wheat is severe. We just made a trip to Shandong and Hebei and ordered 40,000 tons, but we are still short by a lot," said Xue Wangzhi, deputy general manager of Shimofang Flour Industry Company.
Luohe Shimofang Flour Industry Company is a medium-sized flour processing enterprise, processing about 150,000 tons of wheat annually. The company's person in charge admitted that raw material cost and quality have been the biggest problems facing the enterprise in recent years. "Wheat output in Henan Province and even the whole country climbs higher every year, but most of it is medium-gluten wheat, which is different from our needs. In particular, in the past two years the proportion of imperfect wheat grains has been high, and the wheat quality simply cannot meet our processing standards. Farmers are anxious to sell grain, and we are anxious because we lack grain," Xue Wangzhi said.
According to Xue Wangzhi, because domestic wheat quality does not meet the standard, they have increased their use of imported wheat in recent years. However, limited by imported wheat quotas, the company's total annual imported wheat volume is only more than 1,000 tons, far from meeting demand. Xue Wangzhi said that imported wheat is of good quality and its price is even lower than domestic wheat. If not for quota restrictions, we would certainly use imported wheat entirely.
Suiping County is a national advanced county in grain production and a national commodity grain production base county, and is also a national high-quality wheat standardization demonstration area. However, Liu Qiuyan, a director of Henan Yijiayi Natural Flour Co., Ltd., located in Suiping County, this large granary, said that although Suiping County, where their company is located, has an annual wheat planting area of 840,000 mu, they still often worry about qualified raw materials.
Liu Qiuyan said that local wheat is mostly grown in scattered plots. With the same variety and in the same year, the quality of the wheat produced may still differ. To ensure flour quality, the company has no choice but to buy imported wheat at high prices from traders.
Yongcheng City is a major wheat production city and also a major flour processing city, with annual flour production capacity exceeding 1.5 million tons, and is known as "China's Flour City." However, such a flour city that prospered because of wheat is increasingly no longer relying on domestic wheat.
Xiao Yongcheng, deputy general manager of the Zhengzhou Grain Wholesale Market, introduced that customs statistics show that in the first half of 2016, China cumulatively imported 1.77535 million tons of wheat, a year-on-year increase of 27.3%. As the largest wheat-producing province, Henan imported nearly 40,000 tons of wheat in the first half of this year. "Domestic wheat has high costs and no outstanding quality advantage, which not only has led to a price inversion, but also makes it difficult to meet the needs of flour processing enterprises, resulting in the strange phenomenon of wheat output, import volume, and inventory all increasing together," Xiao Yongcheng said.
Resolving the coexistence of the "two difficulties" urgently requires accelerating supply-side reform
On one side, there are bumper harvests year after year, wheat inventory keeps increasing, and farmers suffer the worry of being able to grow grain but not sell it; on the other side, flour processing enterprises face tight raw materials, and imported wheat flows in in large quantities. In response, relevant experts analyzed and said that to solve the awkward situation of the coexistence of the "two difficulties" and the simultaneous increase of the "three volumes" in the wheat market, it is urgent to accelerate supply-side reform of wheat planting.
Zheng Fengtian, vice dean of the School of Agricultural Economics and Rural Development at Renmin University of China, believes that the continued high level of China's wheat imports directly reflects that the current wheat planting structure is unreasonable and that the supply of high-quality wheat is insufficient. Zheng Fengtian said that although total wheat output has repeatedly hit new highs in recent years, the output of high-quality wheat is insufficient. In particular, there is a large gap in wheat raw materials used to satisfy emerging flour food industries such as bread and pastries, and it still cannot meet the rapidly growing demand of the food processing industry and consumers. There is still huge room for improvement in variety, quality, and brand.
Liu Zhengmin, an analyst at the Zhengzhou Grain Wholesale Market, believes that the current wheat supply and marketing system of "household planting - intermediary purchasing - state reserves" suits the demand for ordinary flour foods, but fails in the structural adjustment toward strong-gluten and weak-gluten wheat. "High quality does not necessarily bring a high price, and the output of high-quality wheat is relatively unstable, with high market risk. This leads farmers and even large grain growers to be unwilling to take risks in structural adjustment."