Futures + Insurance Ease Worries, Farmers' Income Growth Welcomes a New Attempt
As crops of the same season, soybeans and corn have a typical land-competition relationship, and which crop can bring farmers more benefits and greater production efficiency has always been a question farmers weigh.
In mid-to-late August, a China Securities Journal reporter followed the "Harbin Agricultural Products Inspection Team," jointly organized by the Beijing Futures Association and Nanhua Futures Company, to conduct on-site inspections of soybean and corn planting areas, weather and growth conditions in Harbin and other areas. The reporter found that soybean and corn planting areas have changed somewhat, current corn inventories remain large, farmers are hesitant about selling corn, grain purchasers are unwilling to take the risk of buying, and some futures companies have launched a new "futures + insurance" attempt, which has spurred growers' enthusiasm for production and is conducive to the adjustment of local crop planting structure.
Soybeans Hard to Find in the Main Soybean Producing Area of Northeast China
On August 20, the inspection team successively visited farms, traders and agricultural product deep-processing enterprises in Hailun City, Bei'an City and Harbin City, including Heilongjiang Province's "Internet + Agriculture" 10,000-mu selenium-enriched organic miscellaneous grains standard demonstration base, Hongxing Farm, Jiusan Group Harbin Huikang Food Co., Ltd. and the Beidahuang Tofu Production Base.
Starting from Harbin City, passing through Suihua City and Hailun City to reach Bei'an City, they traveled more than 300 km in 2 days.
The reporter found that along the way there were few people, the clear sky was visible at a glance, patch after patch of cropland became the focus of people's attention, the glaring sunlight through the car windows made people drowsy, and vehicles passing by from time to time whooshed past.
However, as far as the eye could see along the way, most of it was cornfields, while soybeans were rarely seen, which inevitably prompted the question: is this still the world's main soybean producing area?
In Hailun City, more than 300 km from Harbin, accompanied by Chen Yingjian, Director of the Hailun City Grain Bureau, the inspection team came to the "Suihua City Modern Agriculture Thousand-Kilometer Demonstration Belt" to conduct an on-site inspection of soybean planting and growth conditions, and only then did they find soybeans planted in contiguous fields. The soybeans in the demonstration field were growing relatively well, and the average values of specific data in various aspects were: plant height 100 cm, 16 stem nodes, 50 pods, with an estimated yield of 200 kg per mu, higher than the expected 170 kg. The inspection team then also randomly sampled nearby soybean fields and found that the growth of the soybeans was uneven, with the number of pods mostly between 25-40.
Chen Yingjian said that the difference in growth conditions was mainly due to the different soybean varieties selected for planting; the demonstration field used "Dongsheng No. 11," which has higher yield and better lodging resistance. It is understood that soybeans are currently in the seed-filling stage and have a relatively high water requirement, and the clear, rain-sparse weather will also affect their growth.
"To see China's soybeans, look to Longjiang; to see Longjiang's soybeans, look to Hailun." Chen Yingjian said that Hailun City has long been known by the fine name "Home of Soybeans." In the first half of the year, an agricultural geological survey found that Hailun City sits on the entire selenium-enriched belt, so "selenium-enriched" and "cold-region black soil" have always been the two major brand advantages that have been vigorously developed.
Along the way, Chen Yingjian talked endlessly about the benefits of "selenium-enriched" and "non-GMO," and pointing to the nearby "Internet + Agriculture" sign and the "Solar-Powered Full-Process Traceability System," he described the future of local agricultural development.
Beidahuang Qinmin Organic Foods and Jiusan Group non-GMO soybean oil are two food brands under the Beidahuang Group. Through visits to the Hailun City agricultural product demonstration belt and Hongxing Farm, the reporter found that in agricultural product cultivation, non-GMO seeds, organic fertilizers and manual weeding are all used, and after maturity they go through specialized processing techniques to ensure product quality and safety. It is understood that the Beidahuang Group currently has hundreds of products under its agricultural product categories, including pickled cabbage, miscellaneous grains, soybean oil, beverages and others.
On the way back to Harbin, the inspection team was suddenly caught in a heavy rain, and looking at the soybean and corn fields outside the car windows, it was unclear whether this "timely rain" would bring farmers joy or worry.
"Soybeans Advance, Corn Retreats" Is the General Trend
It is understood that China has long implemented a temporary state reserve purchase policy for agricultural products, which through direct grain subsidies has solved the problems of farmers finding it difficult to sell grain and selling it at low prices, and has also safeguarded farmers' enthusiasm for production. However, the long-implemented temporary reserve purchase and minimum purchase price policies have also fostered farmers' psychological dependence on national policies, leading them to treat corn planting as an ironclad crop and ignore actual planting efficiency, so corn planting area has remained high.
Industry insiders said that temporary reserve corn purchasing will disrupt the normal mechanism of the corn market, and out of consideration for safeguarding national food security, adjusting the industrial structure of soybeans and corn is imperative.
Chen Yingjian said that this year Hailun City's soybean planting area rose from 1.65 million mu to 2.2 million mu, while corn dropped from 2.2 million mu to 1.55 million mu.
The reporter found that although the planting structure of soybeans and corn has been adjusted somewhat, what local growers care about most is whether the state will cancel the corn floor purchase policy. Farmers generally have the mentality of "afraid of a price drop if they don't sell, afraid of a price rise if they sell," while grain purchasers collectively expect corn prices to fall in the future, and no one is interested in buying corn on the market. In addition, visits found that a local warehouse with a capacity of 100,000 tons was already full of corn.
On the afternoon of August 20, at a symposium held by the Hailun City Party Committee and Municipal Government, although grain enterprises and farmer representatives differed on whether the state would cancel the corn purchase and storage policy, they remained unanimous in their bearish attitude toward the corn price trend in the second half of the year.
Li Yongmin, Director of the Green Dahua Research Institute, said that from the current overall economic situation, corn prices lack upward momentum. The government's long-term implementation of the direct grain subsidy policy has placed too great a burden on the state; after the advantages of "futures + insurance" in safeguarding farmers' returns and reducing the government's burden were verified in developed countries, it is expected to be widely used in the future. At this point, there is no dispute that corn prices will fall; farmers should sell corn as early as possible before new grain comes to market to get a relatively good price, and can also obtain higher returns through a combination of futures and spot.
"With large corn inventories and weak momentum for soybean price increases, adjusting the planting structure is now a problem we have no choice but to face." At the symposium, Chen Yingjian repeatedly emphasized that growing well is not as good as selling well, and how to help farmers solve the grain-selling problem is currently the top priority of the government's work. He estimated that this year Hailun City's corn output would be 850,000 tons, while a sales volume of 500,000 tons is the most basic guarantee.
In order to help grain purchasers accurately analyze the current situation, he put forward four suggestions to them: first, grain purchasers should not rush to purchase grain; second, they should determine production by sales, signing contracts before purchasing; third, they should wait until policies become clear and farmers are eager to sell grain before boldly purchasing, with the best opportunity expected to be from January to March next year; finally, he suggested everyone try futures trading, but control the quota, with hedging as the purpose.
"Futures + Insurance" Eases Farmers' Worries
Using "futures + insurance" to serve agriculture, rural areas and farmers is currently a fresh topic in the agriculture and futures markets. So-called "futures + insurance" simply means that farmers buy insurance from insurance companies, and insurance companies go to futures companies for reinsurance.
A staff member of Jiusan Grain and Oil Industry Group Co., Ltd. told the China Securities Journal reporter that Jiusan Group currently has twelve production subsidiaries nationwide, with main products including nine major series and more than a hundred products such as protein, oils and fats, health foods and wild fresh fruit beverages, mainly refining, processing and packaging crude oil roughly processed by other factories, and Jiusan Group's priced products can be seen in supermarkets all over the country.
He Lin, Deputy Director of the Agricultural Products Research and Development Center of Nanhua Futures, said that from the current situation, Heilongjiang's corn production reduction area is less than expected; this year's estimated output is about 31.7 million tons, and after subtracting industrial and feed usage, there will be a surplus of about 18 million tons. Insufficient digestion capacity is the biggest problem Heilongjiang faces, and this situation is expected to persist for the next one to two years. It would be advisable to do a good job in deep processing of agricultural products, extend the industrial chain, and achieve a perfect connection from planting to digestion to sales, which can not only solve the downstream digestion problem of agricultural products but also add channels for farmers to increase income. In addition, financial instruments can also be used to control the risks of agricultural product cultivation.
Taking soybeans as an example, if farmers worry that soybean prices will fall, they can go to an insurance company to buy price insurance. If soybean prices fall during the insurance period, when the insurance is executed, the insurance company will compensate for the income loss caused to farmers by the soybean price decline. The insurance company's compensation amount comes from the compensation paid under the reinsurance it previously purchased from the futures company, and the futures company will also earn profits by shorting in the futures market, hedging the risk brought by the decline in soybean spot prices.
He Lin said that Nanhua Futures is currently conducting a "futures + agriculture" pilot with Sunshine Agricultural Mutual Insurance, taking the maximization of farmers' interests as the starting point, with the pilot site at Zhaoguang Farm, which has a relatively high level of agricultural reclamation mechanization, for a quantity of 10,000 tons of domestic soybeans, with an execution price of 3,800 yuan/ton for the soybean futures 1701 contract, a settlement method based on the average of the September and October board settlement prices, and a pilot period of half a year. Through continuous communication and publicity with farmers, farms and insurance companies, the "futures + insurance" work is currently proceeding relatively smoothly, and it is expected that after the pilot work ends in November, the overall work will be summarized and optimization and innovation will be carried out in option design.
Analysts said that "futures + insurance" creates a win-win situation, from which farmers, futures companies and insurance companies can all benefit. Soybean growers can obtain guarantees on soybean prices, thereby reducing the risk of soybean market price fluctuations, while futures companies and insurance companies can also obtain certain returns from providing services. At a time when the promotion of planting structure adjustment is encountering obstacles, Nanhua Futures and Sunshine Agricultural Insurance's new "futures + insurance" attempt for soybeans will undoubtedly spur soybean growers' enthusiasm for production and help accelerate the pace of planting structure adjustment in Heilongjiang Province.