Published: 2008-04-16

From News, page 4, issue no. 363, April 14, 2008
ranslation by Ren Jie
Original articles: [Chinese]

Farmer Wang Longfang from one of China's most important rice basin, Heilongjiang province, has tons of rice occupying his residence's courtyard.

A good harvest has turned into a burden, as he has been unable to sell eight out of ten tons of what he produced last year.

Wang is not alone. While international markets are suffering from rice shortage and price surges, Chinese rice farmers are experiencing the opposite – they are unable to unload their harvests at fair prices.

As a result, Wang said he lacked the money to buy enough seed and fertilizer needed for the upcoming spring planting season.

"The root of the problem is that supply is greater than demand," said Qiao Jiang, chief agronomist of Heilongjiang Academy of Agriculture Science.

Export Restriction and Rice Surplus
China has avoided supply hiccups that have struck the international grain markets through good harvests and strict export controls. China's annual domestic demand for rice is about 180 million tons, and last year's harvest stood at 186.5 million tons, making rice among the most secure of the three staple grains in China.

The Chinese government tightened export regulations on major grains since late last year, including the removal of export rebates and imposition of temporary export taxes between 5% and 25%. In addition, the rights to export grains are monopolized by a handful of state-owned companies, such as COFCO and Jilin Grain Group (JGG). 

The over-supply of rice is especially felt in the northeastern part of China, partly due to limitations in transportation and storage system.

In Heilongjiang, for example, the gross output of rice was 15.99 million tons in 2007, making up 25% of the country's commercial rice output.

However, bottlenecks in transportation capacity coupled with a lack of proper storage systems meant that local farmers had to quickly unload their produce in bulk within half a year after harvesting.

Qiao proposed the Chinese government to consider granting the right to export for major rice producing provinces, such as Heilongjiang and Hunan. He believed such a move would increase agriculture earnings while guaranteeing China's grain security.

"The government should delegate export rights to the provincial level and let local grain companies to participate," he said.

Qiao pointed out that unlike other grains like wheat and corn that could be turned into bio-fuel; rice had few other uses except as food, thus any surplus would be more quickly and easily translated into price decline.

He believed two measures could solve the problems. One was to regulate the size of planting areas, and the other was to grant the right to export to major rice producing provinces. He added a proposal had been handed over to policy makers of Heilongjiang province for consideration.

Farmers' Plight
Farmer Wang Longfang said there were offers to buy his harvest but that prices were far too low. He lamented: "Some only offered 1,360 yuan per ton, how could I let go at such price without feeling heartache?"

News from the international markets had trickled down to Wang, who learned that prices of rice had surged to 700 dollar per ton, equivalent to 5,000 yuan. He had also heard that some regions in China appeared to have rice-buying panics. Wang said that all of these had only confused him.

Public data showed that the average price for common-grade rice in Heilongjiang on April 7 was between 2,400 and 2,600 yuan per ton, about 100 to 200 yuan lower than last year's domestic price.

The quality of Wang's rice was rated as grade 3, which entitled him to 1,540 yuan per ton based on the latest grain protection price.

Recently, however, few rice processing companies were willing to buy stock from farmers, citing slow demand. One industrial source said: "Our store is filled with rice yet we have a hard time selling, we are not taking in more supply from the farmers." He said the company's cash flow was affected and lacked funds to buy more stock. 

The Sinograin Reserve in Wei Xing village was among the few still buying from farmers. Its director, Sun Zheng, told the EO there was no fixed volume of intake per day, but at most about three to four hundred tons a day.

Farmer Lu Chun, who has contracted paddy fields measuring 400 mu (each mu equals 1/15 hectare), produced 200 tons of rice last year but he was reluctant to sell his harvest to Sinograin.

"Sinograin has a more stringent grading system and its offering price is lower," said Lu, but added there was no other taker and this left him with no choice.

According to Sinograin, it offered the latest grain protection prices – 1,540 yuan per ton for Grade 3, and 1,580 yuan per ton for Grade 2. However, an officer there told the EO that the final payment to farmers would be lower, saying: "Based on certain benchmark, a discount of a few cents for each jin (500 gram) of rice is the norm in order to offset the water and other impurities contained in the harvest." 

Few farmers understood why they were getting less than the published prices, as the complicated grading and pricing process was done behind closed doors. Sun too admitted that the process was closely guarded, but justified it by saying: "We (Sinograin) are representing the state in rice purchases, thus we must be strict with our standards."

Lu said he was contemplating quitting farming next year due to low profits, adding he would rather enter the transportation business.

Fellow farmer Wang had few alternatives. Wang sighed: "It is obvious that planting soybeans now will be more profitable, but I have already invested so much on irrigation. And who knows how the market will turn out to be in the second half of the year?"